For many contingent workforce program managers, incorporating direct sourcing into the program is no longer a flash-in-the-pan concept. The promise of closer connection with talent, cost savings and improved risk management, coupled with more compelling case studies in the market are all reasons why this is a model that shouldn’t be overlooked. But one of the critical services — and, I would argue, the most crucial element of the process — is evaluating, onboarding, managing and paying your directly sourced contingent talent. In this article, I examine payroll and compliance.

The Right Partner. In any program that has been dominated by MSP and/or staffing relationships with program managers, these services may well have been taken care of, and perhaps therefore not previously scrutinized.

If, however, you are considering direct sourcing as your primary channel of contingent talent in the future, then selecting the right partner for IC evaluation and compliance, contractor payrolling — or both — is a critical step. You need to have confidence that workers are satisfied, appropriately classified (in accordance with the jurisdiction in which you are operating) and that they are paid on time, have access to the appropriate benefits, and are clear about who their employer is. Put simply, your talent brand depends on it.

To ensure you are selecting the right provider and tool, consider the following:

Geography. Will the direct sourcing initiative expand outside a single country? If so, choose a partner that can operate globally and can offer guidance and information on local legislative risks and issues.

Worker pools. Does the scope include both temporary workers and independent contractors? If it does, then consider a partner or partners that can provide IC evaluation and compliance (ICEC), and act as both an agent of record and employer of record. Additionally, some providers now offer almost complete automation of the IC evaluation process.

Other tech. What other technologies are you using? Many payroll and ICEC providers now have multiple partnerships and integrations with HRIS, VMS, FMS and direct sourcing technology platforms. If a provider is already working with your chosen technologies, implementation will be simpler.

More services. Do you want more than just a payroll and ICEC provider? Some providers are now offering direct sourcing technology capabilities as well as access to external talent marketplaces and talent curation services, either directly or through partnerships. You may therefore find that your search for a payroll partner leads to an altogether more holistic direct sourcing solution.

The overall market for contractor payroll and ICEC services can broadly be categorized into three distinct groups:

  • Providers that are part of larger staffing firms
  • Providers that offer payrolling and/or ICEC as their primary service
  • Providers that connect workers to clients via a platform and combine the service with a payroll/ICEC solution.


For more detailed information on this market, CWS Council members can read my recent report, “Contractor Payroll and ICEC Landscape 2020,” which includes a directory of more than 150 vendors, an in depth evaluation of 13 providers, a guide to successful implementation, and a checklist of example evaluation criteria when comparing potential providers.

To understand the range of partners a program manager should consider when undertaking a direct sourcing initiative, take a look at SIA Director of Contingent Workforce Strategies and Research Chris Paden’s article, “Slicing and dicing your direct sourcing initiative.” It’s a must-read.