8 Ways Direct Sourcing Reduces Staffing Costs

By MBO Partners • May 19, 2024

7 MIN

Key points

Independent contractors provide quick access to in-demand skills and staffing flexibility.
With direct sourcing, managers can source talent internally rather than relying on a third party.
Independent talent who have successfully worked with your company are great candidates for re-engagement.

Direct sourcing helps companies easily access and seamlessly connect with top independent talent while significantly reducing costs. With direct sourcing, managers can source talent internally, rather than relying on a third-party such as a consulting or staffing company to fill talent needs.

Our workforce ecosystem today is more diverse than ever before. And companies are increasingly using independent talent to achieve their goals. Independent contractors provide quick access to in-demand skills, staffing flexibility, and the ability to complete projects on-demand. Here are eight cost savings opportunities companies can realize from implementing a direct sourcing solution.

1. Benefits

When there is demand for a new skill or project, it is often more cost effective to engage an independent contractor than hire a full-time employee or upskill an existing employee. Independent talent are often more cost efficient than hiring an employee who may require costly benefits packages and the prospect of continued employment even after a particular project has been completed.

2. Hiring Flexibility

Independent professionals give enterprises the ability to bring skilled experts on board when and where they are needed most. This flexibility not only allows companies to be more agile and competitive among their peers, but it also gives them the opportunity to bypass the expense of recruiting, hiring, and training full-time employees for similar initiatives.

3. Simplified Onboarding

Direct sourcing tools such as online marketplaces can help enterprise managers post project opportunities to source and self-select independent talent that fits their needs. This leads to cost savings by reducing the need for time-consuming recruiting activities such as contract administration or onboarding.

4. In-House Recruiting

Direct sourcing minimizes the need to work with a staffing company or consulting firm when searching for and engaging independent talent. One of the main benefits of this is that it allows companies to avoid costly markups that accompany third parties, which can range from 20-40%.

By moving recruiter functions in-house, companies can benefit from the expertise of someone who understands exactly where to find and how to attract independent talent specifically. An internal recruiter with these skills can even proactively stock a company’s marketplace with pre-vetted talent, minimizing future vetting and onboarding time.

5. Empower Managers

Direct sourcing helps to reduce the amount of time managers spend reviewing candidates by creating a simplified, easy-to-follow process. Educate managers about the benefits of independent talent and get them involved in the process. When managers are able to access the talent they need to meet their goals, they will work more efficiently and effectively.

6. Reduce Compliance Risk

When engaging independent talent, it is important for companies to be mindful of compliance. Independent contractors cannot be engaged or treated like traditional employees. One of the biggest benefits of implementing a defined direct sourcing strategy is the ability to reduce compliance risk.

A properly implemented direct sourcing strategy will ensure that independent talent are correctly vetted and engaged, reducing costly lawsuits, fines, and penalties associated with worker misclassification. A direct sourcing strategy minimizes cost by giving independent professionals everything they need to begin their engagement in one place and optimizes internal resources to reduce the risk of compliance violations.

7. Attract Top Talent

Direct sourcing tools help position your organization as a Client of Choice—a preferred destination for self-employed professionals. As competition for the independent workforce increases, positioning your company as an optimal client to work with will help you attract and retain top talent.

Independents value freedom, control, and flexibility in their work. An accessible system that automates onboarding, payment, and engagement documentation will create a positive experience both for your company as well as for the independent talent you engage. Working with a group of satisfied independents will help increase productivity levels and foster interest in re-engagement.

8. Re-engage Preferred Talent

Independent talent who have already successfully worked with your company are great candidates for re-engagement. They are already familiar with the processes and culture of your company. It is much easier to bring this group of talent on board for future project needs. Their expertise has already been proven, they are familiar with how projects run, they have established strong working relationships, and the onboarding process will be simple and quick.