Three arrangements are sold under similar names and they differ on who employs the staff, who directs the work, and who carries the risk if it goes wrong.
Seat leasing
You recruit and employ the staff. The provider supplies the workstation: desk, machine, connection, power, building access, and usually facilities and security.
Cheapest per head and the most work for you. It requires a local entity or an employer of record, and it puts Philippine employment compliance on your side of the line.
Staff leasing, sometimes called the dedicated model
The provider employs the staff and handles payroll, statutory contributions and the office. You direct the work day to day.
This is the arrangement most businesses mean when they say outsourcing, and the arrangement described across this site. The division is that employment is theirs and management is yours.
Managed service
The provider employs the staff and directs the work, against an outcome you specify. You buy a result rather than a person's time.
It suits well-defined processes with measurable output and suits nothing else. Where the outcome is hard to specify, this arrangement converts every disagreement into a contract question.
Which to choose
| Seat leasing | Staff leasing | Managed service | |
|---|---|---|---|
| Employs the staff | You | Provider | Provider |
| Directs the work | You | You | Provider |
| Needs a local entity | Yes | No | No |
| Suits | Existing local presence | Roles you can brief | Defined, measurable output |
| Main risk to you | Compliance | Your own management | Specification |
What a provider is actually selling
The three names are used loosely and the same word means different things at different companies. Establish which arrangement is on offer by asking three questions rather than by reading the brochure.
Whose contract does the person sign? Who decides what they work on tomorrow? And if the output is wrong, who is answerable for fixing it?
The answers place any offer on the table above regardless of what it is called, and a provider unable to answer the third question crisply is selling one thing and delivering another.
Hybrids, which are common and rarely explained
Staff leasing with a supplied team leader is the usual one: the provider employs everybody and supplies a supervisor who handles day-to-day allocation while you set priorities.
It works well where a team is large enough that daily allocation is a job in itself, and it introduces an ambiguity about who the supervisor answers to when your priority and the provider's differ. Agree that in advance and it is a good arrangement; leave it and it becomes the source of every subsequent disagreement.
Where each model goes wrong
Seat leasing goes wrong on compliance: a business discovers it has been employing people in a jurisdiction it had not registered in.
Staff leasing goes wrong on management: the engaging business assumed the provider would supply direction, the provider assumed the client would, and the person in the middle spends three months underused.
Managed service goes wrong on specification: the outcome was described loosely, both sides read it differently, and every conversation afterwards is about the contract rather than the work.
Knowing which failure your chosen model produces is more useful than choosing on price, because the failure is what ends engagements.
Moving between them
Businesses frequently start with staff leasing and later consider their own entity, on the reasoning that removing the margin is cheaper. Sometimes it is. The calculation has to include registration, accounting, statutory filings, an office, and somebody accountable locally for employment compliance.
Below a certain team size that overhead exceeds the margin comfortably. Above it the arithmetic can reverse, and the threshold depends on details specific to the business rather than on a general number.
The one that is rarely right
Managed service for work you have never done yourself. Specifying an outcome requires knowing what good looks like, and a business buying an outcome it cannot describe has no basis for judging whether it received it.
Do the work badly yourself first, or run it as staff leasing until you can specify it. Both are slower and both leave you able to tell whether you are being served well.
What the word outsourcing hides
It covers all three arrangements and several others, and in ordinary use it usually means the second. When somebody says they tried outsourcing and it did not work, the first useful question is which of the three they tried, because the failures are different and so are the remedies.
The employment arrangements described here have different consequences under Philippine labour law and under the law where the engaging business sits, including for tax and for permanent establishment. This entry describes the commercial shape of the three models and nothing in it is legal or tax advice. Take advice in both jurisdictions before choosing.