Making direct sourcing work for your business

Read our Guide to Direct Sourcing to learn how to cash in on the 15% staffing agency dividend of moving to direct sourcing as a component of your talent acquisition plan

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Updated January 2022

Contents

This is an abridged version of our Guide to Direct Sourcing.  For the full article, please download the PDF version.  This guide has the following sections:

Section 1 - Impact of COVID-19
In this first section, we explain why the COVID-19 pandemic has changed the landscape of talent, probably forever.

Talent – The start-point

A new world of talent-related risk

Employer perspective

Workforce perspective

New horizons

Section 2 - What is Direct Sourcing?

In this section, we define the key industry terms, including a detailed description of what Direct Sourcing is and why businesses are investing in it.

Direct Sourcing (DS)

Employer of Record (EoR)

Why a Hybrid model works

Obstacles to adoption

Benefits

 

 

Section 3 - Getting Implementation Right

To examine Managed Direct Sourcing implementation, we step through the USTECH SOLUTIONS Managed Direct Sourcing delivery model example.

The fit

The method

The tech

The governance

The outcome

The team

 

short version of ustech busy workers pic

Section 1 – Impact of COVID -19 on the Talent Industry 

COVID-19 added ever more demand stress to an already oversubscribed talent industry

It’s known that COVID-19 will cause a short-term blip on economic output, but new perceptions of employment risks will also change talent sourcing forever.

The psychology of employers and workers has inevitably shifted for a working generation who’ve never experienced a global event like it before.It’s known that COVID-19 will cause a short-term blip on economic output, but new perceptions of employment risks will also change talent sourcing forever.

The psychology of employers and workers has inevitably shifted for a working generation who’ve never experienced a global event like it before.

There is a talent shortage, globally.

Talent shortage is viewed as the top emerging risk facing large enterprises.  

Source: Gartner US centered survey of 137 senior executives in 4Q18

The US unemployment rate is at a record 50-year low, and the US economy had 7.6 million unfilled jobs.

Source: US Department of Labor

home working

Already, organizations have responded to the skills shortfall by sourcing more work through contractors, leveraging direct sourcing methods.

A 2018 survey of 6,500 executives worldwide found roughly 40% of respondents expected freelance workers to account for an increased share of their organization’s workforce over the coming five years.

Source: BCG survey in partnership with Harvard Business School’s Managing the Future of Work initiative

Increased indirect employment has skyrocketed staffing costs and agency fees.

The latest industry research suggests that the total cost of hiring one new employee can be as high as $5,000, or more, in a professional or manufacturing industry. Even hiring a new employee in a services-related industry typically costs more than $1,000.

Source: Recruiterbox Research

Employers will re-think their talent sourcing priorities and approach in light of first-hand experience of a global health and economic event. Direct Sourcing is one vehicle for sourcing talent likely to grow and grow.

Desirables

  • Increase agility by lowering FTEs % in the event of another global economic event
  • Attract the best talent by leveraging our brand appeal online

Undesirables

  • Employment costs and necessity of agency spend to source talent
  • Employment (and tax) risks of contracting individuals directly by reducing contractors

Is direct sourcing right for you?  Is it too costly for your business?  Do your talent needs justify a hybrid approach?  Get the answers to your questions by talking to one of our workforce management consultants.

Section 2 – What is Managed Direct Sourcing?

Managed Direct Sourcing (MDS) is a hybrid talent acquisition approach that blends a Direct Sourcing technology ecosystem and ethos with Employer of Record services. It means organizations can install an effective way of harvesting talent from their online presence without implementation or operational overheads.

What is Direct Sourcing?

Direct Sourcing describes the activity of harvesting the talent pool formed by their internal recruiting activities and brand reach to source gig workers.  This talent pool includes people who’ve approached an organization through its social media presence, former employees, retirees or applications within the company’s own applicant tracking system.

What is Employer of Record?

An Employer of Record is an Independent Contractor Compliance solution whereby a third-party company provides payroll process outsourcing, enabling organizations to leverage their ability to tap into talent pools for contingent workers.

direct sourcing model illustration
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MODERN WORKERS ARE HAPPIER TO FIND WORK ONLINE

As far back as 2015, Pew Research found that 41 percent of adults have used a smartphone at some point in their job search while 28% of Americans and half of young adults have used a smartphone during a job search. That number today is thought to more than 65%.

Benefits of Managed Direct Sourcing

Faster Talent Sourcing

MDS makes it faster to source talent; from the point of requirement definition to starting work.  Candidates can be pre-screened and available on-demand.

Cut in Talent Costs

Significantly reduces recruitment and resourcing costs. No longer is the business dependent on agencies.

Agility

Many jobs can be fulfilled faster using expert practitioners as project (SOW) and micro-tasks.

Improved Business Continuity

Should a global event like COVID-19, the organization can continue to get work done using remote indirect workers familiar with the business and how it works.

Best-Fit Talent

Richer AI-enabled filtering and a larger talent pool enables hiring managers to more easily find the best-fit talent they need.

Improved Risk Management

Overcome risks of co-employment, data privacy and loss, non-compliance on tax and employment laws, simpler offboarding etc.

Section 3 – Implementation

An effective Managed Direct Sourcing (MDS) approach should blend best-in-class Direct Sourcing technology with Employer-of-Record managed services.

A Direct Sourcing tech stack supports the lifecycle of direct hiring and onboarding

techstack for direct sourcing

Governance

 Managing a workforce today requires deep expertise and understanding of the legal frameworks that exist in territories and industries.  It demands thoughtful design of systems,  methods and checks-and-balances to ensure compliance.

The Business Case for Direct Sourcing

Building a business case on a wide range of KPIs can reduce effort and focus on ‘big ticket’ issues that make the difference. From previous case examples, we know the following areas offer compelling reasons to adopt Managed Direct Sourcing.
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Global Reach

The ideal solution is to work with a talent partner with global reach.  The talent market today is truly global. It takes a global co-location approach and a big support team to give your business the resources it needs to excel at Managed Direct Sourcing in a cost-effective way.

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