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Transitioning from MSPs to Internal CW management
With the changing business environment, many companies are turning to contingent workers to meet their strategic goals—whether it’s filling short-term project needs or injecting specialised expertise for initiatives like product development or digital transformation.
This shift has prompted companies to rethink their workforce strategy, making sure they’re able to manage this segment of their workforce compliantly and effectively. In fact, a report from Deloitte shows that organisations are seeking an integrated approach to manage their contingent workers as part of their overall workforce strategy.
Traditionally, many businesses have depended on external managed service providers (MSPs) to manage their contingent workforce. The thing is, relying too much on MSPs can create challenges, particularly when it comes to building direct relationships with your contingent workers. Since MSPs act as intermediaries, it can be challenging to get a clear picture of your workforce, and you might miss out on opportunities for engagement and communication. So, how do you get out of MSPs?
Fortunately, there are other approaches you can pursue to manage your contingent workforce, such as managing them in-house or leveraging your internal teams. More and more organisations are starting to see the benefits of internal contingent workforce (CW) management. One is because of cost-efficiency. Managing your contingent workforce internally can reduce the associated costs with third-party services and optimise your spending. Aside from cost-efficiency, you can tailor your approach based on your company’s specific goals.
If you’re thinking about transitioning from MSPs to internal contingent workforce management, you’re on the right page. In this blog, we’ll guide you through everything you need to know to transition smoothly from MSPs to internal CW management. We’ll explore the reasons behind the shift and provide some practical steps to help you get going.
Key steps and challenges in transitioning to internal contingent workforce management
When transitioning from MSPs to internal contingent workforce management, there are various factors you need to consider, which include:
Building internal expertise and processes for contingent workforce management
Managing your contingent workers entails a certain level of expertise, especially when it comes to compliance. It’s also important to have internal processes in place—from sourcing and onboarding up to offboarding—so your contingent workers feel supported and confident as they start their engagements.
But you might not have the bandwidth or the expertise to do or initiate such changes, especially if your contingent workers are spread across multiple countries.
If your company really wants to make it work, it’s essential to invest in training and development programs. This helps equip your HR and management teams with the skills they need to effectively manage a diverse contingent workforce.
To speed up the process, you can consider partnering with a workforce solution provider, such as CXC, that can provide guidance and best practices on compliance and help you establish your internal contingent workforce program.
Moreover, you can also gradually pilot internal processes on a smaller scale to help your teams gain hands-on experience while minimising risks.
Leveraging technology: VMS, AI, and compliance tools
Using the right tech tools can save your team a ton of time, letting them focus on other important aspects of the business. Administrative and other HR tasks, for example, can be time-consuming, and doing manual processes can be prone to errors. By leveraging tech tools or platforms, you can streamline these processes and reduce errors.
Some of the technology tools you can leverage are the following:
- Vendor management system (VMS): A VMS streamlines the procurement and management of contingent workers by automating processes such as sourcing, onboarding, and tracking worker performance. This helps to boost efficiency and takes some of the administrative load off your team. It also helps keep track of third-party vendors and contingent workers, ensuring compliance with labour laws and regulations.
- Artificial intelligence (AI) tools: There are so many ways to use AI for managing your contingent workforce. For example, AI can provide predictive analytics or help screen resumes. Another tool you can leverage is AI-powered applicant tracking systems (ATS) which can help streamline your recruitment process. Some of its capabilities are automating candidate sourcing, screening resumes, and matching candidates to job requirements.
- Compliance tools: Managing compliance can be a little overwhelming. And non-compliance can lead to hefty fines and serious legal issues. Compliance tools can automate tracking of labour laws and regulations, helping you reduce risks, especially around misclassification. Some tools even automate payroll processes to ensure that payments to contingent workers are accurate and compliant with tax laws and labour regulations.
You can do so much more when you leverage technology for your internal contingent workforce program. By taking advantage of the right tech tools, you can achieve better outcomes and drive efficiency—all while staying compliant.
Managing compliance and mitigating risks
Managing contingent workers comes with legal risks that companies need to thread carefully. One of the biggest challenges is the worker misclassification, where contingent workers are mistakenly classified as independent contracts instead of employees. This can lead to costly fines and legal repercussions if not handled properly. That’s why compliance should be your top priority when setting up your internal contingent workforce management.
Things get even more complicated when you’re managing international talent. For companies, it’s essential to develop internal policies on your engagement with contingent workers. Invest in targeted training sessions for your team on key compliance issues and best practices related to contingent workforce management.
Regular check-ins can help too. Schedule periodic meetings to discuss compliance status and any potential issues. This encourages open communication and helps you identify risks early on.
Cost and resource allocation: optimising the transition process
To make your internal contingent workforce management work, make sure to build a solid team and provide them with the necessary support, resources, and training they need to thrive in their roles. You may face some pushback initially, especially from your staff who are used to the MSP model. But addressing their concerns and showing the benefits of the new approach can help ease the transition.
That means determining the right internal resources is key to a smooth transition process. Have a dedicated HR leader responsible to oversee the entire lifecycle of your contingent workforce—covering processes from recruitment and onboarding to offboarding. Equipping your internal team should also be part of the plan. Provide training programs focused on compliance, workforce management, and tech tools relevant for managing contingent workers to help them succeed in their roles.
The overall cost of the entire transition process can vary widely based on several factors. These include investments in technology and training, headcount costs, legal and compliance services, and any unforeseen expenses that may arise. The size of your company and its specific needs will also be considered in determining costs.
Thus, careful planning is essential before making this shift. Ensure that you allocate a dedicated budget for this initiative, as thorough financial planning will help set the stage for a successful transition and long-term management of your contingent workforce.
Making a smooth transition to internal contingent workforce management
Building your internal contingent workforce management program offers strategic advantages to your organisation. It gives you greater control and flexibility, so you can quickly adapt to changing needs without having to wait on an external party. This direct control often leads to better alignment and enhanced engagement with your contingent workers, making them feel more connected to your team.
By putting these best practices into action, you can maximise the potential of your contingent workforce. With a strategic approach that prioritises clear policies, the right technology, open communication, and compliance, you can set your organisation apart from the competition. This way, you can attract and retain highly skilled contingent workers.
Remember, being an employer of choice is all about creating an environment where people genuinely want to work. And that starts from creating an effective internal program that benefits not just your organisation but also supports your entire workforce.
How CXC can help
Transitioning from MSPs to internal contingent workforce management can be a lot of work. But it doesn’t have to be!
When you partner with CXC, you get the extra support you need to fill any knowledge gaps. With over 30 years of experience in the contingent workforce space, our team of experts is here to help ensure compliance, especially when you’re working with internal talent across different jurisdictions. This means you can focus on the strategic aspects of your business without getting overwhelmed by the complexities of managing a contingent workforce.Curious to know more? Speak to our team.
Frequently asked questions
How do I leave a service provider?
If you’re thinking about leaving your current service provider, the first thing you should do is check your agreement with them. Look closely at the termination clauses, notice periods, and any penalties that might come with ending the contract. Figure out your timeline for making the transition—consider any important projects or services that need to be moved over and plan to avoid any service gaps.
Once you’ve sorted out all the details, let your MSP know in writing that you’re terminating the contract, following the notice period specified in your agreement. Then, focus on transferring any ongoing projects, data, and responsibilities to your internal team or a new provider. Make sure to exchange all necessary documentation and access credentials so everything goes smoothly.
If you’re passing the baton to your internal team, ensure that your team has the capacity, and they’re prepared to manage the transition smoothly. This could mean giving them a little training or support to ensure they’re fully equipped to take over.
How long is MSP good for?
The length of time a Managed Service Provider (MSP) is useful can vary widely depending on your organisation’s needs, the terms of the contract, and the performance of the MSP itself.
Typically, contracts with MSPs range from one to three years, but they can be renewed or extended based on your satisfaction and ongoing requirements. It’s essential to regularly assess the value the MSP is providing and see if it aligns with your business goals. If you find that they’re meeting your expectations, then there’s no reason to terminate the contract, unless there are other underlying issues.
However, if the services are no longer a good fit or if your needs change, you may want to consider renegotiating, finding a new provider, or managing it in-house. Regular evaluations will help you determine if the MSP is meeting your requirements and expectations.
So, before you sign a contract with an MSP, make sure to thoroughly assess their reputation and capabilities. To help you with that, we’ve created an MSP evaluation checklist to determine if your current provider or potential new one can meet your needs.
