The Eagle Blog

Why Clients Should NOT Source Their Own Contract Talent

CEO of Pepsico on the value of talentThere are 3 compelling reasons why clients should NOT source their own contract resources:

“Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.”   Nancy Pearcey

  1.  PRICE
    •  At first it seems counter intuitive, but if you think about it, the competitive process will almost always give you the best price.
    • Our experience at Eagle would demonstrate that “client sourced” contract resources cost 10% more, on average, than contractors sourced in a competitive process.  Don’t take our word for it, do a little investigation yourself!
    • Experts offering “shop in your own database” options sell their clients on the concept of saving agency fees.  Don’t get blind-sided.  What matters is what you actually pay all-in, not what you pay the agency
    • A hiring manager who identifies a contractor to do some work has a vested interest in their success … that can create governance issues.
    • Will they be subjective that they are choosing the best person for the job?
    • Will they be willing to make tough decisions as quickly as an agency sourced contractor who is not performing?
    • Will they negotiate the best rate or just pay what the contractor asks? (Part of the reason for the price differential.)
  3. RISK
    • In Canada the CRA are very interested in contractor relationships.  If you sourced the person and pay them then are they your employee?
    • Do all of your hiring managers truly understand the risks associated with contractor mis-classification?
    • Do your processes fully protect your company?

“Data beats emotions.” Sean Rad

If those “compelling reasons” were not enough, then consider this

The staffing industry is a $13 Billion industry in Canada designed to find talent for their client in a hyper-competitive market.

  • Do you want to recreate that capability within your organisation, or should you focus on your core capabilities?
  • Will your internal sourcing be as competitive as companies designed solely for that purpose?
  • What is the cost of your internal recruiting organisation?
  • Do you measure that cost against “saved agency fees” or against “reduced contractor spend”?

Kevin Dee is CEO of Eagle (a Professional Staffing Company)
Want to know where Canada’s hot jobs are?   Visit the Eagle Job Board!
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3 thoughts on “Why Clients Should NOT Source Their Own Contract Talent

  1. Great Article Kevin….I would suggest your estimate of the “client sourced” candidate at being 10% more as being conservative. Another challenge when hiring managers are bringing in colleagues and friends is they sometimes do not get the highest quality of candidate. Staffing companies with decades of relationships will have a huge reach and be able to provide candidates that will help make their clients more successful

  2. Tim thanks for your observations … and I can’t disagree. Staffing companies have a very wide reach and can provide the best talent/price ratio for our clients. As for the 10% number … I agree it is conservative. Based on our analysis in 2006 when we had a high number of both payrolled and directly sourced contractors at one client the following was what we found:
    – During this period Eagle placed 340 people against the rate table, of which 70 were “payrolled” and 270 were sourced by Eagle.
    – When measured against the rate table the average payrollee was $4.12 above the table and the average regularly sourced contractor was $2.63 below the rate table. Consequently our client paid $6.75 per hour more for a “payrollee” than for a regularly sourced contractor.
    – If we extrapolate over a year (2000 hours) for this scenario, the client was paying $13,500 too much for every single “payrollee”.

  3. Great article here Kevin. I agree with most of what Tim said. Except I’ve found if you manage expectations with a friend early, they can help you source candidates that are high quality. You just have to have the separation between friend and colleague at times.

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