According to a recent Staffing Industry Analyst report, over 81% of companies with more than 1,000 employees in the US use a Vendor Management System (VMS).

For staffing firms who want those contracts, working with a VMS or a Managed Service Provider (MSP) is an unavoidable reality. While some of the challenges are well known among most staffing professionals, VMS business doesn’t have to just be a “necessary evil” — working with these vendors and systems can also benefit staffing firms who put in the effort to do it right.

With that in mind, let’s dive deeper into the challenges, benefits and best practices of working with VMS/MSPs in staffing.

Top Challenges

VMS and MSPs often get a bad rap among professionals in the staffing industry. The negative connotation can stem from challenges like these:

Lower profit margins. To even be considered for a spot on a VMS vendor list, staffing agencies often have to lower their rates, which can eat into profit margins.

Lack of personal connection. Because the VMS model eliminates personal contact with hiring managers, recruiting professionals often are left with unanswered questions about key desired traits for a position, like personality fit.

Stiff competition. A typical VMS listing has 30-40 vendors competing. And since there’s no contact with a hiring manager, the selection largely comes down to price.

Hiring challenges. To compete for positions, staffing firms must have strong recruiters — but many strong recruiters don’t want to work in the high-pressure, low-margin VMS environment. This conundrum can cause hiring challenges.

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Top Benefits

While at times challenging, there are also benefits and opportunities when it comes to working within VMS/MSP systems.

Find new business. As more companies use VMS system to fill positions — and as other recruitment companies fail to jump on board — a steady supply of available business can help drive company growth.

Match candidates efficiently. In the traditional staffing process, understanding the client’s needs and matching them with candidates takes time. With VMS, everything you need to know is available immediately, and you can use analytics and sorting to respond to your clients rapidly and efficiently.

Avoid communication gaps. At a busy staffing firm, it isn’t always possible for the client to reach the exact right person, which can cause communication delays. But with VMS proxy or delegate features, a coworker can step in and fill the gap to prevent any hiccups.

Track the recruitment process and use data to improve. Using a VMS, staffing firms can track the entire candidate lifecycle down to a very granular level of data. These analytics, such as how many calls required, turnover rates, bottom line cost, etc., can help staffing firms improve their processes.

Best Practices

Finally, let’s talk about best practices for staffing firms who do use a VMS system. You can make your life easier by following these VMS tips:

Confirm time entry. Make time each week to ensure that what is in the system matches up with what you know to be true. If issues arise, contact your VMS or MSP billing issue help system immediately.

Check for rejected time cards. If you’re seeing rejected time in your system, it’s important to keep up on it and make sure that you’re following up to correct and resubmit.

Double-check your bill and pay rates. Small errors here can have consequences. Check that your bill and pay rates are correct in the system.

Upload all documentation. It’s imperative that new employees have correct paperwork in the system before they start on a job. If not, you might not get paid.

Measure your metrics. Make sure to track and report on metrics like gross margin, number of requisitions per month, submission-to-hire ratio, etc. This will allow you to know the true value of VMS business for your agency.

We hope this article was illuminating when it comes to doing VMS business. While challenging, VMS and MSP business can also provide significant opportunities for those staffing firms who do it right.

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