You can outsource people, not responsibility

 

A child cannot be blamed for a soup cooked by the entire household.

 

That African proverb captures a growing contradiction in Nigeria’s personnel outsourcing industry.

Across corporate Nigeria, many outsourcing contracts now contain broad indemnity clauses requiring service providers to absorb almost every operational loss connected to deployed personnel. Fraud, negligence, customer claims, operational disruption, regulatory exposure, and reputational damage are increasingly pushed onto outsourcing firms under sweeping “hold harmless” provisions.

At first glance, this appears prudent. Every business wants protection against risk. But beneath the legal language lies a deeper question: Do we truly want to build a strong personnel outsourcing sector in Nigeria?

This question matters because no industry can become strong when its commercial foundation is constantly weakened.

In many large corporate arrangements, outsourcing firms do not determine the terms of engagement. The client does. Large corporations often define the contract, impose the liability structure, set pricing expectations, and sometimes deploy reverse-bidding processes that reward the lowest possible cost. The outsourcing provider is then expected to deliver quality service, manage employment obligations, absorb workforce volatility, and carry heavy liability exposure, often on narrow margins.

That contradiction is unsustainable.

The same provider pressured to quote the lowest possible fee is frequently expected to carry the broadest possible risk.

Personnel outsourcing is not corporate insurance. It is a workforce management arrangement. The outsourcing company recruits, screens, deploys, and administers personnel. It manages payroll, statutory remittances, employment compliance, discipline, and workforce continuity. Where the provider fails in those responsibilities, accountability is proper.

If an outsourcing company deploys poorly vetted personnel, ignores warning signs, fails to comply with employment obligations, or is directly responsible for misconduct, it should bear responsibility.

But indemnity was never meant to transfer a client’s entire operational risk environment to the outsourcing provider.

This distinction is not merely commercial; it is also consistent with international labour thinking. The International Labour Organization’s Private Employment Agencies Convention, 1997, known as Convention 181, recognises the legitimate role of private employment agencies in labour markets while requiring proper regulation and protection against abuse. Importantly, Article 12 expects responsibilities between private employment agencies and user enterprises to be determined and allocated in accordance with national law and practice. That is a framework of allocation, not blanket risk dumping. (International Labour Organisation)

An outsourced employee does not operate in isolation. That employee works within systems designed, supervised, and controlled by the client. The client determines workflows, approval structures, transaction limits, access rights, supervisory oversight, internal controls, and governance processes.

So, when a loss occurs because several operational safeguards fail at once, is it fair to place the entire burden on the outsourcing firm simply because one outsourced employee was involved?

A fraudulent banking transaction rarely succeeds because of one person alone. It may pass through approval layers, supervisors, control officers, system validations, and reconciliation processes before becoming a realised loss. Inventory losses in retail may arise from weak stock controls, poor supervision, or failed reconciliation systems. Operational disruption in logistics or manufacturing may involve process gaps far beyond the conduct of one deployed worker.

Responsibility should follow control.

This is why blanket indemnity clauses are problematic. They often confuse workforce accountability with enterprise operational responsibility. They assume that because a person was outsourced, the entire risk attached to the business process can also be outsourced.

That assumption is wrong.

Some outsourcing agreements already show a better path. They limit indemnity to direct losses arising from proven fraud, dishonesty, negligence, breach of confidentiality, or misconduct attributable to deployed personnel. Others exclude losses caused by systemic operational failures or contributory negligence by the client organisation. Some also require evidence that preventive controls were in place before an indemnity claim can arise.

That is commercially mature thinking.

It recognises that clients deserve protection, but outsourcing firms also deserve fairness. It recognises that risk allocation must be linked to responsibility, not bargaining power.

The danger of the current approach is not only legal but also ethical. It is economical. When outsourcing firms are forced to carry undefined or unlimited liabilities while competing mainly on the lowest price, the result is predictable. Margins shrink. Insurance becomes expensive or unavailable. Smaller providers struggle. Quality suffers. Responsible operators become commercially disadvantaged against desperate pricing.

Over time, the industry becomes weaker.

That should not be Nigeria’s ambition.

Personnel outsourcing plays an important role in employment generation, business flexibility, and formal workforce participation. Across banking, telecommunications, manufacturing, fintech, logistics, and retail, outsourced personnel support critical functions every day. But if the sector is to remain strong, clients must treat outsourcing firms as strategic workforce partners, not disposable risk carriers.

Strong industries are not built by squeezing providers until they become fragile. They are built through fair pricing, clear responsibilities, shared governance, and balanced contracts.

Nigeria must therefore decide what kind of personnel outsourcing sector it wants: one driven by lowest-cost procurement and unlimited liability transfer or one built on professionalism, sustainability, and genuine partnership.

A company can outsource recruitment, payroll administration, workforce deployment, and day-to-day personnel management.

But it cannot outsource the responsibility to run its own operations properly.

Because when the soup goes bad, the blame cannot rest on the child alone.

 

Dr. Olufemi Ogunlowo is the CEO of Strategic Outsourcing Limited, a leading provider of personnel and business process outsourcing services in Nigeria. He is also a regular columnist on employment and workforce strategy.