Direct Sourcing of external employees: a strategic choice in a tight labour market

At a time when the labour market is tightening and the war for talent is intensifying, more and more companies are opting for the direct sourcing of external personnel in addition to hiring through suppliers. This strategy, according to which companies approach and potentially contract freelancers and temporary employees directly, offers numerous advantages but also comes with challenges. In this article, we delve deeper into the world of direct sourcing, discuss platforms, contracting, and the main pros and cons.

The Rise of Direct Sourcing

Although direct sourcing is not a new phenomenon, it has become significantly more popular in recent years. According to research by Staffing Industry Analysts, 52% of all external labour in the US is expected to be done through direct sourcing by 2025. We are also seeing a clear trend in the Netherlands. More and more Dutch companies are embracing direct sourcing to recruit and retain scarce talent. There are organisations that undertake direct sourcing entirely in-house, but where there are MSPs on the market, it is often the MSP that offers direct sourcing as part of its services.

Platforms: Efficient Talent Finding

In addition to setting up or expanding your own website for attracting talent, there are various platforms available that can help companies find and sometimes also contract and manage external personnel. Popular options are:

Upwork: A global platform with millions of freelancers in various categories.

• Fiverr: A platform focused on smaller assignments and projects.
• Toptal: An exclusive platform with strict selection criteria for highly educated freelancers.
• WorkLLama: End-to-end direct sourcing platform that can easily be branded with the look and feel of the client
• LinkedIn: The professional network where companies can directly contact potential candidates.
• Platform solutions from service providers: Examples include Twago from Randstad, WorkMyway from Manpower and Striive from Headfirst

The choice of a platform depends mainly on the specific needs of the company and the nature of the temporary assignments. Which target groups need to be reached? Is it appropriate to access a candidate pool managed by the supplier or do you wish to set up a completely dedicated candidate pool? Which processes are carried out by the platform and do they fit in with the existing processes in the organisation? And last but not least: To what extent can a platform be integrated into systems already used within the organisation if desired? All these aspects will have to be assessed to determine whether a platform is suitable for your specific situation.

Contracting: Making the right agreements

When direct sourcing, it is important to determine in advance how these temporary employees will be contracted. Directly or through an intermediary (MSP and/or broker).

In both cases, when using freelancers, it is essential to determine whether the assignment is indeed suitable to be carried out by a freelancer. What are the specific activities and what is the desired result? Is it possible to call in the services of a freelancer for this role? And does the freelancer you plan to deploy also meet the requirements? Unfortunately, the legal requirements are not always clear and pressure within the organisation to get the work done can be high. Wrongful deployment on a freelance basis can lead to hefty fines and other financial claims. Moreover, the regulations regarding freelancers differ from country to country.

It goes without saying that the remuneration must also be clearly recorded: What rate is used and how is the payment arranged?

Non-freelancers can be contracted via a temporary contract within their own collective labour agreement or, if you are looking for more flexibility, can outsourced to a service provider such as an MSP or broker who can then apply the country-specific collective labour agreement and/or arrangements for temporary personnel (In the Netherlands the ABU or NBBU CLA).

In the Netherlands, it is important that the intermediary fulfils the allocation role, otherwise the temporary employee will be subject to the so-called payroll regime and other employment conditions will apply. This can often be avoided by granting the intermediary a role in the selection of the direct sourcing offer.

In short, the contracting of external employees must be undertaken with care, any decisions must be made in consultation with a competent legal advisor or direct contracting consultant or via an external service provider.

The pros and cons of direct sourcing

Direct sourcing as part of the overall sourcing strategy for external employees offers several advantages. By recruiting directly, companies can save on the costs normally associated with hiring agencies. In addition, direct sourcing offers a channel for communicating directly with the labour market about available assignments. This can be a useful tool in positioning the organisation on the market as an attractive provider of temporary assignments. In conjunction with the broader employer branding, this makes it possible to reach a wider pool of talent. In a number of cases, it is also an excellent route for finding scarce talent abroad, thus allowing companies to find the best candidates, regardless of their location.

Furthermore, direct sourcing offers flexibility and agility. Companies can build and maintain their own pool of potentially interesting candidates, enabling them to deploy external personnel more quickly and easily on specific projects or assignments. In addition, companies can often speed up the recruitment process by contacting candidates directly.

However, there are also challenges associated with direct sourcing. Placing the right question on the market in a correct and timely manner demands attention and effort. There are of course platforms that can help with this process, butthey come at a cost. You also have to deploy sufficient capacityto build and properly maintain your talent pools. These activities can also be supported using platforms and IT tools. But you first have to conduct thorough research is to arrive at a good choice of one or a few supporting platforms.

Compliant contracting and the payment of external personnel can be a complex administrative process that engenders a number of risks, especially when working with freelancers from different countries. Collaboration with a good broker and possible Employer of Record partners can help solve these challenges.

Conclusion

Direct sourcing is a valuable additional strategy for companies looking for flexible talent. By paying careful attention to contracting, by using the right platforms and by weighing up the pros and cons, companies can reap the benefits of this direct approach.