AN entrepreneur investing in establishing a manufacturing unit or setting up a business will aspire to get maximum returns in terms of profit from his initiative. Depending upon the magnitude of investment, he will have no control over the cost of plant equipment and raw materials, which will depend upon market rates.

However, he will make every effort to keep his administrative or fixed costs as low as possible. This includes the payment of monthly salary and benefits to employees. Here, he would explore all options to curtail the cost without compromising on the quality of his product or business interests.

He will decide about the areas where people with higher education will be required and those who will provide support services. In the former case, he will try to get the best people available and offer them an attractive salary and benefits. He may outsource the support services at competitive rates. This practice is prevalent the world over.

In Pakistan, the practice of engaging third-party contractors has been common since the inception of industry. The motive has been to cut costs and increase efficiency. Initially, there was a huge difference in cost for the same work done by the company’s own........

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