How a Vendor Management System Reduces Contingent Workforce Risk | Conexis VMS

What Is Contingent Workforce Risk Management?

Contingent workforce risk management refers to the policies, controls, tools, and processes used to reduce compliance, financial, operational, vendor, and security risks within flexible labor programs.

Risk increases when organizations:

• Use multiple staffing suppliers

• Rely on manual processes

• Lack real-time visibility

• Manage workers inconsistently

• Have unclear documentation

• Lack centralized invoicing or rate controls

• Use outdated or homegrown technology

A Vendor Management System (VMS) centralizes all contingent workforce activity into one secure platform, dramatically reducing risk while improving compliance and control.

Why Contingent Workforce Risk Is Increasing 

Risk is growing due to several realities:

• Rapid adoption of contract and freelance labor

• Stricter labour and tax regulations

• Rising misclassification lawsuits

• Complex vendor ecosystems

• Increased data privacy expectations

• More hybrid and distributed work

• Greater financial scrutiny

• More demand for real-time visibility and auditing

Companies without a VMS face significant exposure, even if they believe their processes are “working fine for now.”

The Biggest Risks in Contingent Workforce Programs

Here are the key risks you should be aware of when managing a contingent workforce program, and how a Vendor Management System (VMS) can help. 

  Worker Misclassification Risk

Misclassifying workers can lead to fines, penalties, back taxes, and lawsuits.

Common causes include:

• Incorrect worker type selection
• Lack of consistent workflows
• Manual onboarding processes
• No centralized documentation
• Inconsistent vendor standards
• Human error

How a VMS Reduces Misclassification Risk: A VMS automates worker classification workflows, ensures required documentation is collected before engagement, and centralizes audit trails so classification decisions are consistent across all suppliers and worker types.

Regulatory & Compliance Risk

Managing contingent labor requires consistent documentation, credential tracking, and adherence to labor and tax regulations. Without centralized oversight, organizations face compliance gaps that may surface during audits or regulatory reviews.

Common compliance risks include:

• Missing or incomplete worker documentation
• Expired certifications or licenses
• Inconsistent onboarding procedures
• Lack of standardized vendor requirements
• Poor audit preparedness
• Limited visibility into compliance status

How a VMS Reduces Compliance Risk: A VMS centralizes documentation, enforces standardized onboarding requirements, tracks certifications, and provides real-time visibility into compliance status across all suppliers and workers.

 Co-Employment Risk

Companies that manage contractors too similarly to employees (or allow vendors to maintain too little oversight) may be exposed to co-employment claims.

Causes of co-employment risk:

• No standardized onboarding

• No clear worker ownership between client and vendor

• Poor documentation

• No system of record for contingent labor

• Emails/spreadsheets replacing workflows

How a VMS Reduces Co-Employment Risk: A VMS defines proper ownership, enforces standardized processes, and maintains clear documentation to reduce co-employment exposure.

 Financial Risk

Manual processes increase the likelihood of:

• Incorrect markups

• Bill rate creep

• Rogue spend

• Invoice discrepancies

• Duplicate or incorrect billing

• Paying out-of-scope rates

• Inconsistent overtime rules

How a VMS Reduces Financial Risk: Centralized rate controls and automated invoicing eliminate billing errors, prevent overpayments, and ensure accurate financial reporting.

Vendor & Supplier Risk

When multiple staffing suppliers operate without standardization, risk increases.

Common vendor risks:

• Inconsistent vetting

• Uneven candidate quality

• Payment disputes

• Lack of compliance documentation

• Poor onboarding

• Misaligned performance expectations

How a VMS Reduces Vendor Risk: A VMS tracks vendor performance, enforces compliance, standardizes documentation, and keeps vendors accountable.

Operational Risk

Operational risk includes:

• Missed deadlines

• Lost documentation

• Errors in onboarding

• Hiring delays

• Poor time-to-fill

• Burnout from admin work

• No centralized communication

How a VMS Reduces Operational Risk: A VMS automated workflows replace emails and spreadsheets, reducing errors and improving speed, compliance, and worker experience.

 Technology & Data Security Risk

Organizations managing contingent labor across multiple tools or outdated systems face:

• Data breaches

• Lack of role-based permissions

• No secure audit logs

• Inconsistent data quality

• Reporting inaccuracies

• Lack of real-time visibility

How a VMS Reduces Data Security Risk: A VMS Provides a secure, centralized system of record with proper permissions, data protections, and reporting.

How a VMS Reduces Contingent Workforce Risk

A modern Vendor Management System adds structure, standardization, and automation across the entire contingent workforce lifecycle:

A VMS reduces risk by:

• Automating compliance workflows

• Validating worker classification

• Ensuring consistent onboarding

• Providing rate controls

• Reducing invoice errors

• Standardizing vendor requirements

• Creating complete audit trails

• Providing real-time visibility

• Securing sensitive worker data

• Reducing manual human error

• Preventing miscommunication among vendors, MSPs, and clients

What Happens Without a Vendor Management System?

Organizations managing contingent labor manually often experience:

• Increased misclassification penalties
• Lack of audit documentation
• Vendor rate inconsistencies
• Duplicate invoices
• Limited visibility into spend
• Compliance gaps during audits
• Delayed reporting for leadership

Without a centralized VMS, risk is reactive instead of proactive.

If you have a VMS: How Secure Is Your Vendor Management System?

Here are some questions to ask to check to see if your Vendor Management System is Secure:

1. Does your VMS have SOC II L2 reporting, and/or ISO 27001 certification?
2. Does your VMS perform penetration testing?
3. Does your VMS follow GDPR or other data privacy guidelines?
4. Where is your VMS data Hosted? 
5. Does your VMS have multiple data processors that share your data? 
6. What data encryption and data security principles are employed in your system?

The Conexis VMS Advantage 

Conexis is Built to Reduce Risk for Contingent Workforce Leaders, MSPs, and Staffing Agencies

Conexis was purpose-built for contingent workforce programs that need to reduce risk quickly and affordably - without the cost or complexity of legacy systems.

✓ Automated Compliance & Documentation

Eliminate manual tracking and ensure every worker and vendor meets your requirements.

✓ Misclassification Prevention

Embedded workflows guide hiring managers to the correct worker type with required documentation.

✓ Rate Controls & Audit-Ready Billing

Configurable rate cards stop overbilling, bill rate creep, and rogue spend.

✓ Secure, Centralized Worker Data

Protect sensitive information with role-based access, audit logs, and modern security protocols.

✓ Vendor Standardization & Scorecards

Ensure all staffing suppliers follow the same rules, onboarding steps, and compliance checks.

✓ Real-Time Visibility into Worker, Spend, and Vendor Risk

Conexis dashboards consolidate all activity into one clean system—no more spreadsheets or email trails.

✓ Fast Implementation, Low Cost, High Adoption

Conexis reduces risk immediately because it’s simple to use, easy to roll out, and built for organizations that don’t want heavy tech.