Optimizing Your Contingent Workforce Management (CWM) Strategy
When your company’s contingent workforce has grown to over fifty headcount, it is time to consider hiring a managed service provider (MSP) to manage your contingent workforce program. Without central management of your contingent workforce, this will likely result in governance issues and a lack of control in managing agency markups, as well as business owners branching off working with different agencies for their contingent hire needs.
In my own experience, I have personally seen bad practices where contingent workforce management (CWM) was either lacking or non-existent.
A marketing manager hired a contingent worker through a new agency, with the agency advising that the cost would be $100/hr to hire the candidate. The candidate was hired with a one-year commitment but shortly quit after only two months. The casual was the worker was getting paid only $40/hr with $60/hr as the markup going to the agency. There were not any controls in place that ensured the rate to the continent worker was reasonable, so the contingent worker found a better opportunity after two months of the contract. This clearly showcases that the agency’s main motivation is to maximize its markup and that the company needs to do better due diligence when utilizing contingent workforce agencies.
Outsourcing Contingent Workforce Management (CWM) to a Managed Service Provider (MSP)
Managing your contingent workforce should be outsourced to a managed service provider (MSP) that has extensive deep domain experience. The first step when engaging a managed service provider (MSP) would be establishing a brief company policy on contingent workforce management (CWM). Instead of looking at it solely through the lens of “outsourcing”, consider it as a partnership with procurement, alongside Human Resources (HR), Legal, and Finance.
The key components of the policy will pertain to how to hire a contingent worker through the managed service provider (MSP) and how to effectively manage the individual while ensuring a clear distinction between contingent workers and permanent employees. This is why the organization needs a well-suited MSP, in which the key areas to focus on within the program include the following:
MSP markup, which will likely be less than 1%
A clear, concise layout of the MSP’s role in managing the contingent program
Reviewing the MSP system that tracks the contingent workforce
Agency markup - should only be in 20% to 30% range
Agreement on agency contingent workforce rates - should be reviewed twice a year
Minimum benefits that the agencies will provide (e.g. vacation, health benefits, etc.)
Agencies that MSP will contract fully comply with agreed markups and benefits
Ensure there are no additional fees when converting to a permanent employee
Interview the planned MSP program manager and agree on key metrics to track on a quarterly basis
Review contingent employees reaching their exit date
Track any and all overtime (OT) - needs to be kept to a minimum
Procurement will work right alongside the MSP, which is why it is essential to ensure that the MSP and procurement are strategically aligned.
Bridging the Gap Between Contingent Workforce Management and Your Organization
Having a managed service provider (MSP) will ensure strong governance alongside effective markup management. It will also ensure that contingent workers are being paid at competitive rates, agency rates are reasonable, and complete/total transparency amongst all parties involved.
Mike Glass runs GPC (Glass Procurement Consulting), a procurement consulting firm focused on optimizing a company's spend. Mike has worked in senior procurement management positions at NVIDIA, Google, Meta, Fitbit, and Flextronics. Mike would enjoy getting your insight on any procurement topic, feel free to contact Mike at mike@glassprocurementconsulting.com.
