Most prevalent myths and surprising truths on direct sourcing contractors

Direct sourcing is a rapidly growing practice in the market where companies are opting to engage talent directly, instead of having to go through a third-party recruitment agency.

Direct sourcing and contingent workers are a natural fit, with both contributing toward an organisation’s agility and flexibility. By their very nature, contractors can allow companies to rapidly scale up and down as needs require, which allows you to have a firmer grasp on your hiring practices and cut out the middle man.

These contractors can come from a number of different sources, including:

Direct sourcing examples

The global gig economy is worth a massive $4.7 trillion, $768 billion of which is from directly sourced contractors.

Despite being an enormous segment of the workforce, there are a number of misconceptions surrounding direct sourcing, leading many to implement poor practices or neglect this approach entirely.

Below, we outline some of the most prevalent myths, and some surprising truths, when it comes to direct sourcing your contractors.

Myth: Direct sourcing is too risky for our organisation

Many organisations are put off direct sourcing because they perceive the risks of getting it wrong are too high. Common concerns include:

Barriers to direct sourcing

These are all valid concerns.

However, organisations should ask themselves whether hiring contractors through a number of recruitment suppliers, who all have their own interpretation of legislation and inconsistent processes, is that much better. In recent years, we’ve seen recruitment providers exposing clients to noncompliance, misclassification and labour-hire licensing fines.

With transparent, defined recruitment processes, all these apprehensions can be mitigated. If organisations use reputable talent marketplaces, together with proven payroll and workforce management providers, risks can be far below that of an inconsistent approach through a number of suppliers.

Fact: You directly source more than you realise

Direct sourcing likely makes up a huge chunk of your contingent workforce, even if you’re not aware of it. According to some sources, it is far more prevalent in organisations than they realise, sometimes reaching up to 75% of an organisation’s contingent workforce.

This is largely due to a severe lack of tracking and visibility of contractors in the workplace.

We’ve previously talked about hidden contingent workforces in the past, and directly sourced contractors are no exception. To circumvent headcount or deal with a short-term priority project, hiring managers often use departmental budgets to directly hire contractors on a short-term basis. The issue is when these workers get lost in an organisation, leading to excess costs and compliance breaches.

All direct sourcing programs need a strategic direction, robust processes and business-wide buy-in. Businesses will benefit from a workforce audit, which will likely uncover a host of other contractor-related noncompliance issues.

MYTH: It’s too hard to find contractors ourselves

Some companies assume directly sourcing talent isn’t for them as they don’t have the expertise or relationships to find quality talent.

In fact, there are many talent marketplaces out there today that remove the barriers to entering into direct sourcing. The focus of these marketplaces can vary, from gig workers to professional independent contractors, and can cover a wide variety of industries and professions. These networks give you the ability to develop and maintain a customised talent pool, reducing your recruitment costs and time to onboard, with minimal effort.

For instance, CXC’s talent marketplace, Workforce Exchange, harnesses the capabilities of proven and qualified talent; workers who have successfully completed a contract for our other clients. Sourcing a contractor is as simple as submitting a request to our team, who identify the appropriate resource from a pool of 9,000+ contractors within 48 hours.

Fact: Direct sourcing can save you time and money in recruitment

One of the benefits of directly sourcing talent is the ability to minimise reliance on third-party staffing firms, leading to significant cost savings. Staffing firm markups on talent typically fall in the 20–40% range, which is an enormous expenditure if you’re looking at hiring by volume.

A direct sourcing strategy can also reduce the time it takes to fill a skill gap, dramatically reducing the costs associated in the hiring process. Additionally, having the ability to quickly find the talent you need leads to stronger workforce planning and greater control over the value proposition you put forward in the market.

However, occasionally this can prove more costly – directly sourced contractors can often negotiate a higher rate with hiring managers. It’s important to have a direct sourcing program in place to avoid paying more for a given role.

Myth: Companies can avoid direct sourcing

Although there are a number of hurdles that companies need to overcome to develop a truly performing direct sourcing program, direct sourcing will always remain an essential part of your workforce strategy. At the very least, it is an effective strategy to complement your recruitment agency practices when required.

In addition to the efficiency and cost benefits we’ve called out previously, more gains can include:

Benefits of direct sourcing

In today’s world, traditional methods for sourcing and engaging contractors are being progressively disrupted by direct sourcing.

As employers are finding it increasingly difficult to find and retain the skills they need, it’s essential you develop a direct sourcing strategy to remain competitive in this war for talent.

As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce strategy. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your program.

If you would like to find out more about how we can help please contact us here.