An increasing number of businesses are turning to contingent and temporary staffing 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.
The Benefits of a Contingent Workforce
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.
How to use your VMS to control cost and save 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.
Staffing Contract
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
Time and Materials (T&M) 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.
Milestone Contracts
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.
Use Your VMS: 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
The rate card will clearly define 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.
Use your VMS: to gain visibility to measure performance
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
Download a copy of our free VMS Buyers Guide - it includes everything to know about a VMS and a checklist of all the questions you should ask a VMS provider; including the Top 10 Pricing questions.
Additional Articles on the Cost and ROI of a VMS
Everything You Need to Know about VMS Cost Savings | Guide
Funding Your VMS:
Cost and ROI of a VMS
- How Much Does a VMS Cost?
- A Quick Overview of Vendor Management System Pricing
- Maximize ROI: Top 4 Vendor Management System Best Practices
- VMS ROI: What Size of Operation Do You Need to Make a VMS Worthwhile?
- Vendor Management Software: What's the Cost & ROI?
- What Size of Operation Do You Need to Make a VMS Worthwhile?
- 5 Best Practices to Optimize your Vendors and Maximize ROI
- Save money with Conexis VMS flexible pricing
- 10 Questions to ask a VMS Provider about Cost and Pricing
Cost Per Hire
Staffing Agencies
- 5 Ways a VMS Reduces Staffing Costs with Smart Rate Card Management
- Staffing Agency Bill Rate: What is it?
- Staffing Agencies: How a VMS can increase your Revenue
MSPs
Government
Contingent Workforce Spend & Cost Reduction
- How to Save 20% on your Contingent Workforce Cost with a VMS
- How a VMS Lowers Contingent Workforce Costs
- How to Manage Contingent Workforce Rogue Spend
- Driving Spend Under Management in a Contingent Workforce Program
- 4 Ways to use your VMS to Control Contingent Workforce Cost and Save Money
- 4 Ways to Gain Control of Your Contingent Workforce Spend
- How a VMS helps you Control Costs during Market Uncertainty
- Why Spreadsheets may be costing you millions in Contingent Labor Spend
- Do you know what you're spending on Contingent Workers this year?
Conexis VMS Case Study
Case Study: How a Manufacturer Cut Costs by 27% and No Shows by 80% with Conexis VMS
About Conexis VMS
Conexis is an award-winning Vendor Management System built for organizations that want the power of enterprise software without the complexity or cost.
Leveraging the latest technology, Conexis delivers the expertise, reliability and security of enterprise systems, while offering the flexibility, user friendliness and tailored, personal service you require. Learn more about our Company and why organizations Choose Conexis VMS.
Discover the Power of Conexis VMS
Conexis VMS is purpose-built for organizations seeking to manage their contingent labor spend effectively. Here’s why we're the right choice:
- Fast Deployment: Get up and running in weeks, not months
- Transparent Pricing: Flexible pricing with no hidden costs
- White-Label Ready: Customize the platform with your brand
- Real-Time Insights: Make faster decisions with built-in analytics
- Audit-Ready Compliance: Store contracts, worker data, and rates in one secure hub
Looking to Switch Your VMS or Just Getting Started?
Whether you are looking to switch your VMS, or just getting started, we are here to help. Contact Us for a Free No-Obligation Consultation, See how Easy Conexis is to use by taking a quick 2 minute Self-Guided Online Demo, or Book a Personal Demo Today!
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