What is a Managed Service Provider (MSP) in Contingent Staffing?

Engaging temporary workers can save your organisation money, give you access to high-quality talent, and help you to build flexibility into your operations.

But managing a contingent workforce can be a significant challenge, especially if your HR and recruitment teams are not used to working with on-demand labour.

For many organisations, the solution is to enlist the help of a managed service provider, or MSP.

Managed Service Provider

In this article, we’ll discuss exactly what an MSP is, and explain how this solution could help you to build a contingent workforce that meets your organisation’s needs. 

What is a managed service provider (MSP)?

A managed service provider (MSP) is a specialist organisation that companies use to manage a specific service. For example, many organisations use MSPs to manage their IT systems without having to onboard internal technicians. 

In the world of contingent staffing, a managed services provider is an organisation that companies engage to manage their on-demand workforces, which might include temporary employees, statement of work (SOW) contractors, freelancers and other types of contingent workers. The MSP typically manages the entire contingent talent lifecycle from sourcing and acquisition through to offboarding. 

Managed service provider vs. managed services programme

While the acronym ‘MSP’ usually stands for ‘managed service provider’, it’s sometimes used to refer to a ‘managed services programme’. This means that ‘MSP’ can refer to either a managed service provider or the service that the organisation delivers to its clients. 

MSP vs. VMS

A vendor management system (VMS) is a cloud-based software platform that enables companies to find, engage and manage independent workers. Using a VMS is an alternative to engaging an MSP, since it allows companies to more effectively source and manage contingent workers. 

A VMS alone is no replacement for the human expertise you’ll gain access to if you engage an MSP. However, when you use an MSP, you will often be given access to a VMS, which can help to give you visibility over your external workforce. 

What does a managed service provider do?

A managed service provider handles the sourcing, hiring, onboarding and management of a company’s contingent workforce. 

Working with an MSP can alleviate the pressures put on your HR and recruitment functions. It can also reduce risks related to compliance, which are a particular concern when your internal teams are not used to working with non-permanent staff. 

Here are some of the services that a managed service provider might provide: 

  • Sourcing and engaging contingent and SOW workers
  • Building candidate pools to draw from for future openings
  • Reviewing of contracts with suppliers and vendors (i.e. staffing agencies) 
  • Introducing new vendors and negotiating pricing with existing ones
  • Providing reporting and workforce analytics through a VMS
  • Management and payment of supplier invoices 
  • Advising on key industry labour market trends
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Types of MSP

Broadly speaking, there are three main types of managed service providers: 

  • Vendor-neutral MSP: In a vendor-neutral model, the MSP does not prioritise any one supplier when providing its clients with contingent workers. This is generally seen as an advantage since it maximises the chances of the best candidates being chosen for each role. 
  • Master-vendor MSP: These MSPs prioritise a single, primary supplier when providing workers to their clients. This supplier or vendor is almost always the MSP itself, or a staffing agency that’s affiliated with it. A master-vendor MSP may still engage a second tier of suppliers when no appropriate workers are available through the primary vendor. 
  • Hybrid MSP: As the name suggests, this type of MSP includes elements of both vendor-neutral and master-vendor programs. For example, the MSP might act as the sole supplier for technical employees, while using other vendors for other roles. 

5 benefits of the MSP model

If you’ve always managed your contingent workforce needs in-house, you might be wondering if it’s really worth engaging an MSP — but this solution comes with a lot of advantages. Here are five of the biggest benefits of using a managed service provider: 

1. Improved governance and compliance

Non-permanent workers are subject to different rules and regulations than permanent employees. And if your recruitment and HR teams aren’t familiar with these differences, you could be at risk of various compliance issues when engaging contingent workers. 

An example is worker misclassification, which is when a worker is classified as an independent contractor when their actual working conditions suggest that they are really an employee. This can have serious consequences for a company — even if it’s not done deliberately. 

Working with a managed service provider is a good way to mitigate this and other compliance risks because any good MSP will understand the best practices that need to be in place to ensure compliance with the appropriate laws and regulations.

Misclassification

2. Simplified and reduced costs

Part of the role of a managed service provider is to introduce new staffing agency vendors and negotiate better deals with your existing providers. This means that working with an MSP could significantly reduce the staffing costs your organisation has to pay. 

Using an MSP also simplifies the process of paying suppliers, because the MSP will usually pay suppliers on your behalf and issue you with a single, global invoice to pay. You’ll no longer have to deal with payments to multiple vendors, which simplifies your operations.

3. Process efficiency

Working with a managed service provider allows you to manage every aspect of your contingent workforce management through one point of contact. This can simplify your administration and free up your HR and recruitment teams to work on other things. 

MSPs also allow you to automate various processes related to the management of your contingent workforce. Again, this can save time and allow your internal teams to focus on driving growth in your core business. As an added benefit, this automation can also reduce administrative errors that can arise when processes are completed manually.

4. Increased access to talent

Managed service providers are experts in attracting the right talent, even in competitive markets. A master-vendor MSP typically works with a pool of thousands of pre-vetted candidates and will be able to match the right person to each role. 

And a vendor-neutral MSP may be able to introduce you to new vendors and suppliers that you may not otherwise have been able to access. All of this means that using an MSP gives you greater access to talent without the hassle of having to attract candidates through job sites and vet and assess them internally. 

5. Flexibility and scalability

One of the many advantages of using an MSP is that you’re able to expand and contract your workforce as your needs change. This might mean taking on workers with specific skills to complete a short-term project, or just engaging extra workers at busy times of the year.

Without an MSP, it’s not always easy to quickly ramp up your workforce, especially on short notice. Using an MSP ensures that you’re never left short-staffed — and don’t have to waste money paying for staff that you don’t need at quieter times of the year. 

How do you know if an MSP is right for your business?

Using a managed service provider allows you to simplify your contingent workforce management, increasing efficiency and ensuring compliance. However, it’s not the right solution for every business. 

For example, if your contingent workforce needs are limited (e.g. you only need a handful of freelancers or SOW contractors), it may be more cost-efficient to manage them yourself rather than engaging an MSP. 

On the other hand, you might consider outsourcing your contingent workforce management to a managed service provider if any of the following apply: 

  • You need to quickly scale your workforce up and down according to your business needs, for example by adding large numbers of seasonal workers 
  • You want better cost control over your staffing vendors, or you want to be introduced to new vendors
  • You’re looking for greater compliance and risk management 
  • You want more detailed reporting, workforce analytics and key insights to help you make better contingent labour decisions

Introducing CXC’s MSP model

If you want to build a more flexible, more agile, and more efficient business model, CXC’s MSP solution could be the answer. 

We’ll work with you to fulfil all of your contingent hiring needs, including temporary employees, contractors and SOW workers. Our solution will scale up and down to match your hiring needs, helping you to effectively manage the peaks and troughs of demand throughout the year. 

Want to learn more?

Contact one of our experts to find out if a managed services programme is the right solution for you.