Direct Sourcing: Myths and Concerns

Directly Sourced contractors are paid on average 15% more if not managed correctly.

Even though many companies are already utlising direct sourcing it is not always very well understood, maintained, or leveraged.

Some of the misconceptions:

1. We don’t do much direct sourcing

Companies often do not track their direct sourcing and therefore are unable to quantify the amount of sourcing is happening. In our experience 30%-50% of contingent programmes workforce has come directly from direct sourcing.

2. Direct sourcing is more cost effective.

There is no straightforward answer to this as there are many factors that need to be considered.

Most companies believe the theory that they are not paying the vendor fees and therefore it must be less expensive. We have seen in practice this is not always the case, as the additional costs such as staff, payroll and higher pay rates are not taken into account.

If a direct sourcing programme is not correctly managed a contractor sourced via this channel can cost up to 15% more than a contractor who is via a preferred supplier who works according to a rate card. As direct sourced candidates are not represented by an experienced agent who understands the market rates and what are comparable salaries, they can ask for higher rates.

3. We only need direct sourcing

Direct Sourcing isn’t always the solution to all your needs. It can be a highly powerful strategy when coupled with strong staffing agencies or vendors who understand the importance of resourcing correctly, and use it as one of the pieces in the sourcing continuum.

These two sourcing channels complement each other and serve different purposes in the overall sourcing spectrum. Direct Sourcing can sometimes be perceived as a more effective way to recruit but this could also point to problems in your selected vendors and highlighting whether they are the correct partners for your business.

Good direct sourcing programmes should have similar compliance and rate rules to your normal sourcing channels, and both should be aligned to your business strategy; delivering to your procurement and business objectives.

For all types of direct sourcing, a company should engage a single, independent third-party contractor payrolling (contract administration) provider to drive and manage efficiencies, standardise the contract compliance framework and provide a front-line presence for risk and issue management.

4. You don’t need direct sourcing

Once a direct sourcing programme is set up it has an important relief valve for the contingent program that can help meet hiring manager expectations and mitigate performance challenges that can crop up in a very competitive talent market.

Resourgenix recommends the following to start a Direct Sourcing program:

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