Direct sourcing has recently become one of the most popular, filling open positions with contingent talent. By leveraging the company’s unique brand and developing a private database of qualified candidates, the hiring process can proceed in a faster, more cost-effective manner than ever before.
At the same time, however, there is no denying that many organizations aren’t equipped for the wide variety of human resources tasks associated with the direct sourcing model.
Its direct sourcing program will struggle if a company fails to provide a quality hiring and onboarding experience for contractors and others. The brand perception will falter, and back-office errors could leave the organization financially vulnerable.
Because of this, many organizations choose to combine an employer of record (EOR) model with direct sourcing, enabling this hiring solution to reach its full potential. In these circumstances, the direct sourcing provider also serves as the legal employer for contractors hired to work with the company. The distinct benefits of using an EOR model can profoundly impact future hiring outcomes.
1. Enhancing the Employer Brand Experience
An employer of record manages the entire process of engaging with contractors. From initially attracting contractors to an open position to onboarding and offboarding, the EOR handles everything.
While this can certainly help reduce the overall workload of your back-office staff, it delivers vital consistency each time your organization engages with contingent workers. By managing all aspects of the candidate experience (including pay and benefits), the EOR helps deliver a professional, positive experience to all contractors who work with your organization.
This level of professionalism plays a crucial role in how contractors perceive your company. While engaging and rewarding work is undoubtedly essential in getting them to want to work with you again, a streamlined and professional back office experience will significantly influence their desire to work with you again. An EOR model combined with direct sourcing enhances the employer brand, leading to solid word of mouth and contractor retention.
2. Optimizing onboarding
Onboarding is a critical area where combining EOR and direct sourcing can significantly impact your contractors’ experiences with the brand. Without an EOR model, contractors are often subjected to time-consuming delays that keep them from getting to work, particularly regarding payroll and other necessary HR tasks.
Miscommunications and mistakes can quickly occur when a contractor is handed off from one department. A lengthy delay from when someone is told they’re hired for a project to beginning the onboarding process is often enough for contractors to decline to work with you ultimately.
With an EOR, all elements related to hiring and onboarding are handled by the same organization. As a result, qualified contractors won’t fall through the cracks — and more importantly, they can get to work that much sooner.
3. Eliminating Worker Misclassification Risk
The prevalence of contingent workers has resulted in an increasingly complex regulatory environment, particularly when it comes to classifying contractors. Worker classification directly impacts how a company is required to handle taxes, withholdings, and benefits. Improper classification can make an organization vulnerable to significant fines from the IRS.
The direct sourcing model may seem to complicate worker classification further. The possibility is that the direct sourcing partner and the company that engaged the contractors are viewed as co-employers. On the other hand, with an EOR model, the direct sourcing provider is legally considered the contractor’s legal employer.
In other words, the EOR partner takes on all responsibility and liability for proper worker classification, giving your organization one less thing to worry about.
4. Handling Other Key HR Tasks
An employer of record further ensures full compliance with local labor laws by fulfilling a wide range of HR and legal responsibilities associated with engaging the contingent workforce. This includes payroll administration and negotiation, terminations and other HR issues, and even healthcare coverage and benefits administration (when applicable).
By taking care of these essential back-office tasks, EOR ensures that your office staff doesn’t have to take on extra work to enlist the talents of qualified contractors. They can continue to focus on their current responsibilities. Leaving these tasks to industry experts also helps prevent mistakes or miscommunications that could disrupt work with a contractor.
5. Letting You Focus On Engaging With Top Talent
While back-office elements are undoubtedly crucial for engaging with contingent talent, actually working with your company is what will broadly define a contractor’s experience — and likely determine whether they want to work with you again. Building a strong talent pool for your direct sourcing efforts is dependent on your company’s ability to provide an enjoyable work environment.
By combining an EOR model with direct sourcing, your team is free to focus on things within your area of expertise that will have the most significant impact on a worker’s experience and productivity. From streamlining project collaboration to simply helping a contractor feel like part of your team, these actions can go a long way in defining your employer brand in a manner that makes contractors want to work with you again in the future.
When you don’t have to worry about back-office HR tasks, you can devote your full attention to completing projects alongside contingent talent, delivering a better work experience while simultaneously enhancing results for your company.
Making the Most of Direct Sourcing and EOR
The freelance revolution is here to stay. Adopting a direct sourcing method will ultimately be the most effective solution for many organizations to engage with a qualified contingent talent to achieve desired outcomes.
In this ever-complex hiring environment, however, you cannot afford to allow inefficiencies and mistakes to derail your direct sourcing program. Utilizing an EOR model can avoid common HR pitfalls that damage your reputation or leave you vulnerable to regulatory fines.
With myBasePay as your EOR provider, you can have peace of mind knowing that all compliance concerns are being handled appropriately and that your engagements with the contingent workforce are setting you up for lasting success.
Author: Cesar Romero
Cesar is the Head of Marketing at myBasePay, where he’s responsible for overseeing the company’s content marketing, community, and partnerships strategy. He also co-hosts The Ivy Podcast where he interviews executives from Fortune 500 companies on executive leadership. When he’s not helping startups with marketing and community strategy, you can find him paying it forward by serving as a mentor for leading organizations like StartingBloc, Hive, and Global Citizen Year.