Who uses an MSP?

Any company that has a high volume of one or more of the following can or should consider engaging an MSP. An MSP might be right for your company if one or more of the following scenarios applies to your organization:

  • Constantly faced with the challenge of finding the right people to fill talent gaps, at the right time, at the lowest possible cost;
  • Your organization’s total contingent labor comprises roughly 25% or more of the total headcount in the organization;
  • You spend a total of $1M or more on flexible talent;
  • You’re managing 10 or more vendors engaged in sourcing and placing flexible talent in your organization

Do any of these sound like your firm? You may be missing out on potential cost savings and efficiencies without installing an MSP program.

How to select an MSP?

Step 1 – Know Your Costs
Calculate your current contingent labor recruiting and employment costs. These costs, which vary from company to company, are impacted by the number of contingent workers hired in a year and the suppliers used to find that labor. Before you start the process, you should know your numbers inside and out.

Step 2 – Know Your Strengths & Weaknesses
Before you begin searching for an MSP, you should understand the strengths and weaknesses of your current processes for managing contingent labor. If your current process has weaknesses, determine whether you will work to improve those weaknesses prior to selecting an MSP, or if you prefer to have an MSP who can help you improve your processes.

Step 3 – Evaluate Potential MSP Partners
Begin searching for potential MSP partners. Ideally, you want a provider who will be a fit with your company long-term. As a result, consider the following items:

Order Fulfillment
One of the primary reasons you leverage an MSP is so that resource gaps and talent needs are identified and filled quickly. Metrics and reporting are of the utmost importance.

  • time-to-fill rate
  • submit-to-hire ratio
  • cancellation rate
  • assignment longevity
  • turnover
  • contractor classification (e.g. IC, temporary worker, W2)
  • reporting and visibility

Cost Savings & Containment
If the primary reason for using an MSP is to fill resource and talent gaps quickly with quality contingent labor, the next most important reason is for the cost savings. If you’re not realizing cost savings using an MSP, you’re throwing away money. A good provider can help you manage cost in a variety of ways:

  • Cost per hire
  • Spending trend analysis
  • Billing accuracy
  • Rate management and routine analysis – Without an MSP,

By leveraging an MSP, you regain control over potentially rogue recruiting expenditures which can run in excess of 40% above the competitive market rates you should be paying. It’s not uncommon to recognize savings of over 20% in direct contractor labor costs once an MSP program is installed. Additionally, it’s common to incur additional, specific savings, such as:

  • Transaction costs – Without an MSP, 100% of recruiting time falls on you to make calls and send emails to potential candidates. With an MSP, those activities shift from you to the MSP, and you recoup 90% of that time to spend on other activities in your organization.
  • Rate discounts – Without the leverage of an MSP, you’re likely going to pay full market rates. However, with an MSP program, the average discount on rates is approximately 10%.
  • Cycle time – If it normally takes you 20 days to get a requisition through the approval process, an MSP program can reduce that by roughly 75%, to approximately five days.
  • Agreement compliance – Who has time to ensure that you’re getting the results you expected from your contingent workforce and that your vendors are charging you correctly? Without an MSP, agreement compliance runs around 60%. When an MSP program is implemented, agreement compliance runs about 90% because the provider has a vested interest in ensuring you’re getting what you’re paying for at the agreed upon rates and terms.

Quality Factors
While filling resource gaps and talent needs quickly is the primary function of an MSP, you also want a provider that’s a strategic partner. Consider the quality of the following:

  • No show rate
  • Requisition activity
  • Contractor quality (overall performance / results of the individual worker)
  • Responsiveness
  • Efficiency and effectiveness

The MSP is also a barrier between you and potential employment law problems. Quality providers should ensure they keep you apprised of relevant and meaningful employment law changes as well as advising on how to best mitigate risk to your organization. Evaluate the provider’s:

  • Approach to overall risk mitigation
  • How they remain legally compliant
  • How often they audit to ensure compliance and remedy any issues

Step 4 – Select an MSP & Form a Partnership
The early stages of an MSP partnership should focus on getting costs in line. The provider should have a strategy for evaluating current vendors, looking for inefficiencies and improving processes while simultaneously managing costs.  After costs are aligned, the focus should be more strategic, working to improve matches and seamlessly integrate contingent workers into the organization and managing their success.

What does an MSP Cost?

There are two primary cost models in the market today: supplier-funded and client-funded. In a supplier-funded model, a percentage of invoices billed by a supplier is held back by the MSP to cover program costs. There are no direct costs to the client. One potential drawback is in markets where the mark-up is low, some providers (and subsequent suppliers) may hold back their best talent or be unwilling to participate in the MSP’s program.

In a client-funded program, the client pays a fee to the MSP. The agreement may be a fixed or variable model. A client-funded approach may be beneficial because it ensures the provider (and subsequent suppliers) deliver a higher quality of talent more quickly.

Why do you need an MSP? // Why does your business need an MSP?

Reason #1: Risk Management / Opportunity Identifier
If you don’t know what’s going on with your contingent workforce, then you can’t manage potential risk or leverage potential opportunities. Partnering with an MSP:

  1. Leverages alternative sourcing channels beyond traditional hiring approaches
    Partnering with an MSP gives you the ability to tap talent resources to which you might not otherwise have access. Qualified talent is tough enough to find, so why wouldn’t you leverage all the resources possible to find the right help? An MSP provides you with a comprehensive approach to talent acquisition.
  2. Assists with identifying and reducing billing errors
    Wasting time correcting billing errors isn’t something you want to waste time doing. This problem is dramatically reduced by using an MSP with an affiliated VMS. Consolidating rate and agreement information in one location reduces the amount of time hunting down contracts and recalculating the proper amount to be billed.
  3. Aids with recognizing potential (or actual) timesheet fraud
    Errors and fraud on timesheets are real. You don’t want to pay for work not performed, nor do you want to be in the throes of a lawsuit. You need an efficient and robust method for tracking, monitoring, adjusting, and reviewing time worked. An MSP is the right provider for the job.
  4. Efficiently pools resources who may be impacted by a change to a point of employment law
    Are you keeping up with all the changes in employment law? No? That’s normal. If you’re running a business, you don’t have time to keep up with the finer points of employment law. Using an MSP helps mitigate employment law risk by proactively keeping you (and your workforce) current and up-to-date with employment law compliance.
  5. Provides visibility into accurate and appropriate employment classification of contingent labor
    It’s common for companies to misclassify workers. Are you certain, without doubt or hesitation, that your contingent labor is classified correctly? If not, it can lead to wage and hour lawsuits and affiliated fines. An MSP can do this work on your behalf and add a layer of protection to your organization.
  6. Supplies a consistent onboarding and offboarding platform
    Most companies have a consistent approach to onboarding and offboarding W2 employees. However, when it comes to flexible talent, the processes are either non-existent or fragmented at best. Without a consistent process in place, miscommunication, duplication of resources, and extra administrative effort easily occurs. All of these time-wasters can easily be avoided. An MSP can created and install a defined process for onboarding and offboarding contract workers.
  7. Contributes to proper tenure management of contingent labor
    You hold performance reviews with your W2 employees. How often are you reviewing the performance and results of your contingent workforce? With an MSP, material data points about performance, outcomes, achievements, and results are tracked and recorded. Instead of blindly renewing contract worker agreements, you can easily and efficiently offboard workers that aren’t achieving results and be in a better position to negotiate with contract workers who are valuable contributors to your business’s outcomes.

A comprehensive contingent workforce program that is properly managed by an MSP can reduce your organization’s exposure to employment risks while also providing data and insight to potential resource opportunities.

Reason #2: Centralized Talent Resourcing
If you’re using multiple vendors to secure the right talent, you’re probably spending some amount of time weekly (or daily) to manage those vendors. It’s a task that’s probably not part of your day job, yet it needs to be done.

By centralizing the talent search and selection process with an MSP, you reduce the time it takes to manage this process. A centralized relationship with one provider lends itself to a long-term partnership where the nuances of your business will be learned and leveraged when sourcing the best talent.

Why would you keep doing something that can easily be transferred to one, consolidated provider?

Reason #3: Cost Control
Without data into your contingent workforce, it’s tough to make sound business decisions because you’re essentially “flying blind.”

  • How can you appropriately forecast a budget when you don’t know what you’re spending on your contingent labor?
  • How can you avoid potential rate inconsistencies if you don’t know how many consultants you engage and the rates for each?
  • How do you know if you’re missing out on capturing great talent because the rates you’re willing to pay don’t match the fair market?

Questions like these can easily be managed and answered by an MSP. By consolidating vendors with an MSP program, you can narrow your purchases down to the best-in-class and negotiate better margins or long-term discounts.

What are the benefits of a MSP?

    • Automate and streamline the staffing and contingent labor acquisition and affiliated payments
      • Decreases the amount of time a position remains vacant in the organization
      • Increases the likelihood of a better match for the position and the company’s culture
      • Decreases the occurrence of incorrect or late payments
      • If your firm’s talent acquisition strategy doesn’t include the use of the contingent workforce, you’re missing out on a large piece of the talent acquisition puzzle. Using contract labor reduces the risks involved with poor hires, which in turn saves time, improves productivity, and reduces costs. ISG excels at sourcing provisional talent in a methodical and efficient way.
    • Manage and maintain contingent labor contracts and associated transactions
      • Renew and update agreements in a timely manner, avoiding the last-minute “fire drill” when agreements are set to expire
      • Provides history and a tracking mechanism for any agreement adjustments while an active agreement is in place
      • Reduces the risk of incurring fines if audited by a government entity by documenting and retaining the correct and proper classification of each contingent worker

Why ISG as your MSP provider?

  • Bill – Need your thoughts here as I don’t have the history you do with the firm!
  • ISG can develop a program tailored to meet your needs by expertly managing your staffing supply chain. No matter what type of resource you need – contract workers, independent contractors, countless suppliers, statement of work engagements – ISG can help.

Notes / Appendix

Ways to say temp labor – Contingent Workforce; Contract Labor; Non-Permanent Staff; Non-Employee Workforce; Provisional Staff

Why use a VMS?
There’s a reason that organizations leverage software to manage their W2 employee population. You want visibility into your employee’s skills, knowledge, experience, career progression, and a whole host of other metrics and data points to make sound business decisions.

It makes sense then, to have a system that provides the same kind of data and insight into the contingent workforce that typically is not housed in the same system as your W2 employees. The VMS system provides the visibility that would not otherwise exist.

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