An increasing number of businesses are turning to contingent and temporary staffing, obtained through staffing agencies, to meet their workforce requirements. This article explores how a Vendor Management System can assist in managing expenses and reducing costs.
Industry research indicates that roughly 25-30 percent of the US workforce is contingent, and more than 80 percent of large corporations plan to substantially increase their use of a flexible workforce in coming years.
That’s because the benefits of contingent workers are significant. They provide organizations with the ability to access hot skills, achieve workforce objectives in a competitive market, increase business flexibility, and realize significant cost savings.
Yet, without the right contingent workforce management program, organizations simply cannot achieve the above benefits.
A vendor management system (also known as a VMS) provides your business with the platform it needs to manage both your staffing agencies and contingent workforce. By acting as a system of record for your company’s entire staffing agency process, a VMS centralizes, automates and consolidates all of the processes and data associated with managing your vendors.
A VMS gives you complete visibility and control over staffing agency performance and your contingent workforce.
With increased visibility and control over your contingent workforce program, your organization now has the ability to optimize its use of VMS software to manage contingent workforce costs and save money.
Here's how to use your VMS to control costa and save your company money:
#1 - Choose the type of contractual agreement that works best for your organization
There are three common types of contract types for contingent workers, staffing, time and materials (T&M), and milestone contracts.
A staffing contract is the payment of time worked to a staffing agency, time and materials is where the worker is billed per hour at the agreed contractual rate, while a milestone contract is where pricing is fixed and based purely on the competition of a specific project or length of time.
It’s important to find the most cost-effective contract type for your organization. Most companies that use contingent workers will likely have them on staffing contracts, but if you do hire any contingent workers directly, then T&M vs. milestone contracts is an important consideration.
Time and material contracts generally work with more flexible schedules and budgets, while milestone contracts only pay workers for the actual work done. Both contracts have their pros and cons, so it’s important to find the one that works best for your company’s processes.
In the staffing industry, agencies quite often will use milestone arrangements to hide higher than normal markups. Traditional time based staffing agreements typically require the agency to disclose, and adhere to a capped markup.
#2 - Set a cap on staffing agency markup
If your contingent workers are hired through staffing agencies and your business is located in the US, then they are more than likely employees of the staffing agency. That means they are paid directly by the agency, and not your business. However, if your business is in Canada, then this will depend on the category of worker (whether they are a T4 worker or independent contractor).
If your contingent workers are paid through your staffing agency, then your organization will pay the staffing agency a markup - which is a payment to the staffing agency for its services (overhead costs and profit) on top of the wages (pay rate) that you will also be covering for the contingent worker.
A staffing agency bill rate is the addition of the pay rate and markup.
To keep contingent costs under control, use your vendor management system to establish a maximum bill rate and a maximum markup. This will ensure that staffing agency payment is standardized across your entire organization, minimizing the risk that hiring managers will go rogue with overpayments.
#3 - Develop a rate card for all hiring managers to follow
Similarly, to standardized contingent costs across your entire business, it’s important to design a well-defined rate card for hiring managers to follow. This will minimize the risk of rogue spend across your contingent workforce management program.
Use your VMS to build a rate card that clearly defines the maximum rates allowed for various job titles, locations and experience levels. By doing this, you’ll prevent hiring managers from overpaying for workers.
#4 - Measure staffing agency performance
Measuring, analyzing and managing the performance of your staffing agencies ensures your organization is able to alleviate supplier risk, cut costs and drive continuous improvement within your contingent workforce management program.
A VMS solution puts data and insights at the forefront of your contingent workforce program. The visibility and control you gain of your contingent workforce through a VMS allows you to clearly analyze key metrics such as turnover, time-to-fill, fill rate and many more.
The better your staffing agencies perform, the better access your organization has to top talent.
Learn More About the Benefits of a VMS and Choosing the Right One for Your Company
About Conexis VMS
Conexis VMS is the world’s most modern vendor management system, built on the latest technology and designed with the user in mind. Conexis stands out from other VMS solutions due to its unique functionality and features such as open APIs and flexible data solutions which allow our customers to create fast, easy, and cost-effective integrations, that can be done in under a week, compared to the legacy systems, which have to custom code each one.
We are also leading the industry with our white-gloves customer care, our pricing and our fast implementation. With our market-leading work shift, scheduling, timekeeping, and credentialing capabilities, Conexis is the only VMS that can handle all skill categories without clunky third-party add-ons. Learn more about our company and our award winning VMS Software.
Contact Us
Whether you are looking for a new VMS Solution, or just getting started, we are here to help. See how easy Conexis is to use by taking a quick 2 minute Self-Guided Tour. Contact Us for a Free No-Obligation Consultation to discuss your workforce challenges (and get immediate actionable insights) or Book a Personal Demo Today!
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