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In general it is a question of preparation, whether negative things will happen or not. You cannot say that every outsourcing has negative aspects by default.
Totally agree with Mohd Sheraz Lari - legal is an extremely important factor, maybe the most important. But beyond legal there are other negative things that might happen.
The risk to lose knowledge can involve a huge negative impact and includes also the risk of being too dependent from the contractor. Staff means people, people mean knowledge, knowledge means greatest asset of a company.
Reduction of flexibility (like shifting from one department to another) can also be a negative aspect as the staff that is no longer with you is no longer under your control.
Staff might be annoyed and performance will suffer transitionally. Same for potential substitutes from outside. This should be considered in the ramp up phase planning.
It is also possible that requirements are not well described in a Statement of work (SOW) - that can cause deviations regarding the understanding of deliverables. Thus it is extremely important to have a rock-solid SOW.
Other issues might come up when customers must validate or approve an outsourcing. They will most likely ask for a portion of the generated savings and have surely an audit that might generate findings that cause additional cost.
From health and safety perspective an external service provider in-house is always a risk. The expectations, requirements and deliverables should be clearly described in the SOW and align with own standards.
Outsourcing the staff should first fit the legal system , i.e, the hired staff should have valid work permits, no run-away from previous employers etc. Because if these things come under the radar of the Labor Ministry, then it is your firm under the axe.
