Startup crisis and mass layoffs: How outsourcing can be an alternative

When the situations are related, it is common that in times of crisis mass layoffs occur because startups often seek to cut costs. Therefore, outsourcing has become an alternative to help keep companies alive, preventing employee cuts from getting worse and sometimes stopping altogether.

It is important to conceptualize at this point that outsourcing is the transfer of production, manufacturing, or service activities from one country to another to save costs, such as labor costs and taxes. This practice can occur under various conditions, including an increase in production efficiency, a reduction in costs due to lower wages, as well as cheaper living expenses for employees in target countries.

In this sense, outsourcing also helps startups to save on corporate income tax when producing their products abroad, which ends up generating more profits instead of deducting everything with taxes.

The advantages of outsourcing are many and one of the main ones is that this type of work can lead to a more efficient production of goods and services, which ends up generating jobs in both countries, as well as saving time and money in labor costs. It can also lead to economies of scale where companies can use the same technology, equipment, and know-how that gives them an edge in the market.

Outsourcing became a very hot topic during the financial crisis when many companies were pressured by their creditors to lay off hundreds of thousands of workers. It was thought that outsourcing would help prevent layoffs from getting worse, thus preventing mass layoffs.