The Difference Between Direct Hires (Contractors) and BPO Companies

business process outsourcing (BPO) company can provide organizations with third-party professionals to work on assigned tasks. These skilled workers can help businesses enhance operations, decrease operating costs, and increase revenue. 

But did you know companies can directly hire competent talent from staffing agencies to achieve similar results?

This article is for business owners and decision-makers who want to know what a directly hired contractor is and what benefits and potential issues they provide. It also explores the difference between direct-hire workers and a BPO company.

Read until the end to learn more.

What Is a Directly Hired Contractor?

A directly hired contractor is a professional staffing firm or recruiting agency tasked with finding, screening, and recruiting a full-time employee to benefit its client organization. Upon accepting the job offer, the fresh hire is immediately placed on the client company’s payroll and becomes one of its employees.

Simply put, the employee acquires the job at the company through a recruiting firm that accepts job seekers and hires candidates on behalf of their clients. Staffing agencies are typically committed to handling their clients’ hiring processes. 

This arrangement is not to be confused with the contract-to-hire arrangement, wherein the client employs contract workers for a certain period (which can be short-term or indefinite). In this model, the staffing agency pays for workers’ salaries unless they become regular employees of the client company.

Direct-Hire Contractor Versus BPO Provider

A BPO company also screens, hires, and trains qualified individuals. But what is the BPO provider’s difference from the directly hired contractor?

The difference is that the BPO firm enlists talent full-time after the recruitment and BPO training periods. It supervises and supplies employees with the relevant equipment to help them perform client tasks. Aside from fixed monthly salaries, it offers other perks, such as bonuses and health insurance.

The BPO firm’s account manager discusses projects with the client before assigning them to the staff. The manager receives client feedback and collaborates with workers to track task progress. Many U.S. businesses outsource services to providers worldwide. Their specific needs and goals determine which countries most U.S. companies outsource to.

Some advantages of BPO providers include

• Reduced operating costs. The BPO provider shoulders recruitment expenses (e.g., hiring, upskilling, and training costs) and keeps the employees on the payroll. It also uses its physical infrastructure (e.g., computer systems and digital networks) to perform outsourced tasks. 
• Improved speed, output, and efficiency. What is the disadvantage of a directly hired contractor compared to a BPO provider? The BPO provider has specialists skilled in boosting the quality and quantity of the client’s projects. 

Comparison Between Directly Hired Contractors and BPO Providers

Below is a rundown of the advantages and disadvantages of directly hired contractors and BPO providers:

What Are the Benefits of Directly Hired Contractors?

Among the benefits of directly hired contractors are higher-quality candidates, organized and time-saving application review, full-time status of workers, convenient fulfillment of sought-after roles, and proper integration of new hires. 

Check out the details below:

• Higher-quality candidates. Most job seekers prefer ongoing, full-time employment over short-term or freelance work. Choosing direct-hire contractors ensures that many highly qualified applicants vie for the post. This arrangement helps companies quickly find workers or meet a specific talent need. 
• Organized and time-saving application review. Client companies benefit from a direct-hire arrangement because the staffing agency reviews numerous resumes. Clients can reduce the hours worked by their in-house HR team when the recruiting firm assists in managing this time-consuming activity.
• Full-time status of workers. New hires accepted as permanent workers are more committed to the client organization than contract workers, who expect to stay on board temporarily. Full-time employees are more involved in their jobs, contributing to the company’s overall performance and sustainability.
• Convenient fulfillment of sought-after roles. The ideal staffing firm has access to an extensive list of talent. It also has skilled and experienced recruiters who have cultivated personal and professional ties with diverse professionals. 
• Proper integration of new hires into the organization. The client company can further train and develop their skills professionally since direct hires are in for the long haul. Additionally, it can invest more time and resources to ensure they fit into the organizational culture, increasing morale and preventing new hire turnover. 

What Are the Potential Issues with Directly Hired Contractors?

Among the potential issues with directly hired contractors are costly staffing fees, a long and tedious recruitment process, and uncertain client-worker compatibility. 

Explore the details:

• Costly staffing fees. When choosing this approach, the client typically incurs a service cost called a placement fee. The price differs widely based on the employment agency and the type of position required. The more extensive the role’s requirements, the more expensive the charge is.
• Long and tedious recruitment process. Despite the staffing agency’s expertise, finding the ideal individual to fill a position requires time and effort. What surprises many is that the directly hired contractor approach is not for clients seeking “instant” employees. Patience is needed to find the right professional. 
• Uncertain client-worker compatibility. The client cannot have a trial run to test whether the hired workers are a good fit over the long haul. The client must remember that the directly hired contractor must be a reputable recruitment firm to avoid mismatched workers.

Choosing a Third-Party Vendor for Better Staffing Management

The client should note that directly hired contractors and BPO providers are third-party vendors. Remember these five essential factors to find the best business partner.   

• Excellent background. Pick a third-party vendor with solid credentials to find the ideal professionals. Accreditations, independent client testimonies and acknowledgments, industry affiliations, and government honors demonstrate the vendor’s legitimacy.
• Appropriate size. Direct-hire contractors and BPO providers prioritize organizations that match their size. Pick a partner that is the same size as your company. A start-up or an emerging business should choose a third-party vendor at a similar level. A large-scale provider tends to concentrate on large corporate accounts. 
• Outstanding performance history. Obtain credible references from prospective third-party vendors. To understand their history and experience, read independent and unbiased online evaluations. Working with a respected partner boosts business confidence and relationships. 
• Different services. The ideal third-party vendor must offer varied services. The prospective third-party vendor should tap qualified personnel from various industries, such as marketing and sales, human resources, information technology, marketing, and finance. 
• Industry-specific skills. Companies should remember that the directly hired contractor or BPO provider must possess extensive knowledge and background in their sector. Delivery of services is more effective when the third-party vendor knows industry issues, developments, opportunities, obstacles, and risks.

The Bottom Line 

Hiring a third-party vendor is a tried-and-true business approach when a company requires more professionals to improve its in-house operations at an acceptable price.

Remember that the directly hired contractor or BPO provider is a non-affiliated organization. Precautions must be taken when requesting a few staff. Doing so will help the company learn the intricacies of doing business with a third-party contractor. 

Let’s connect if you want to learn more about third-party contractors!