Why EOR Services Make Direct Sourcing Better

The direct sourcing model has quickly become one of the most popular methods for attracting contract workers. When organizations can curate a private database of qualified contractor candidates, they can rapidly improve their time to hire, facilitating the onboarding process and saving money.

While direct sourcing is already a valuable method in its own right, working with an employer of record (EOR) can make it even better. By addressing some of the common concerns and stumbling blocks that keep companies from successfully implementing direct sourcing, a direct sourcing provider that also offers EOR services can truly take your brand’s talent sourcing to the next level.

A Quick Refresher on Direct Sourcing and EOR Services

To understand the relationship between direct sourcing and EOR services, it is essential that companies first understand what these are and how they can benefit them.

Direct sourcing is a hiring system in which the company uses its unique employer brand to attract contractor candidates and curate them into a private database, which is organized by talent pools. These candidates can come from former employees, contractors who have worked with the brand before or even “silver medal” candidates who were qualified for but did not ultimately obtain a previous opening.

Direct sourcing allows brands to build a highly engaged talent pool of prequalified individuals, enabling faster onboarding and making it easier to fill open positions. 

An employer of record (EOR) is an organization that manages a wide range of back office operations related to talent acquisition and onboarding. For tax purposes, the EOR serves as a contractor’s legal employer. In this role, the EOR takes on many of the responsibilities — and liabilities — associated with traditional employment.

This includes a broad range of personnel functions, including payroll processing, filing taxes, creating and maintaining contracts, administering benefits, and onboarding and offboarding employees.

While each can offer significant benefits on their own, their true potential is unlocked when both are used in tandem. Because of this, brands stand to benefit the most when they work with a direct sourcing provider that also delivers EOR services.

Enhancing the Employer Brand Experience

The employer brand experience is central to a successful direct sourcing program. A strong employer brand is what attracts contractors and others to work with a company in the first place — be it through word of mouth, online reputation or their own previous experience with the organization.

While much of the employer brand experience is dependent on day to day interactions with others at the company, it is also heavily dependent on a streamlined contractor process.

Contract workers expect — and deserve — consistent, positive experiences with the organizations they engage with. No matter how good the day to day working environment might be, contractors aren’t going to want to work with a company that has issues with pay and benefits and other crucial back office responsibilities.

An EOR ensures a consistent and positive experience by managing all facets of the contractor process, from attraction and initial onboarding to offboarding and retention in the direct sourcing talent pool. By managing pay, benefits, tax form distribution and other necessary tasks, contractors and the companies they work for enjoy a seamless experience.

This way, the organization that will be working with the contractor can focus on creating a quality work environment that will enhance future direct sourcing efforts.

Optimizing Onboarding

Onboarding tends to be one of the biggest hangups when working with contractors, even when using the direct sourcing model. Cumbersome handoffs between different departments can result in delays and miscommunications that keep a contractor from getting to work.

This can completely undermine one of the goals of direct sourcing, which is to facilitate faster hiring and onboarding. When issues occur during the onboarding process, an organization becomes less agile. Projects get delayed, and depending on the scope of the issue, a contractor may decide that it isn’t worth working with the company after all.

EOR services provide full end-to-end onboarding service. Because all aspects of this process are handled by the same dedicated team, miscommunications and interruptions can be avoided entirely. This enhances the experience for the contractor, while also improving productivity for the company they will be working with.

Eliminating Misclassification Risk

The freelance revolution means that more and more companies are engaging with independent contractors to address a variety of needs rather than hiring additional full-time employees. Employers who misclassify 1099 contractors can be subjected to fines by the U.S. Department of Labor, the IRS and state agencies. Severe infractions carry hefty fines that can put significant financial stress on a company.

In an increasingly complex employment environment, it can be all too easy for a direct sourcing  classification mistake to occur. Even violations that are determined to have been “non-willful” or accidental can lead to financial penalties.

By working with EOR services, the direct sourcing provider will serve as the legal employer for direct-sourced contractors. The employer of record will be responsible for handling worker classification as well as other tasks that relate to employment law, such as salary negotiation, termination and benefits administration.

The employer of record essentially takes on all traditional tasks and liabilities associated with employment. The hiring organization can have complete peace of mind, as in these circumstances, they would not be held responsible for any misclassifications that took place. Of course, when these matters are handled by an experienced EOR, worker misclassification is also highly unlikely to occur.

Choose the Right EOR Provider

While working with EOR services can greatly enhance your direct sourcing program, it is even more important that you choose the right provider to partner with. myBasePay is a premier EOR provider focused on successfully managing today’s complex world of worker compliance.

By offering a full suite of back-office solutions, myBasePay provides the agility your company needs to compete in the current work environment. With a dedicated success partner on your side, your team can focus on the things they do best while having confidence that payroll, compliance administration, onboarding and other vital tasks are being managed appropriately.


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.

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