Outsourcing in the Dominican Republic

Introduction

Outsourcing is the economic practice of transferring resources and specific business tasks to another, which provides specialized services.
In the outsourcing process, a business function is done by a third-party service provider. The hiring company transfers part of its administrative and operational management to an outsourcing firm. In this way, the outsourcing firm can operate away from the hiring business's normal relation and its clients.

Many companies employ specialized firms to manage part of their business. These include IT, human resources, asset management, real estate, and accounting. Many companies also outsource technical user support and call handling, manufacturing, and engineering.

Overall service costs are usually lower if these areas are outsourced, allowing many businesses to close their customer relation centers and transfer them to a third party.

The main goal of outsourcing is to reduce production costs. However, outsourcing is also a source of competition, as it allows businesses to reduce production costs by outsourcing firms that offer the best quality at a lower price.

The hiring business no longer must bear the costs of running a specialized function, which is a fixed cost. A variable cost essentially replaces this by employing a firm that has taken these fixed costs. Moreover, the outsourcing company is more specialized in this function. This strength results in an increased market reach and greater specialization in the outsourced task for the outsourcing firms.

Due to this demand, customer service call centers have grown significantly in the Caribbean. This is especially the case in the Dominican Republic.

Legal analysis

In the Dominican Republic, labor laws provide high protection for employees. Dominican law seeks to ensure that their employers are solvent. One way to ensure solvency is to give employee protection by making several companies jointly responsible for labor debts.

Because of this requirement, we need to look at the various labor relations patterns that can give rise to outsourcing and differ from the traditional employer-worker relationship.

Here are the different forms:

A) The subcontracting business. This is a company that relies on another firm to provide goods and services. This firm agrees to work at its own risk and with its own financial, material, and human resources.

B) Labor market intermediary. This brings an apparent employer between the worker and the actual user or recipient of its services.

There are various kinds of contracts used to govern labor relations for outsourcing contracts in the Dominican Republic. However, depending on the different circumstances affecting the contract - although it is a commercial contract, this might well develop into a labor subcontract.

I. The subcontracting business.

For a subcontracting business, there is no employment relationship between the service recipient and the subcontractor. This is possible because of how a subcontracting company works. In most cases, it provides services outside the client's headquarters. It works with its budget, its administration, and no apparent link to the service recipient.

In the Dominican Republic, the outsourcing method of subcontracting work occurs mainly in the free zone sector. Subcontracting companies (textiles, medicine, pharmaceuticals, electrical parts, voice, and data services) serve large multinationals and form part of their global outsourcing chain.

No labor disputes have emerged in the practical application of Dominican labor law involving this type of subcontracting business.

II. Intermediation.

In these forms, we have commercial subcontracting arrangements that are:

i) Traditional labor market intermediary. In this type of contract, an intermediary is limited to managing and placing staff on assignments. At no point does this intermediary perform or take part in the performance of the labor contract.

ii) Apparent employer. In this case, the intermediary becomes an “apparent employer” for all the contracted workers who were generally unaware of their “actual employer”.

iii) Supplier of temporary labor. In the Dominican Republic, it is not intermediaries, but employers who engage employees to work for others without being supervised by the contractor. But if the intermediary is an insolvent company, the courts could make jointly responsible the contractor for paying employment benefits to the employees of the intermediary.

Conclusion

To sum up, in the Dominican Republic, employees receive high protection from labor laws. In particular, the law gives employee protection by ensuring that businesses are held jointly responsible for their employees to ensure the financial safety of their work benefits.

For this reason, it is recommended that when you commit to outsourcing contracts of any form, the labor implications should be scrutinized by a legal expert.