Psychological Consequences of Outsourcing among Public Sector Employees: Evidence from Health and Education Sectors in Punjab, Pakistan

Outsourcing has increasingly been adopted in Pakistan’s public sector, particularly within health and education services, as a strategy to enhance efficiency and reduce operational costs. Despite its widespread implementation, limited empirical evidence exists regarding its psychological consequences for employees. This study examines the impact of outsourcing on employee mental health in the health and education sectors of Punjab, Pakistan, using a mixed-methods research design. Quantitative data were collected from 400 outsourced employees (200 from the health sector and 200 from the education sector) using the General Health Questionnaire-12 (GHQ-12), while qualitative insights were obtained through semi-structured interviews with 40 participants. Statistical analyses, including descriptive statistics, chi-square tests, and multiple regression analysis, revealed that job insecurity and workload significantly predicted higher levels of psychological distress, including stress, anxiety, and burnout. Conversely, organizational support demonstrated a significant negative association with psychological distress. Comparative analysis indicated that employees in the health sector experienced higher levels of distress than those in the education sector. Qualitative findings further highlighted pervasive concerns related to contract instability, excessive workload, and the absence of formal mental health support systems, with employees primarily relying on informal coping strategies. The findings underscore the need for policy-level and organizational interventions, including the integration of mental health provisions, workload regulation, managerial training, and transparent communication, to mitigate the adverse psychological effects of outsourcing on public sector employees.