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back to article Outsourcing your own job much more common than first thought

Computer programmers outsourcing their own jobs and pocketing the profit from salary differentials overseas is much more common than first thought. Last month, Verizon reported that an investigation into a client had revealed that the unnamed company's star programmer, a chap dubbed Bob, had outsourced his job to a Chinese firm …

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Anonymous Coward

"The easiest way to catch these people out is to check access logs for the location of the worker, Sartin explained. If you've hired a coder in California, it's a dead giveaway if they are logging in from China."

That means nothing. The more savvy would just setup a server at a hosting facility and let their employees access it to make their outbound VPN sessions. Another option is to create a VPN proxy. It is not hard to make it look like connections from China are connections from say California.

Another option would be the use of wireless broadband and they just control a VM running on the company computer. No logs from say a VPN connection and the work is being done from your company computer.

Not hard at all.

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Not hard at all.

Indeed. For an RSA token, you could even setup a webcam so the remote dev can login without you having to send them the physical token.

The amazing thing is that the chap was bright enough to outsource, but dumb enough to fail at the remote access.

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Devil

Re: Not hard at all.

Quote: The amazing thing is that the chap was bright enough to outsource, but dumb enough to fail at the remote access.

Nothing particularly amazing. He was business bright and technically dumb. In fact, business dumb too - he would have made more money registering himself as a company and working that way (would have had better tax positions too).

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Re: Not hard at all.

"he would have made more money registering himself as a company and working that way (would have had better tax positions too)."

Umm... no. Because he was a full-time employee, and registering a company would have left a hefty paper-trail.

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Anonymous Coward

Remote access

"The more savvy would just setup a server at a hosting facility and let their employees access it to make their outbound VPN sessions. Another option is to create a VPN proxy. It is not hard to make it look like connections from China are connections from say California."

Remote access is typically allowed only from company-supplied notebooks which are locked down to ensure that nothing naughty is installed and that there is no routing or proxying going on. If you want to allow remote access in such a situation, a networked KVM offers an undetectable approach (because many people use standalone keyboard, mouse and monitor with their notebooks).

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Re: Not hard at all.

Actually, in the US, single programmers can not register as a company. For software companies, legally, they have to have at least 3 employees.

A few years ago, a software engineer got into a lot of trouble because of that clause. He flew an airplane into the IRS building in Houston to protest that legality.

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Re: Not hard at all.

"Actually, in the US, single programmers can not register as a company. For software companies, legally, they have to have at least 3 employees."

I am pretty sure that this is bull.

DO you have a source? From IRS?

I personally know several people who created their one-person software consulting business.

The idiot who flew his plane into the IRS building in Houston had other issues with IRS, like a tax audit...

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Re: Actually, in the US, single programmers can not register as a company.

A 'single programmer' most certainly can form a corporation in any of the 50 states, so I would have to ask: [citation needed].

In fact, said programmer could set up himself as an LLC (limited liability company) or either an "S" corporation or a "C" corporation. An "S" corporation provides for income and expense pass through to its owners before taxation (IOW the income passed to the owners is taxed only ONCE); while a "C" corporation is taxed before its dividends are passed on to the owners.

There are limits on the number and types of owners in a "S" corporation, while a "C" corporation do not have those limits. And, unlike an "S" corporation, whose yearly income and expenses MUST be passed to the owners; the "C" corporation can keep its profits "on the books" as retained earnings (see Apple for an example of a "C" corporation that does not distribute its profits to its owners).

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ummmm

Outsourcing their own job... isn't that what all shit kicking middle managment do?

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Trollface

Re: ummmm

Let's hire some management consultants!

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Re: ummmm

Exactly. The hypocrisy of these companies here stinks to high heaven, a perfect example of do-as-as-we-say-not-as-we-do, we-can-but-you-can't mentality. If companies can outsource, why can't employees? And I part-own a company myself. If I found one of my staff doing this, I'd commend them for their resourcefulness.

The only problem I can see in this is one of security. I'd want to see what measures the employee has taken to ensure company confidentiality; if they'd thrown open our codebase to some two-bit Chinese outfit THEN some stern words would be spoken. I'd want to see all the paperwork, contracts, quotes and so on, but if they'd addressed this satisfactorily then I'd have no problem with it.

After all, I spend a fair whack of my work time perusing and posting on El Reg. I can hardly complain if my staff want to do the same, as long the work gets done one way or another!

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Re: ummmm

" If companies can outsource, why can't employees?"

Because an employment contract is a 'contract OF service'. The service must be given personally by the employee. There is no right of substitution.

Other contracts are a 'contract FOR service' and substitution can occur in these.

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Re: ummmm

I believe the position is different in the US, but as a UK freelance your contract must allow you to make just such a substitution. Otherwise, HMRC may be able to claim that you should be treated as an employee ('IR35') with disadvantageous taxation results for both you and the company paying for your services.

[edit] As I can now see Richard 12 has pointed out, below.

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@ romanempire

Not quite - unless you explicitly state that the service must be given personally by the employee. And I've never heard of such a clause being part of a work contract.

A work contract, or to give it its proper title, a "job and person specification" is a list of tasks, and their outcomes, the incumbent is expected to accomplish. How they are accomplished is in most cases up to the person tasked with achieving that outcome. If the job includes cleaning the toilets, then my only expectation in that regard is clean toilets. If the employee then goes and finds someone to clean toilets in his behalf at a lower rate, what boots it as long as the job gets done? Of course, if the substitute hired to actually clean toilets then goes and cleans out the company safe, the employee who hired them has to bear their share of the responsibility for that.

It's like subletting a rented house. Here in Australia, the law forbids a landlord from preventing a tenant from subletting rooms in the house to other tenants. The tenant has to notify the landlord of course, but the landlord cannot stop the tenant from doing so. But if the sublet tenants then knock holes in the walls, it's the original tenant who has to foot the bill, because they're the ones who signed the contract with the landlord.

So if an employee outsources all or part of their job, as long as the company security is maintained and policies and procedures respected, then there's no problem. To punish an employee for simply finding a cheaper solution when that is what the entire company is about doing, is nothing more than sheer mean-mindedness.

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@Steven Roper

I don't know what kind of weird entitlement utopia you live in, but here in the real world a company is not a person. A company hires you to do a job so they can make profit, not so they can help the employment figures. They can choose who to pay to do the work because it's their company, and they are the decision makers.

Or to make it simple for you... employERs do the hiring, employEEs do not.

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Re: ummmm

It's a poor sword that doesn't point both ways.

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Anonymous Coward

Re: ummmm

Management consultancies are paid billions to do just this. They have no idea of Technology and simply use Google to subcontract the work. What there great at is building client relationships. Writing PowerPoint slides which there too stupid to even know that such functionality cant be delivered by their organization.

They are so bad they don't even have the skills to know when third party vendors try and sell to them nonsense technology such as Hadoop for enterprise data in the hope they will be the only ones to support it.

They are even stupid enough to pay for a Oracle RAC license when they only have a single node. If people really knew their job description. Find out what the client wants then hire somebody using Google to boss around. If they had the skills to hire the right people then they would pay their worth, there not even capable of this.

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Re: ummmm

>>It's a poor sword that doesn't point both ways.

A sword that points both ways would be useless. That's the whole point (!) of a sword, it has a good end and a bad end.

And I don't see you saying that the flow of money from employer to employee being one directional is a bad thing.

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Joke

Re: ummmm

"It's a poor sword that doesn't point both ways."

I'd argue that it was a *very* poor sword if it has a pointy bit at each end! How would you even hold it?!

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Boffin

Re: ummmm @ casaloco 27/02/13 04:15 GMT

"Let's hire some management consultants!"

Consultant. Someone who knows 48 positions for making love - but doesn't know any girls...

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Re: @Steven Roper

"but here in the real world a company is not a person"

Er - yes it is. Companies and corporations are regarded as persons having human rights for legal purposes. Their often unscrupulous exploitation of this fact is where many of the perceived social problems with them comes from.

As for the rest of your post, I can only say that your ideals sound rather Pharaonic to me. I may live in a weird entitlement utopia, but that sounds a lot better than the master-slave plutocracy you seem to be advocating.

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Re: ummmm

Please allow this slight correction:

Outsourcing their own job... isn't that what all shit kicking eating middle managment do?

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http://successfulworkplace.com/2013/01/17/man-outsources-own-job-to-china-fraud-or-brilliance/

So a business can outsource their processes but an employee is not allowed to outsource their business ?

I think this guy was a genius (although there have been reports it was a fake now)

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Unhappy

"I think this guy was a genius "

Wait till you try to support "his" code or make sense of "his" comments"

This s**t always sounds good unless you have to clear up after someone like this.

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Anonymous Coward

Re: "I think this guy was a genius "

If his code isn't being reviewed or monitored and is just going live without any interaction from a third party then you're screwed anyway.

My _only_ problem with this while thing is the breach of trust. Sounds like a great idea otherwise.

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Re: "I think this guy was a genius "

"My _only_ problem with this while thing is the breach of trust. Sounds like a great idea otherwise."

Kinda like horse meat in lasagne, then?

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Coat

Re: "I think this guy was a genius "

Nay, Nay and thrice Nay!

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Isn't that the definition of freelance?

The tax man will be very interested in any companies complaining about this behaviour, because it's a clear indication that the person is really an employee.

- So the employer has to pay NI, holiday pay, pension etc.

Not sure about other countries, but in the UK, if you can't subcontract your contract then you're usually considered an employee, and not a self-employed (freelance) contractor.

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Re: Isn't that the definition of freelance?

>>in the UK, if you can't subcontract your contract then you're usually considered an employee

No you're not. IR35 is normally measured on several factors. Lacking the ability to substitute does not indicate anything. In fact while most contractors have contracts which say "the contractor can provide a substitute" this is subject to the client's approval and is hardly ever used.

Come and find out more http://forums.contractoruk.com/accounting-legal/

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Happy

Re: Isn't that the definition of freelance?

" So the employer has to pay NI, holiday pay, pension etc."

I thought that the entire point of off-shoring to Asia was to get around those pesky little issues...

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Anonymous Coward

Re: Isn't that the definition of freelance?

>> IR35 is normally measured on several factors. Lacking the ability to substitute does not indicate anything

Er, yes it does. It's one of the factors. (Or at least it's believed to be; HMRC don't provide clear rules.)

>> In fact while most contractors have contracts which say "the contractor can provide a substitute" this is subject to the client's approval and is hardly ever used.

If it's subject to the client's approval, it's not really a *right* to substitute. My contracts say it's entirely unilateral in my favour (and then I promise them verbally that the clause will never be used). The point is not to use that clause; the point is to have it in there as *one* factor towards your claim of being a non-employee.

Disclaimer: I get my information from the PCG rather than from some dodgy web forum.

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Re: Isn't that the definition of freelance? Of and For

And, obviouslyt, those working in retail, fast food, or car wash sites cannot outsource, hehehehe. Even if money for the presumed hired person is diverted to a presumed jobless person, and even if the original hire is just helping peole get jobs, there will be the lack of official, company training, ID verification, acceptance by the other employees, and even immediate rejection and ejection of both the original and the stand-in workers.

So, by extension, why cannot an employer say "If you elect to regard this as a contract OF labor, your hires must be able to do the work we are contracting YOU to do. They must be able to at random demonstrate sufficient to greater than minimal knowledge, skills, expertise, and capabilities improvement for YOU to retain this contract OF labor..."?

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Megaphone

Right of substitution

Every freelancer/contractor will have a right of substitution clause in their contract. Outsourcing your own work is the perfect way out of an IR35 investigation. Provided there is no security clause they're doing nothing wrong.

Pretty sure employees aren't allowed to though.

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Re: Right of substitution

No, they won't. Many will but it's normally not something you could enforce. IR35 is based on the reality of your working relationship, not what the contract says... if your contract says "contractor will not be subject to direct control" or "contractor is not obligated to accept work" (the other 2 pillars of the IR35 core test) but your client approves your holidays and expects you to be there 9-5 every day unless they give permission, you still fail.

Come join our community http://forums.contractoruk.com/accounting-legal/

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Anonymous Coward

Re: Right of substitution

>> Many will but it's normally not something you could enforce.

It's IN THE CONTRACT.

>> IR35 is based on the reality of your working relationship

Right, so if a right to substitution is never *in fact* used, the only way to gauge its reality is by looking at THE CONTRACT. OTOH, we are talking about a rare case where the right to substitution is *actually used*, which means it *is* part of the reality of your working relationship.

>> if your contract says "contractor will not be subject to direct control" or "contractor is not obligated to accept work" (the other 2 pillars of the IR35 core test) but your client approves your holidays and expects you to be there 9-5 every day unless they give permission, you still fail.

True, but irrelevant to the original point. If you are subcontracting the work out, you are demonstrating non-employment status on a fairly strong basis. This would be a MAJOR factor towards being outside IR35.

The only problem is, no one can GUARANTEE you are outside IR35 until HMRC have you up in court and a judge agrees with you (or not). That's why it's such a sucky system. Nonetheless, on current information, the original point seems perfectly valid.

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Pirate

Google

Like all semi-incompetent programmers I get Google to do all the hard work for me

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Anonymous Coward

Re: Google

Google will help you with things that have been done before.

The problems start when you are trying to do something that hasn't been done yet anywhere in the world.

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Re: Google

"The problems start when you are trying to do something that hasn't been done yet anywhere in the world."

Yes, but unless you are at the cutting edge of some research programme the key warning sign is that you are considering doing something that hasn't been done before. Quite often - not always, I grant you - it's an indication that you might be about to do it wrong.

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Holmes

Re: Google

The problems start when you are trying to do something that hasn't been done yet anywhere in the world.

That's when you post a question on stackoverflow... at the very least, you'll get pointed in the right direction.

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Anonymous Coward

Re: Google

Its such programmers that take days to write a single page of a Web Application.

Work that should have been done in hours ends up taking days.

Fine if you are a good programmer and don’t know how to do something but an incompetent programmer then you will be out of a job pretty soon.

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Anonymous Coward

Re: Google

John - I have to disagree. Google is good for quickly finding API's.

Just imagine yourself wring a subsection of a program that verifies Basel II rules for a bank.

Where you gonna find a program on the internet showing you how to do it.

A lot of the work you do as a programmer is marked confidential so you cant post it on Slashdot.

Google's good for looking up API's or learning how to display a button with a programming framework.

If your an incompetent programmer you surely will struggle.

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Anonymous Coward

How long before El Reg authors outsource their job to China?

Preferably to someone that writes domestic appliance user manuals.

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Pint

Re: How long before El Reg authors outsource their job to China?

"How long before El Reg authors outsource their job to China?"

Well, if we see a Lewis Page article in support of hydro-electric power, or pointing out the futility of having a Blue Water navy, then we'll know what's happened...

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Re: How long before El Reg authors outsource their job to China?

I'm fine with that, as long as they don't outsource the BOFH.

...or the SPB!

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Free market economy...

Isn't this a great example of a free market economy. Why are employers complaining? They do the same, I'm 100% sure they understand what the word 'outsourcing' means - smacks of double standards to me.

Example: Employer agrees a price for a piece of work, the employee gets it done and satisfies the agreement. Employer happy with delivery. So what if the employee outsources the role and frees up some time to live his/her life?

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Unhappy

Re: Free market economy...

"Isn't this a great example of a free market economy. Why are employers complaining?"

In the particular example of the guy in California, the complaint is not about the work done but the breach of TRUST. He exposed secure systems by sending security tokens to some unknown Joe in China, and he passed off work done by them as his own. So he's a liar.

Anyway, after a few weeks at work surfing the web wouldn't he get SERIOUSLY bored??! I know how much I hate doing nothing at work day after day: it's mind numbing and you have no sense of personal achievement!

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Re: Free market economy...

If the employee wants to do that, they should not be an employee. Be an entrepreneur and set a up a company selling the service.

An employee who does this has no protection if the people he hires screw his employer over. A service company has indemnity insurance, contracts with the sub-contractors, etc.

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Happy

Re: Free market economy...

"Anyway, after a few weeks at work surfing the web wouldn't he get SERIOUSLY bored??!"

Nah, he'd just spend his time on El reg's comments section.

It works for us!

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Anonymous Coward

employers are less than impressed

Read: it's great when we do it to others, but outrageous and totally unacceptable when others do it to us.

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Re: employers are less than impressed

Because as a company owner yourself, you are well aware of the legal ramifications to the company and its clients? When your employer gets sued for $millions because the guy you hired unofficially was allowed to see sensitive data they promised their client would not go outside the building, you have insurance and legal protection to cover that?

You're just a wage slave totally ignorant to what goes on above you, which is precisely why it's dangerous if you blithely do things your own way. Shortcuts are called shortcuts for a reason.

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