As the business and hiring worlds evolve, working to staff your company can feel difficult and overwhelming. Methods like using a recruiter can be less work for you, but end up costing more as you pay the recruiter a premium for top talent. On the other hand, using online sites like LinkedIn can leave you spending precious time combing through underwhelming options and applicants that aren't the right fit. Direct sourcing strategies may be a better way for your business as you explore ways to hire employees. Direct sourcing skips third-party recruitment agencies and goes straight to the talent pool to find contingent workers. It's a cost-saving measure for you and helps independent talent find an appropriate place for their expertise.
Where does one start when trying a new hiring tactic? It's important to be aware of your employer brand because you want to attract top talent! Contingent workers can help you reach deadlines and flush out your roster while cutting down on costs. This avenue of talent acquisition puts you in the driver's seat and identifies independent professionals who fulfill your needs. In this article we will define the direct sourcing model, giving you examples of how it could benefit your recruitment process.
What is Direct Sourcing?
As mentioned above, direct sourcing asks hiring managers to go straight to contingent workers or independent contractors for their staffing needs. You avoid working with a staffing agency middle man, which saves money and helps the company be more aware of its staff. You're able to work with the hiring community to identify your needs and re-engage in an open network of contingent talent. This means you're in control of who works for your business.
You might be unfamiliar with contingent workforce programs or freelance management systems. Think about the candidate's journey through direct sourcing; they're self-employed and talented in their field. As a freelancer, they want to help a business accomplish its goals and gain experience themselves. It can be overwhelming on either end to be in charge of one's own employment needs, but a direct sourcing program is accessible and easy to manage. Considering ways to use direct sourcing, let's look at the various pros and cons.
Pros of Direct Sourcing
- Cost savings: A benefit of direct sourcing includes saving money. You cut out payments to a staffing agency, and by working with contingent talent, you won’t worry about paying out employee benefits or employment taxes. A staffing agency can charge a premium to fill your needs, causing you to feel the finance pressure.
- Increased contact with the talent pool: You can find ways to make connections in the community around you or online marketplaces. Virtual work opportunities have increased, especially in the last three years during the pandemic. One benefit of this cultural shift is the increased ease in finding temporary workers online. This increases your chance of discovering people who are a good fit for your business and have the skills and talents you're desperate to find.
This is a chance to meet appropriate independent talent in person or online. Face-to-face contact allows your employer brand to attract potential employees. Let them see your company culture, and then use your employer value proposition to do the talking for you.
- Flexibility: You're not tied down to a specific recruiting company, so you can dabble in different techniques to find your contingent talent. Sure, online resources like LinkedIn or Monster.com can help you look for candidates and view a wide variety of resumes. However, there are other ways to practice direct sourcing that may work better for you. You can use social media platforms to advertise your business and openings, and visit job fairs or local school campuses to find students looking for independent work.
Along with the flexibility of finding independent talent via direct sourcing, it's convenient to have employees that fill a need when necessary. Once their contract is over, or once the need for their freelance work has been fulfilled, workers can go their own way and you don't have to worry about severance pay or similar concerns.
Cons of Direct Sourcing
- Must plan ahead: It can be easy to inundate your current workforce with too many employees when you haven't considered what you need before hiring. When you hire regular employees, it's often because there's an immediate need to fill. With direct sourcing, you may see that you have a project to finish and are feeling the pressure to do so. When your need is urgent, you may bring in multiple contract employees and this may cause an issue with having too many employees for your needs. The ease of filling the spots can also create a blind spot in your business plan. To combat this, take the time to plan out your needs and how many people are required before direct sourcing.
- Competition and co-employment risks: Because contingent talent is by definition independent, it's common for these people to be freelanced out to multiple companies. It's important to consider that some of these companies might be competitors and may now have some access to your confidential information. Be sure to cover your bases and ensure that independent contractors understand confidentiality statements and respect the privacy between the businesses they work for.
Co-employment occurs when two or more companies hold responsibility over a person. The risk comes because the companies, both the hiring business and the organizer of direct sourcing, have employer obligations toward these employees. It is especially prevalent when considering which employer owes the employee the various items or pay they need to complete their job. If you're using a company that offers direct sources, make sure you have a conversation with them regarding who covers which responsibilities to the employee.
- More work for onboarding and training: Because independent employees aren't a permanent part of your workplace, you'll have to put more effort into onboarding and training these workers. This time and effort can slow down your processes. Consider streamlining your training to make the most of your time and help the contingent workers to get to work promptly.
The Difference Between Direct Sourcing and Recruitment Agencies
Now that you're aware of direct sourcing and its pros and cons, the next consideration is the difference between using this technique versus a recruitment agency.
Direct Sourcing Strategies
Direct sourcing skips a third party's involvement and places the momentum on your hiring managers. They have to do the initial legwork to place ads online, utilize social media, talk to current and previous employees to share with their friends and family, and contact local schools and job fairs. This can seem like a lot of work at first, but as mentioned above, your employer value proposition becomes clearer the more advertised you make it. Having these passive hiring strategies in place, it'll become easier to use direct sourcing to fill your employment needs.
Direct sourcing can require your hiring managers to examine current and previous employees to find connections, and then reach out to the people around them. Direct sourcing builds relationships with talent pools in your community. Working with local schools and attending job fairs lets people see your company culture and how you treat employees. Ensure that, along with the community, you maintain good standing with your current and former employees. Don't let your name get sullied by those who see you on a daily basis.
These third-party agencies reduce work for hiring managers. They do the legwork to search through employment sites, contact prospective hires to set up interviews, and ideally only give you top talent to sort through. However, these staffing agencies require a fee for their services.
Using Contingent Workers
Contingent workers provide the help you need to fill your employment needs at less cost. As mentioned, these workers can be found using direct sourcing. Here are some considerations to have in mind as you hire contingent workers.
Labor Law Compliance
One of the main differences between regular employees and contingent employees is that contingent talent is subject to different labor laws. As independent contractors, these workers are not held by the same tax laws or benefit requirements. They're paid the agreed-on fee for their services but aren't bound to your HR department to handle their taxes or ensure they have health insurance and other benefits. Doing your due diligence in the research can keep the right candidates and assist your organization to get the work completed.
Researching the laws associated with the IRS website ensures compliance with tax laws. You don't have to worry about providing benefits, so an independent employee can offer a lower-cost option for your business. Full-time employees can build the core of your business and help strengthen your culture, and temporary workers provide necessary help and outside points of view. This can also increase the number of clients you reach.
Broadening Talent Pool
Along with potentially extending the number of clients you reach, direct sourcing can extend your talent pool as well. As briefly mentioned above, because you're bypassing a traditional staffing agency, you have control over the contingent talent you see and bring into your business. You can lean on your internal recruiters or even a company like TalentCrowd, a service provider that works as a direct sourcing program. One of the benefits of direct sourcing is connecting with your community as you source talent and scour online marketplaces for self-employed workers. You know what you're getting and allow for a gradual transition as you increase your contact with the pool of workers that fulfill your needs.
Status and Loyalty
While there are many benefits of direct sourcing, you need to keep your best talent around and that starts with respect. Even if they don't fall under the same legal or tax category as a full-time employee, that doesn't mean they should be treated differently. Show the contingent talent that they're worthwhile and valuable to your business. They're helping to fulfill tasks for your clients! These workers need a buy-in; engage with them, and create a space where they feel important.
Determining the Right Options in Acquiring a Talent Pool
So, is a direct sourcing strategy right for your company? As mentioned in the pros and cons section, consider your work plan and your employer brand. These two items impact your decision the most as they determine the long-term relationships you build with your current and core employees as well as the contingent workers you bring in to help.
Forecasting a Work Plan
This term refers to when a manager examines the needs at hand and makes predictions about the outcomes of current projects. These plans occur as you review past goals and present projections, cut unnecessary costs, and boost the likelihood of the project's success. A work plan defines a timeline and the costs necessary to finish. With direct sourcing, you want to make sure you have the contingent workers you need to be successful.
Enhancing the Employer Brand
Your brand covers everything from your reputation and company culture to your employee's day-to-day experience. Your presence in the community and how your employees and clients share their experience matters. Determine any weak spots in your brand and fix them. Strengthen your culture to determine the best outcome in hiring, and keeping, future employees.
Finding independent workers to fulfill your talent acquisition needs can feel overwhelming, especially when you choose to skip over a service provider and go straight to the supply chain. However, direct access to temporary talent with specialized skills can be cost-effective and give you greater control over the selection of your candidates.
Use TalentCrowd to enhance your direct sourcing strategy and fulfill your employment needs. They aren't a staffing agency that would overcharge you. There are plenty of options in their pool of contingent talent to fill the open positions at your business.