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HCMWorks Insights

Contingent Workforce Management: Pros and Cons of the 3 Main Outsourced MSP Program Models

Posted by Julia Fournier on 14 Nov 2019

The contingent workforce has grown significantly over the past decade, and, according to research from Ardent Partners, currently sits at around 41.5 per cent of the average company’s overall talent pool.

In fact, the contingent workforce has grown by roughly 2.5 times over the past decade due to several important factors, according to the same body of research, including:

  • The contingent workforce offers greater financial agility.
  • Non-employee talent offers lower fixed costs than traditional talent.
  • There is significant ease-of-use in many new technologies aimed towards on-demand talent engagement.
  • The contingent workforce delivers a better alignment between talent/skill sets and the projects that require real-time expertise.

Despite the plethora of benefits that this workforce brings your organization, its management comes with a wide range of challenges that must be properly addressed.

What are the challenges of managing a contingent workforce?

With labour being one of the biggest expenses for your business, it’s only natural that your organization would turn to the contingent workforce for an innovative way to get work done more efficiently at a lower cost.

A contingent workforce management program, however, is about much more than hiring non-permanent workers and reaping the rewards.

In fact, it’s unlikely that your organization will have the in-house expertise and know-how to effectively implement a contingent workforce management program.

CAE Company Case Study

That’s because contingent workforce management programs are complex, time-consuming and require highly-skilled managers that have expertise in the contingent workforce and how to manage it.

A contingent workforce management program should improve your business in four key areas - quality, efficiency, cost and risk - and should manage/oversee everything from your recruitment process, the onboarding process, analyze staffing suppliers, invoice and pay workers, compliance management, program reporting and much more.

Ensuring your company is realizing maximum benefits from its contingent workforce management program

A successful program will lead to benefits such as access to top talent, an improved bottom line, more efficient processes, increased workforce agility, consistent non-employee hiring processes across your entire organization and much more.

To access these benefits, companies outsource their contingent workforce management programs to a managed services provider (MSP). But what are the pros and cons of the three most common outsourced MSP program models?

1 - Vendor-neutral MSP

MSPs can be either be partnered with a staffing supplier or completely independent. MSPs that are truly independent, void of any staffing affiliation (i.e. do not engage in any recruitment activities) , are considered true vendor-neutral MSPs.

A vendor-neutral MSP will ensure it implements a vendor management system that supports your unique workforce objectives - with no ties to any staffing vendors, alternate service providers or technology firms.

Pros:

  • Simplified customer billing.
  • Incorporates social media recruiting and freelance management systems (FMS). More about an FMS can be read on our blog, titled ‘Freelance Management Systems Explained: What They do and How They Work’.
  • Competitive bidding will help ensure your company received market rates.
  • A holistic approach that builds an optimal MSP program based on their client’s specific requirements.
  • Complete visibility supplied to their clients, including their own profits.
  • Build trusting relationships with suppliers that benefit your organization in the long run.

Cons:

  • Too much competition could lead suppliers less inclined to compete.
  • Supplier fee is often higher in the vendor-neutral model.
  • The MSP will not be specific to the staff in your particular industry. If they are unable to develop a deep understanding of your company’s needs, it’s possible your company may experience quality issues with the workers they provide.

2 - Master supplier/vendor

A master supplier/vendor MSP program assumes the overall responsibility for providing a client with temporary workers. All requisitions and orders go directly to the master supplier, which can then fill them or distribute them to sub-contract suppliers.

Pros:

  • The difference between bill rate, markup and pay rate confuses some organizations when it comes to MSP models.
  • Master suppliers have a very simplified billing model. Your entire MSP workforce will be accountable to only one single supplier, making it far easier to analyze.
  • Predictable costs means your organization can plan future recruiting budgets.

Cons:

  • Since this model only uses one supplier, there’s a serious lack of competition resulting in less choice.
  • The supplier may experience skills shortages or only cover staff in a specific geographical area.
  • There’s an increased risk with one supplier. If you can’t acquire the talent you need, there’s nowhere else to turn.

3 - Hybrid program

A hybrid program is a contingent workforce management strategy in which an MSP will blend the vendor-neutral and master supplier sourcing models. This would see an organization engage a single provider for some services but multiple providers for others.

Pros:

  • Since they can work with multiple suppliers, competitive bidding will ensure your company has access to competitive market rates.
  • Unlike a master supplier model, this MSP program reduces the dependency on a single staffing supplier. This means you’ll have more flexibility if one supplier isn’t helping you reach workforce targets.

Cons:

  • The model is complex since it offers services in both recruiting and managed services. This is more complex for your organization and the MSP may have multiple teams that work with you company.
  • Other managed service program responsibilities may suffer if there’s too much focus on staffing margins.

Want to learn more about managed services provider programs, and how they can significantly benefit your organization’s contingent workforce management strategy? Contact HCMWorks today.

Helping a Client Manage their Contingent Workforce More Efficiently

Tags: Contingent Workforce Management

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