As the contingent workforce continues to grow, and an increasing number of organizations utilize it to improve their business flexibility as well as reduce costs, so does the need to manage it effectively.
While the contingent workforce brings a huge number of benefits to businesses that use it - helping to address workforce shortages, reducing workforce costs and making it easy to scale up and down rapidly - it can also bring challenges and risks when managed ineffectively.
Risks of a contingent workforce program that’s managed ineffectively, include:
What might be the most effective and efficient way to manage the contingent workforce for one business, however, may not be the same for your organization.
So, do you outsource the management of your contingent workforce to a third-party expert with the required resources and category expertise, or do you manage your program in-house through your HR or procurement department (or a mixture of both)?
The decision of whether to outsource contingent workforce solutions or manage them in-house depends on various factors, including your organization's size, business goals, expertise and available resources. Here are some pros and cons of both options:
Outsourced Contingent Workforce Management Solutions
Organizations that don’t have the expertise and resources in place to implement a contingent workforce management program in place typically outsource their program to a third-party expert.
Contingent workforce solutions offered by outsourced organizations include:
Managed services provider (MSP): An MSP is a third-party contingent expert that will assume responsibility for a company’s entire contingent workforce management program. They’ll be responsible for all things related to the program, from implementation and engaging vendors, to hiring contingent workers, onboarding and billing. The aim is to take away the strategy and ongoing management burden of a contingent workforce away from the actual business itself. Learn more about MSP full program.
MSP lite services: Similarly to an MSP, an MSP lite program (also known as master vendor or prime vendor) is a way to outsource a company’s contingent workforce program. However, it isn’t as complex as a full MSP program, and organizations can pick and choose which aspects of the program they’d like to outsource to the master vendor. A master vendor typically works with its own network of pre-approved staffing agencies to fulfill a company’s workforce requirements. Learn more about MSP Lite.
Supplier consolidation services: Supplier consolidation services are a tactical solution that differs from the highly-strategic solution of an MSP. With supplier consolidations services, organizations outsource the paperwork and processes of managing their staffing agencies to a third-party expert, freeing their internal team to work on more complex revenue-driving tasks. Learn more about supplier consolidation services.
The Pros and Cons of Outsourcing the Management of Your Contingent Workforce Program to a Third-Party
Pros
✔️ Cost savings: Outsourcing contingent workforce solutions can often lead to cost savings, through a variety of ways, including saving your company time, improving contingent workforce program ROI and leveraging economies of scale through an MSP which can negotiate better rates and optimize staffing levels.
✔️ Specialized expertise: Third parties have specialized expertise in contingent workforce management, including compliance, risk mitigation, vendor management, contingent workforce technology such as VMS (Vendor Management System), tech integrations, contract management, end-to-end process, pricing and cost.
✔️ Scalability: Outsourcing your contingent workforce management can help you to quickly scale your program up or down to meet changing business needs, providing greater flexibility than in-house solutions.
Cons
⚠️ Lack of control: Outsourcing contingent workforce solutions, in some cases, means giving up some control over your contingent workforce program. That’s why it’s important to work with a provider you trust.
⚠️ Communication challenges: Working with an outside provider can sometimes lead to communication challenges, which can result in delays and misunderstandings. Ensure you work with a partner that has good communication and can understand your company’s unique needs.
⚠️ Contingent workforce is too strategic: For some companies, in industries such as management consulting, the contingent workforce is too strategic a category to outsource and simply isn’t an effective way to enhance your program.
⚠️ It’s more expensive in the long term than internal solutions: Companies in the medium to long term could reclaim the MSP fee and use it for internal costs.
In-House Contingent Workforce Management Solutions
With the appropriate resources, time, money and contingent category expertise, it’s definitely an option for some organizations to manage their contingent workforce program in house.
Just like an outsourced contingent workforce management program, the key to a program that’s managed in-house is to use a vendor management system (VMS) to underpin the management of the program.
A VMS is used both by companies managing their contingent workforce internally, as well as to augment an MSP program.
A vendor management system acts as a system of record for a company’s entire contingent workforce program in one centralized platform, giving them complete visibility and control over their contingent workforce.
VMS software will consolidate and automate all of the processes associated with managing the contingent workforce, including sourcing vendors, engaging contingent workers, onboarding, time entry and approval, analyzing vendor performance and making payments.
The Pros and Cons Managing Your Contingent Workforce Program In-House
Pros
✔️ Greater control: Managing contingent workforce solutions in-house gives organizations greater control over the hiring process. Companies also understand their internal culture and processes better than a third party.
✔️ Cost savings: If you already have the resources, expertise and know-how to effectively manage a contingent workforce in house, then it will be more cost-effective than outsourcing. However, the vast majority of companies do not have these things, and rogue costs run rampant throughout the program.
Cons
⚠️ Increased costs: Managing contingent workforce solutions in-house can be more expensive as organizations need to hire additional staff to manage the program.
⚠️ Limited expertise: In-house solutions may lack specialized expertise in workforce management, leading to potential compliance and risk mitigation issues. Hiring this expertise can be expensive when done in-house.
⚠️ Lack of resources: Unless your business has large HR and procurement teams with contingent workforce category expertise, it’s unlikely you have the resources required to successfully manage a contingent workforce program. You’ll likely need to hire more staff for this role.
Interested in learning more about outsourced vs in-house contingent workforce solutions, and what may be best for the unique needs of your business? Book a meeting with Contrax today. Our team of contingent workforce management specialists would love to discuss how we can help.
