In many areas of business contingent labour has become the norm, or at least an important element of a firm’s HR strategy. However, recruiting a contingent workforce brings with it a number of costs and risks, which is why many organisations turn to a Managed Services Provider (MSP) to keep these under control.
So what are the objectives that you should set if you are considering the appointment of an MSP? Well, the drivers behind any MSP agreement fall under four main headings:
- Securing the best talent
- Achieving cost savings
- Risk management
- Process efficiency
The emphasis will shift between these depending on your requirements such as the nature of the talent to be secured and the volume. For example, there is much more scope to achieve process efficiencies in a high-volume project (for example taking an hour out of the recruitment and on-boarding process for 1,000 temporary call centre staff), whereas a project that involves hiring a small team of compliance experts will put greater emphasis on securing hard-to-find talent.
The time-cycle will also influence your objectives. Generally speaking, the focus at the start of any MSP agreement will be to get the best talent on board within a set timeframe and achieve cost reduction whilst managing risk. Further down the line process efficiencies will come more into play.
Securing the best talent
The overriding objective here is assurance of supply in labour markets where there is a relative shortage. The word “relative” is important here – you might not have any problem recruiting half a dozen application development testers, but if you need 50 in order to get an application up and running to a tight schedule, you are likely to struggle. Conversely, perhaps you need to appoint just one senior-level contractor with a unique skill set that only half a dozen people in the entire country would match. An MSP therefore takes control of all the effort involved in identifying, recruiting, screening and interviewing candidates. Typically this will involve managing several sources of supply: what you get is not a consolidated model but an aggregated offering, so you only have to manage a single supplier, the MSP, which will identify the optimum number of sources and suppliers to ensure that all of the roles are filled all of the time.
Cost savings fall under two headings: direct and indirect. A good MSP will secure reductions in the daily rate by selling the benefits of an assignment (e.g. the opportunity to learn new technology or develop new skills and experience.) To do this effectively the MSP must have a very good grasp of the “rate for the job” and the leverage over this that the particular employer and the assignment gives over this. Trying to beat people down below this is going to be counter-productive in terms of assuring supply: if contractors are dissatisfied, attrition imposes costs. In short, the MSP must know the “sweet spot” which is agreeable to both hirer and hiree.
What people often overlook is the indirect or “soft” savings that an MSP brings through task-transfer: screening for eligibility to work, compliance checks, interviewing and on-boarding, time sheet management, performance reviews etc. To take just one example: “first-day readiness” can bring major cost savings. The MSP does what it takes for the contractor to hit the ground running (access to the building, email logins etc.) rather than spending the first day(s) under-utilised.
Managing regulatory & internal risk
Although there have been efforts to harmonise labour law between countries (in particular within the EU) the regulations governing contingent workers still differ widely. Your MSP needs to be on top of this. In some countries you may only be allowed to employ contingent workers for a certain duration or for specific reasons (such as maternity cover). Lawsuits in the USA have established that despite what the contract language states, if the reality of the arrangement looks and feels like an employer-employee relationship, the company could be liable for employment-related claims such as stock options. In Germany, strict intellectual property law has left some companies in the lurch when courts decided that contractors owned the rights to inventions, not the company. And so on. A good MSP will use technology to give early warning signals that a contract is reaching its legal limits, an employer needs to take out liability cover etc.
In addition to external regulatory requirements, the MSP needs to be aware of the company’s own internal rules and culture: there are additional risks such as permanent employees feeling resentment that contractors, who owe the company no long-term loyalty, are getting a much better deal.
The MSP should bring a variety of efficiency improvements throughout the end to end process. This is where many of the ‘soft’ savings can be generated. Well written Job Specs matched to an accurate rate card will help the hiring managers make the right choices, and will enable a speedy and effective candidate attraction and selection process. Automated Management Information will give you touch-of-a button visibility of your contingent workforce enabling better controls and accurate forecasting. We examine every step of the process to unlock process efficiencies from on-boarding, to timesheet management, online reporting, quality assurance, purchase order extensions and streamlining payments. This is all supported by best-in-class Vendor Management Software that underpins every step of the process, enabling us to deliver outstanding service at all times.