Offshoring vs outsourcing: what's the difference?

The two words are often used as if they mean the same thing. They don’t, and the difference matters when you decide how to add capacity to a small business. One describes where the work happens. The other describes who does it and who they work for.

What is offshoring?

Offshoring is moving work to another country. The work can stay inside your business, as when you hire a bookkeeper in Manila yourself, or it can go to an overseas provider. Offshoring that stays in-house is sometimes called captive offshoring.

For an Australian small business, offshoring usually means one or more full-time staff members in the Philippines or another country who work Australian hours on your systems and report to you.

What is outsourcing?

Outsourcing is paying an outside company to do work your own staff would otherwise do. The provider can be in Australia or overseas. A local payroll bureau, a managed IT firm and an overseas call centre are all outsourcing.

When you outsource, you usually buy a service or an outcome. The provider decides who does the work and how, within the terms of your contract.

Offshore outsourcing and nearshoring

Offshore outsourcing combines the two. An overseas provider does the work for you, such as a contact centre handling customer service or a firm processing transactions.

Nearshoring is offshoring to a country close to your own, mainly to share working hours. For Australia, distance matters less than time zone. The Philippines runs on UTC+8 with no daylight saving, two hours behind Sydney under AEST and three under AEDT, close enough to cover most of an Australian working day.

Outsourcing vs offshoring compared

	Outsourcing (onshore provider)	Offshore outsourcing (overseas provider or agency)	Offshoring by direct hire
Who hires the worker	The provider	The provider	You, as employer or contracting party
Who controls the day-to-day work	The provider, to agreed service levels	The provider, or you with agency support	You
Cost structure	Service fees or hourly rates	Monthly fee per person or per service, including the provider’s margin	Salary paid to the person, plus any one-time recruitment fee
Main risks	Less control, provider lock-in	Less control, data leaving Australia, provider margin for as long as you stay	Employer obligations in another country, management load, data leaving Australia
Best for	Specialist tasks you buy as a service	Defined processes at volume	Ongoing roles you want to own

Offshoring to the Philippines: models for Australian small businesses

For the three models side by side, see outsourcing to the Philippines: rent a team or hire your own.

There are four common ways to offshore a role.

1. DIY hire. You advertise on a job board, screen applicants, and engage the person yourself. It is the cheapest in cash, but it costs you the time to read applications, run tests and interview.
2. Direct-hire recruiter. A recruiter such as Tarino sources and screens candidates, and you hire and pay the person directly. Tarino typically builds a pool of 1,000+ candidates per role and sends a shortlist of 3 to 4 finalists in about two weeks. The fee is $250 upfront and $4,750 on hire, $5,000 excl. GST, with no monthly fees. See how our hiring process works.
3. Managed agency or staff leasing. The agency hires the person, pays them and usually supplies equipment and HR support. You direct the work and pay the agency every month. This is a hybrid: you control the work, but the employment is outsourced.
4. Employer of record (EOR). An EOR becomes the legal employer in the other country and runs payroll and compliance for a monthly fee. You choose and manage the person.

One fee or a monthly fee: what the difference adds up to

Staff Domain is one of the few managed providers that publishes its rates. On its Scale pricing page, checked in October 2026, it lists A$1,099 per person per month, plus a A$1,200 recruitment fee per hire.

Over 12 months that is $14,388 in agency fees. Over 24 months it is $27,576. A direct-hire recruiter fee is paid once: Tarino’s is $5,000 excl. GST, whether the person stays two years or ten. The salary is paid in every model, so it is left out of these figures.

The agency fee does buy things a direct employer pays for separately, including payroll, statutory benefits, equipment and replacements while you are a client. Add those to the direct-hire side before you decide. Our direct hire vs offshore staffing agency comparison sets out the full 24-month table, and the offshore staff cost calculator lets you run the numbers for your own role.

Benefits of offshoring

• A larger pool of skilled people. Hiring offshore widens the search beyond your local market. For roles such as executive assistants and bookkeepers, Tarino typically builds a pool of 1,000+ candidates per role.
• Lower salary costs for many roles. Salaries for skilled roles in the Philippines are generally lower than Australian salaries for similar work, even when set well above the local minimum.
• A dedicated person. Unlike most outsourced services, an offshore hire works only for you, learns your processes and builds knowledge over time.
• Working-hours overlap. With a two- or three-hour time difference, offshore staff can work most of an Australian day.

Risks of offshoring

• Employer obligations. If you hire someone in the Philippines directly, local rules apply, including the regional minimum wage, 13th month pay and pay for public holidays.
• Getting the structure wrong. Calling someone a contractor does not make them one if the relationship works like employment. Get professional advice on how you engage the person.
• Data leaving Australia. If the Privacy Act applies to your business, APP 8 requires reasonable steps, usually an enforceable contract, before you disclose personal information to an overseas recipient. You can remain accountable for how that recipient handles it.
• Management load. An offshore hire needs a clear brief, documented processes and regular check-ins, especially in the first month.
• A hire that does not work out. Check what happens if the person leaves early. Tarino’s fee includes 6-month replacement cover for the same role.

How to choose

• You want a result, not a person. Outsource the task to a specialist provider, in Australia or overseas.
• You want a long-term team member and are comfortable being the employer. Offshore by direct hire, either yourself or through a recruiter. How to hire Filipino staff from Australia covers the steps.
• You want someone else to be the employer. Use a managed agency or an EOR, and expect to pay a monthly fee for as long as the person works for you.
• The work is regulated. Keep advice, approvals and sign-offs onshore, and offshore the preparation and admin around them, as with an admin assistant.

This page is general information, current at 12 October 2026. It is not legal or tax advice.