Agency employment vs. outsourcing: what is the difference and when does each model make sense

The same production hall, two different models

A manufacturing company needs twenty additional workers. In one case they are supplied by a temporary employment agency. The workers arrive at the plant and the shift supervisor of the user employer assigns them workstations, gives them tasks, organises their work and checks the result.

In another case the company hands an agreed activity or part of a process over to an external partner. The partner provides its own team, its organisation and the delivery of the agreed service.

At first sight both situations may look similar: workers of another company perform work on the premises of the manufacturing plant. The legal and organisational logic, however, need not be the same.

The model of cooperation is not decided by the name of the contract alone. What also decides it is how the work is actually organised and directed.

How agency employment works

Agency employment means the temporary assignment of an employee to a user employer. The employee has an employment relationship with the temporary employment agency, which temporarily assigns them to perform work for the user employer.

The Labour Code provides that during the temporary assignment the user employer gives the worker work tasks, organises, directs and controls their work and issues instructions for that purpose.

That is an important practical feature of the agency model. The company does not need the agency to take over a specific production activity; it needs workers whom it will integrate into its own organisation of work.

Who remains the employer

Even though the day-to-day work is directed by the user employer, the employment relationship remains between the worker and the temporary employment agency. The agency provides wages, wage compensation and travel allowances, unless the law or a special regulation provides otherwise.

At the same time, managerial employees of the user employer may not perform legal acts on behalf of the agency towards a temporarily assigned worker.

Working and pay conditions

In a temporary assignment the conditions of a comparable employee of the user employer cannot be overlooked. The Labour Code requires that the working conditions, including pay conditions, and the employment conditions of a temporarily assigned employee be at least as favourable as those of a comparable employee of the user employer.

For a company this means that the agency model is not merely a question of the hourly price agreed between two companies. It has its own labour-law rules that must be respected when the cooperation is set up.

How long can a temporary assignment last

The Labour Code provides that a temporary assignment may be agreed for a maximum of 24 months. With the same user employer it may be extended or re-agreed within that period no more than four times; the law also contains specific exceptions.

When agency workers are used over a longer period, it is therefore not enough to watch only the current headcount. The company must also keep control of the duration and history of the individual assignments.

What outsourcing is essentially about

The term outsourcing is used in corporate practice for various models of externally securing activities. When assessing it, it is therefore not safe to rely on the name of the contract alone.

Operationally, outsourcing is typically distinguished by the fact that the subject of the cooperation is not merely the availability of a specific number of workers, but securing an agreed activity, service or result through an external supplier.

In a genuine outsourcing model the supplier has its own organisational role. The client defines the scope of the service, the required result, quality, deadlines or other parameters, while the supplier organises its own team so as to deliver what was agreed.

The biggest misconception: if we call it outsourcing, it is outsourcing

A contract may be titled outsourcing, provision of services or delivery of an activity. The title alone, however, does not rule out that the real functioning of the relationship will bear the features of a temporary assignment.

Section 58(2) of the Labour Code covers the situation in which work performed by an employee, through whom their employer or an agency carries out an activity for another legal or natural person, may also be regarded as a temporary assignment, if the statutory features are met simultaneously and the provider does not prove otherwise.

These features include that the other person gives the worker work tasks, organises, directs and controls their work and issues instructions to them; that the activity is performed predominantly on that person's premises and predominantly with that person's work equipment or facilities; and that it is an activity registered as that person's object of business.

The name of the contract does not in itself determine the true character of the cooperation.

A practical example from manufacturing

Imagine an external team of fifteen operators working in the client's plant. Every morning the client's supervisor distributes them across the individual lines, gives them specific tasks, moves them as needed, checks their work and directly handles the organisation of the shift.

If the cooperation is at the same time performed predominantly on the client's premises and with the client's equipment, and concerns an activity belonging to the client's object of business, the mere designation of the contract as outsourcing need not be decisive. Such a setup has to be assessed according to the actual way the work is performed and the statutory features.

Conversely, in a model where the external supplier takes over an agreed activity, organises its own team and bears responsibility for the agreed delivery, the organisational logic is different.

From a practical perspective

The greatest risk does not arise when a company deliberately chooses agency employment and sets it up according to the rules of temporary assignment.

The risk arises when both sides believe they are using outsourcing, but the day-to-day functioning of the cooperation is set up as the provision of labour.

The difference often becomes visible at shift level: who distributes people across workstations, who gives them instructions, who checks their work and who resolves operational decisions.

How we approach this at FLEXIVIO

Before cooperation begins it is important to first understand what the client actually needs. Sometimes they need to add labour into their own management. At other times they want to entrust an external partner with broader operational responsibility for an agreed activity.

At FLEXIVIO we therefore consider it important to set the scope of the service, the competencies, the way work is directed and the responsibility before the workers start. The contract and everyday practice must speak the same language.

If a specific setup raises labour-law doubts, the right step is an individual legal assessment before the model is launched.

Agency employment and outsourcing in a simple comparison

When the agency model makes sense

• workers are integrated into the client's existing shifts,
• tasks are assigned to them by the client's managers,
• the client has its own processes, supervisors and management system,
• the need for labour is temporary or flexible.

In such a case it is more transparent to use the model that corresponds to the real way the work is organised.

When outsourcing can make sense

Outsourcing can be suitable when a company wants to entrust an external partner with a specific activity or part of a process and expects from them not only people, but also the organisational delivery of what was agreed.

A clear definition of the scope of the service, the responsibilities, the way work is directed, quality and result is essential.

Five questions before signing the contract

• What exactly are we buying — the availability of workers, or the delivery of a specific activity or service?
• Who will give the workers their specific work tasks every day?
• Who will organise, direct and control their work?
• What exactly is the external supplier responsible for?
• Does the way things work on the shop floor match what we have written in the contract?

What you can do today

• Who distributes the external workers across workstations in the morning?
• Who gives them their specific work tasks?
• Who decides about moving them during a shift?
• Who checks the way the work is performed?
• For which result or service does the supplier bear its own responsibility?
• Do these answers match the model you have set up contractually?

Conclusion

Agency employment and outsourcing can address a similar need of a manufacturing company: securing capacity or external support for the operation. They are not, however, automatically the same model.

In a temporary assignment the law explicitly assumes that the worker's day-to-day work is organised, directed and controlled by the user employer. In an outsourcing model it is essential that the declared external delivery of the activity is matched by the actual organisational functioning.

The right question is therefore not which name sounds better. The right question is who will actually organise and direct the work, and what they will be responsible for.

Legal sources and note

This article draws in particular on Section 58 of Act No. 311/2001 Coll., the Labour Code, and on official information materials of the National Labour Inspectorate concerning temporary assignment and agency work. The legal situation was verified in September 2026.

This article is of a general informational nature. A specific contractual and operational model must be assessed according to its actual setup and individual circumstances; the article does not replace legal advice.

What we recommend reading next