I don't understand from a p&L perspective how outsourcing employee benefits T, aren't the costs for now outsourced contractors more expensive than regular employees?
And what kind of deal.would they have to offer the outsourcing company to take AT&T employees , I doubt very much consulting companies like IBM just accept customer employees without it somehow benefiting them.
It reduces the number of employees on AT&T's books, therefore increases productivity. Good for the stock.
Contractors also get furloughed at will for a few days or weeks a year to balance RS's spreadsheet. Typically they get furloughed at the end of the year to for Christmas so budgets are met.
Contractors can be hired and fired more easily than employees.
If you don't care about experience or continuity, you can offload a lot of "people" headaches by this insertion of a straw boss between you and the actual labor.
Scalable, hence cheaper in a downturn.
They save the most when they let the employee go and move it to a $15 per hour employee in India. They make up the severance in under 9 months and from then the savings mounts quickly
So they can offload capital investment onto somebody else, because paying a contracting company is a cost of doing business - they can make more capital available for 5G investments instead of splitting it 3 ways between network, content and IT.
Overall it cheaper, and in some cases they can capitalize those resources and spread that expense over years. Also as things die it easier to let loos of those resources.
They move the employees-no severance, then they can unload the real estate and then the magic happens with finance. Lower debt, lower short term costs.
No Surplus Pay, No Benefit Subsidies, No Pension Health Benefit if they are qualifiable when they meet MR75 and outsourced prior to etc...As stated above the IT Vendor benefits as they take the employee for a year and those they want to keep they offer a new salary rate not the same they had at AT&T and those they do not want to keep they off-shore the work for 1/4 the cost...….It's a Win-Win for them but not for the Employee....other than having a guarantee of employment based on the one year contract the outsourced employee has to sign.....
It reduces persistent "laibility". Employee payroll|benefits are a liability on HR (one reason why vacations cannot be rolled over, which is not the case at many other companies). The leadership came from finance background, they are "leaders" of bottomline, and when thinking of HR, they think that "h"uman are "R"esources. And BTW, pendulum will swing back. SBC (AT&T) took back IT work from IBM in 2007-2008 when they realized how much was flowing out. 5 years from today, somebody bright CFO will wakeup and become a hero by arguing that we are paying "margins" of IBM/TechM,Accenture and that we should bring work back, and keep margins to ourselves.
It benefits T by getting off the books and not having to pay them severance or having them qualify for retirement benefits.
It benefits the receiving company because they get rid of them in a year and replace them with overseas workers. Or cut their salary or cut their benefits after getting the "knowledge transfer". And any severance they choose to pay them will be based on 1 year of service. Many also only honor the AT&T service time for one year and at that point they've lost pretty much all time based benefits.
T can also claim they didn't lay anyone off even though they know what will happen to those people.