How Do Pre-Identified Candidates Impact the Contingent Workforce?

One of the most common goals of a contingent workforce managed service provider (MSP) is to help companies find cost efficiencies and drive savings, achieved in part by adhering to a competitive rate card. Although rate cards have a high success rate of driving savings, there is often a portion of the contingent workforce where this does not apply – we refer to this population as “noncompetitive” or “pre-identified” workers. 

Competitive sourcing relies on multiple suppliers submitting candidates at competitive market rates within the rate card guidance, at which point hiring managers select the most qualified candidate. Noncompetitive sourcing is formed mostly by the hiring of pre-identified candidates, which usually stems from hiring managers utilizing their network – bringing in someone known to them or others at an already agreed rate, often under the misconception that this option will be cheaper than an agency sourced candidate.

In other cases, they utilise an agency supplier but outside of the MSP process with no rate card guidance in place. Other noncompetitive workers may be the result of job requisitions being released to only a single supplier within the MSP process.

The main impact of sourcing pre-identified candidates is they have a high propensity to be more costly for the business than sourcing via competitive routes. Relying on pre-identified candidates can also have an impact on organisations' diversity, equity and inclusion goals. 

Pre-Identified Workers as Share of Total Population

Allegis Global Solutions (AGS) studied competitively sourced versus noncompetitively sourced workers within our global MSP programmes and found there is an opportunity to lower costs and expand talent pools by reducing the reliance on pre-identified workers. Using our Acumen® Intelligent Workforce Platform, we looked at thousands of placements across North America, EMEA, India and APAC and found the following:

1. The size of the pre-identified population can vary greatly depending on company policies. 

The use of pre-identified workers varies considerably across different companies, which highlights how best practices and policies can range. In the U.S., pre-identified workers make up on average 47% of the contingent workforce, but this proportion can range from 6% to 87% among different companies owing to policy, industry, and cultural differences. In EMEA, APAC and India, the average figures are 58%, 52% and 55%, respectively. 

2. A lack of competition and limited control can lead to increased costs.

When comparing rates for competitively sourced and noncompetitively sourced workers, there are potential savings to be made in specific markets and labour categories. In the U.K., competitively sourced workers come in on average 6% below rate card guidance, while noncompetitive workers only 4%. Within IT roles, the savings from competitive sourcing using a rate card are even greater. Targeting a higher proportion of your contingent workforce to be sourced via competitive routes could result in significant cost savings to your organisation. 

3. Experienced or complex roles are more likely to be filled by pre-identified candidates. 

For roles that are typically filled by workers with 10 or more anticipated years of relevant experience, pre-identified candidates comprise over 60% of this population. This is compared with less than 50% for entry- to mid-level roles requiring less than five years’ experience, suggesting greater cost impacts among higher-paying roles. For IT-based roles in the U.S. and India, this can result in average worker costs being 15-16% higher among pre-identified, rather than competitively sourced, candidates. 

4. Although more costly, pre-identified candidates boast greater retention rates. 

Unlikely a surprise to most, it’s shown that candidates who are already known to an employer are more likely to successfully complete their assignment. In Australia, the rate of successful placements for pre-identified workers is 82% – significantly higher than among competitively sourced workers (67%). For key roles that require a consistent presence and carry more risk to the organisation, hiring individuals who are more invested in the success of the assignment could prove more important than cost savings. 

Our Take on Pre-Identified vs. Competitively Sourced Candidates

Although pre-identified workers make up a key part of the contingent workforce, employers should take the time to properly consider the costs and benefits associated. There are several best practices that AGS can offer – focusing on visibility, cost and controls to ensure you get the most from your contingent workforce. For those looking to reduce the size of their pre-identified population, here are a few strategies to consider: 

• Increase awareness among the hiring manager community to help change behaviors and encourage more cost-conscious decision-making even when hiring pre-identified workers, such as negotiating rates
• Mandate competitive sourcing via the programme to drive more adherence to the process (although this requires buy-in among the hiring manager community to be effective) 
• Review workers at the point of assignment extension to ensure more cost-effective options are considered 
• Build a formal process for referrals into your contingent workforce programme for greater control   

To learn more about these best practices and how we can help, reach out to your local AGS representative.