Blog · Remote Hiring
Offshoring vs Outsourcing: Which Fits a Small Business?
The difference between offshoring and outsourcing, how nearshoring fits in, the pros and cons, and the honest answer on local jobs.
Prateek Sahni
Published: 23 October 2026 · 13 min read
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Offshoring vs outsourcing comes down to where versus who. Outsourcing means paying an outside provider to do a task. Offshoring means the work is done in another country. They overlap: a virtual assistant placed by a provider in the Philippines or India is both. For a small business, what matters is whether you are adding capacity or replacing someone.
What is the difference between offshoring and outsourcing?
Outsourcing is about who does the work: an outside provider. Offshoring is about where the work is done: another country. They are two separate choices, so you can outsource locally, offshore to your own overseas team, or do both at once.
Work done in your country | Work done in another country | |
|---|---|---|
By your own staff | In-house | Offshoring to your own overseas team |
By an outside provider | Domestic outsourcing | Offshore outsourcing |
A bookkeeping firm in your city is domestic outsourcing.
Your own staff in an office you open overseas is offshoring.
A virtual assistant placed by a provider such as My Virtual Mate is offshore outsourcing: an outside provider recruits the person and supports the engagement and the person works from another country.
Most small businesses that hire a remote assistant end up in the bottom-right box.
More examples: a payroll provider in your city is domestic outsourcing. A customer-support team you employ yourself in another country is offshoring. A software firm abroad that builds your app is offshore outsourcing.
Offshoring | Outsourcing | |
|---|---|---|
What it is | Moving work to another country | Paying an outside provider to do the work |
The question it answers | Where is the work done? | Who does the work? |
Can it stay local? | No, it always crosses a border | Yes, it can be in your own country |
Needs an outside provider? | No, it can be your own team | Yes |
Common reasons | Lower labour costs, skills, longer working hours | Skills you lack, less to manage, flexibility |
Common risks | Time zones, culture, legal differences | Less control, dependence on the provider, quality |
These are the definitions most business writers use. Some providers use the two words differently, so check what a provider means.
What is offshoring and what is offshore outsourcing?
Offshoring means moving work to another country, whether to your own overseas team or to an outside provider. Businesses do it for lower labour costs, skills that are hard to find locally and longer working hours. The cost advantage is real, but it is not the whole story: time zones, communication and legal differences all add work for you. When an outside provider is involved, it is called offshore outsourcing.
For a wider view, see our offshore staffing guide and our guide to global hiring.
What are nearshoring and onshoring?
Onshoring, also called reshoring when work comes back, means keeping work in your own country. Nearshoring means using a nearby country, usually in a similar time zone. Offshoring usually means a country further away.
Option | Where the work is done | The usual trade-off |
|---|---|---|
Onshoring | Your own country | Simplest to manage, usually the highest local cost |
Nearshoring | A nearby country, often a similar time zone | Easier overlap in working hours, usually less saving than offshoring |
Offshoring | A country further away | Often lower cost, with longer gaps in working hours |
For an Australian business, the Philippines is 2 to 3 hours behind the east coast and India is 4.5 to 5.5 hours behind, depending on daylight saving, so working hours overlap more easily with the Philippines than with India.
What are the pros and cons of offshoring and outsourcing for a small business?
The main advantages are lower cost per hour, access to skills and flexibility. The main disadvantages are time zones, communication, less day-to-day control and the questions about local jobs and worker status.
Advantage | What it means for you |
|---|---|
Lower cost per hour | Help you could not afford locally becomes affordable. Compare the full cost, not only the hourly rate. |
Access to skills | Bookkeeping, admin, estimating and similar skills without a long local search. |
Flexibility | Many providers let you add or reduce hours as work changes. |
Longer coverage | Staggered hours can cover earlier starts or later finishes. |
Disadvantage | How to manage it |
|---|---|
Time-zone gaps | Agree overlapping hours and a short daily summary. |
Communication and culture | Write instructions down. Use checklists and short videos. |
Less direct control | Agree standards and reporting in writing before the work starts. |
Data and security | Ask about confidentiality agreements, access controls and two-factor authentication. |
Worker status | Make sure the arrangement is set up correctly. See our guide to sham contracting. |
Local-jobs concerns | See the next section. |
For the cost side, see Remote Hiring vs Local Hiring: Cost and ROI and Virtual Staff vs Full-Time Hire.
Is offshoring bad for local jobs?
It can be, depending on what work moves. Research links offshoring to lower employment at home when work that local staff were doing moves abroad. It also finds the effect is smaller, or even complementary, when the work abroad is different from the work at home. A small business adding help it could not afford locally is a different decision from a large employer moving existing roles. We found no study that measures that second case directly, so we can only reason from the evidence below.
Source | Setting | Finding | What it means for a small business |
|---|---|---|---|
Harrison and McMillan, Review of Economics and Statistics (2011) | US manufacturing multinationals, 1982–1999 | Offshoring to low-wage countries generally substituted for jobs at home. Where firms did different work abroad and at home, the two were complements. The net effect on US manufacturing jobs was small. | Substitution is real, and it depends on what work moves. |
Hummels, Jørgensen, Munch and Xiang, American Economic Review (2014) | Danish firms and workers | Offshoring tended to raise high-skilled wages and lower low-skilled wages. Workers displaced from offshoring firms lost more earnings, low-skilled workers most persistently. | Harm concentrates in lower-skilled, routine work. |
Li and Kumar, University of Sydney (18 June 2026) | Telstra, NAB, Officeworks and Woolworths | In 2026 these companies announced job cuts at home alongside roles abroad. The counts come from union statements and media reports, and many of the roles are entry points for graduates. | The real corporate story, and a concern about the entry-level pipeline. |
Jobs and Skills Australia, 2025 Occupation Shortage List | Australia | No occupation in the Clerical and Administrative Workers group was in persistent shortage from 2021 to 2025. | Admin work is not scarce, so the case for offshoring it is affordability, not availability. |
Sources: Harrison and McMillan, Hummels and others, University of Sydney, Jobs and Skills Australia. None of these studies looks at small businesses using virtual assistants.
Small businesses are a different case. The Australian Small Business and Family Enterprise Ombudsman reports that 97.3% of Australian businesses had 0 to 19 employees in June 2025, and that these businesses employed 39% of the private sector workforce in 2023–24. A sole operator or a five-person firm often has no admin team to replace. The Australian Bureau of Statistics put the trend unemployment rate at 4.6% in September 2026.
On our own sales calls, owners have not raised this question. We still think it deserves a straight answer, because it is a fair one.
When is offshoring the wrong call?
When it replaces someone you could keep, removes a local job you could realistically fund, or covers work that must be done locally.
Situation | Effect on local jobs | Better approach |
|---|---|---|
Replacing a current employee | Removes a local job | Keep or redeploy the person, and take employment advice first. |
Work that needs a licence, a site visit or a face-to-face client | Not suited to offshoring | Keep it local. |
A graduate or entry-level pathway | Weakens the local talent pipeline | Keep at least one local entry-level role if you can fund it. |
Admin that eats your selling time | Adds capacity, nobody is replaced | Offshore the admin and use the freed time to sell and serve clients. |
Help you could not afford locally | Adds capacity, nobody is replaced | A reasonable choice. Be honest that it also creates no local job. |
This is general information, not legal advice. For redundancy rules in Australia, see the Fair Work Ombudsman’s page on redundancy and take advice before changing anyone’s role.
How do you choose? Five questions
Am I adding capacity or replacing a person? If replacing, stop and take advice first.
Does the work need a licence, a site visit or a local client relationship? If yes, keep that work local.
Can I write the task down as steps? If not, fix that first, because no provider can follow instructions that exist only in your head.
Do I need overlapping hours? Decide which time-zone gap you can live with: onshore, nearshore or offshore.
Do I want to manage the person myself, or have a provider recruit, support and review the work? That is the difference between offshoring to your own team and offshore outsourcing.
If your answers point to adding capacity, work you can document and a provider to support it, offshore outsourcing is usually the fit for a small business.
If you go ahead, our guides on how to onboard a virtual assistant and what to do if a hire isn’t the right fit cover the first weeks.
Country notes
The idea is the same everywhere, but the local rules and the local debate differ.
Australia
Small businesses are most of the economy, as the numbers above show.
Worker status is a legal question, not a label. See our guide to sham contracting.
Replacing an employee can carry redundancy obligations. See the Fair Work Ombudsman’s page on redundancy.
The Philippines is 2 to 3 hours behind the east coast and India is 4.5 to 5.5 hours behind, depending on daylight saving.
United States
The US counts firms with fewer than 500 employees as small, so its numbers are not comparable with Australia’s 0 to 19. The Small Business Administration’s Office of Advocacy reports 36.2 million small businesses, 99.9% of all businesses, employing 62.3 million people, or 45.9% of private sector workers.
Worker status is in flux. In February 2026 the Department of Labor proposed replacing its 2024 test with an “economic reality” test, and some states apply stricter tests of their own. Take advice before relying on a contractor label.
The Philippines is 12 to 16 hours ahead of US time zones and India is 9.5 to 13.5 hours ahead, depending on the zone and daylight saving, so overlap needs shifted hours. Nearshoring to Latin America gives a closer time zone, and our talent pool includes Latin America for selected roles.
United Arab Emirates
Emiratisation is the local-jobs debate here. The Ministry of Human Resources and Emiratisation says private companies with 50 or more employees must grow the number of Emiratis in skilled roles by 2% a year, and some companies with 20 to 49 employees in specified sectors must hire at least one Emirati. See the ministry’s Emiratisation targets, and check how the rules apply to you before changing your team.
The Philippines is 4 hours ahead of the UAE all year, and India is 1.5 hours ahead, because none of the three observes daylight saving.
United Kingdom
The UK counts firms with fewer than 250 employees as SMEs. The Department for Business and Trade estimates that SMEs employed 16.9 million people at the start of 2025, 60% of private sector employment.
Replacing an employee can trigger redundancy rights. Employees with 2 or more years’ service are normally entitled to statutory redundancy pay and employers must consult. See GOV.UK on redundancy rights and take advice first.
The Philippines is 7 or 8 hours ahead of the UK and India is 4.5 or 5.5 hours ahead, depending on UK daylight saving.
Canada
Canada counts businesses with 1 to 99 employees as small. Innovation, Science and Economic Development Canada reports that 98.2% of employer businesses were small in 2024 and that small businesses employed 46.6% of private sector employees.
Termination and redundancy rules vary by province, so check yours before changing anyone’s role.
The Philippines is about 11 to 16 hours ahead of most of Canada and India about 8.5 to 13.5 hours ahead, depending on the province and daylight saving.
Other countries: the same five questions apply anywhere, but the rules differ, so check yours before changing your team.
Comparing where to hire from? See Hiring a Virtual Assistant: Philippines vs India.
An example: a Melbourne builder
One of our case studies is a family-owned Melbourne builder with a local senior estimator. After missing tenders, it kept the estimator and added two offshore associates, instead of the local junior hire the case study says it could not afford. Read the Melbourne Residential Builder case study. The case study shows adding capacity, not replacing someone. The builder also did not make a local hire, which is why we do not claim that offshore help creates local jobs.
Not sure which option fits your business? We will go through the five questions with you. |
How My Virtual Mate works
My Virtual Mate recruits and places virtual staff from the Philippines, India and other countries, with a dedicated Project Manager, the 6-Week Performance Assurance and the 5-Day Replacement. We charge no recruitment fees and there is no lock-in. Rates start from A$9/hour (around US$7, £5 or €6), depending on the role and scope, confirmed on a Discovery call.
Would you like to talk it through? Book a free Discovery call. |
Frequently asked questions
What is the difference between offshoring and outsourcing?
Outsourcing is about who does the work: an outside provider. Offshoring is about where the work is done: another country. They are separate choices, so a task can be outsourced locally, offshored to your own team, or both, which is called offshore outsourcing.
Is a virtual assistant outsourcing or offshoring?
Usually both. If an outside provider recruits and supports a virtual assistant who works from another country, that is offshore outsourcing. If you hire the person directly yourself, it is offshoring without the outsourcing.
What is nearshoring?
Nearshoring means using a nearby country, usually in a similar time zone. Working hours overlap more easily than with offshoring, though the saving is usually smaller.
Is offshoring bad for local jobs?
It can be when work that local staff were doing moves abroad and research links this to lower employment at home. The effect is smaller where the work abroad is different from the work at home. We found no study of small businesses using virtual assistants, so the honest test is whether you are adding capacity or replacing someone.
Should a small business replace an employee with an offshore hire?
Not without taking advice. Replacing a current employee is the case most linked to lost local jobs, and it can carry redundancy obligations. In Australia, see the Fair Work Ombudsman’s page on redundancy. Offshoring works best when it adds capacity or frees the owner’s time for selling.
Is offshoring ethical, including to the Philippines or India?
It depends on how the work is set up: written terms, fair pay and clear conditions. Ask any provider how its people are paid and what benefits are available.
How much does a virtual assistant cost?
Rates start from A$9/hour (around US$7, £5 or €6), depending on the role and scope, confirmed on a Discovery call. We charge no recruitment fees and there is no lock-in.
Is it legal to engage someone overseas as a contractor?
Worker-status rules differ by country and a contract label alone does not decide the question. In Australia, the Fair Work Act prohibits sham contracting. See our guide to sham contracting and take advice. This is general information, not legal advice.
