Using contingent, freelance, gig, contractor, and service-based work provides companies with the flexibility and resilience they need to survive and thrive in their industry. It’s through this extended workforce that many organizations are able to fill talent gaps and acquire the highly specialized skills they need to complete certain jobs or tasks.
With at least 43% of companies using contingent labor, improving efficiency in the program’s management can be a key differentiator for that employer in the market, helping them to become an employer of choice.
Why Do Companies Manually Track Contingent Labor?
Based on spreadsheets, emails, and paper invoices, many smaller to mid-size organizations may start with a manual process to track their extended labor programs. These manual processes allow companies to build out their programs to their specific needs. They are often low-cost, run by an individual or small team to create processes in spreadsheets, and use data from emails and other correspondence.
Developing a manual process can be a good starting point for any contingent labor program, but it’s not usually scalable as the organization grows its extended workforce. Manual tracking makes it difficult to capture high-quality data and gain clear visibility into the total cost of contract labor, the number of contractors in the business, whether a fair rate is being paid for the work, and much more.
It does, however, give you a basis for finding the right vendor management solution (VMS) for your needs.
What Is a VMS?
A VMS is a cloud-based application that provides a single source of record for managing your contingent workforce. It helps companies procure, manage, and pay workers sourced through staffing agencies or any other sourcing avenue. The VMS also captures data that is often held in silos across the business to enable reporting and better decision-making.
If you’re still not sure whether implementing a VMS is right for you, consider these three benefits.
1. Reliable Compliance Management
With on-demand labor, ensuring compliance of those workers is critical. For example, while independent contractors aren’t new, the rules and regulations are ever-changing. This increases the urgency for properly tracking and vetting your independent contractors. Additionally, global organizations must consider the requirements of contingent labor in other countries. In the UK, recent legislative changes to IR35 now require many companies to classify their contractors, rather than placing the burden on the workers themselves.
With a manual management system, this becomes increasingly difficult to maintain as the program grows. A VMS helps program managers and HR leaders to accurately track and take action with their contingent workforce by:
- Initiating and monitoring background checks
- Maintaining worker licenses, certifications, and testing requirements
- Storing legal documents, including NDAs, non-competes, and intellectual property agreements
- Asset tracking for equipment, including laptops, swipe cards, building access, and cell phones
READ MORE ON IR35 | ‘What Is IR35 and Will I Be Impacted?’
2. Increase Program Efficiency
It’s possible to create rules and formulas in spreadsheets that can automate some processes in a manual contingent program, but it does require creating that programming yourself.
To ensure you’re getting the right talent for the roles at the best value, a VMS can automate many processes for procuring and sourcing talent. A VMS allows hiring managers to focus on their core business by:
- Automating candidate submission and comparisons
- Tracking rates
- Scheduling interviews
- Managing onboarding and offboarding tasks
- Tracking time, expenses, and payments
A VMS creates efficiencies for your vendors as well, making it easier for them to submit high-quality candidates and understand your processes.
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3. Drive Cost Savings
For companies managing their contingent workforce manually, adding software or a cloud-based platform seems like it would incur an immediate cost. When it comes to a VMS, however, most programs don’t charge licensing or renewal fees. This is because they are typically vendor-funded.
Under a vendor-funded pricing model, VMS providers don’t charge the buyer a software licensing or transaction fee. Instead, the technology is funded through a participation fee paid by staffing vendors, who pay a percentage of spend for the labor they provide on your behalf. Your vendors also benefit from the VMS since it is a more efficient system, saving them time, providing access to data they can use to provide a better service to you, and may result in faster payments due to automated billing and invoicing.
In addition to the platform having no cost to your organization, a VMS can also help manage and reduce costs within your program by:
- Managing competitive bidding between vendors to get the best rates
- Tracking contractor budgets to reduce rogue spend
- Using data to standardize or reduce rates and identify poor performing vendors
- Consolidating invoicing and payments to suppliers to reduce invoicing costs
- Tracking overtime and turnover among workers
- Enforcing length of service limits
Many organizations see significant savings by implementing a VMS over their manual processes.
YOU MIGHT ALSO LIKE | ‘4 Reasons to Track Your Independent Contractors in a VMS’
When to Make the Change
Contingent labor offers flexibility to companies as they grow and scale. From specialized skills to project-based work, the extended workforce is becoming a larger part of organizations around the world. As programs grow, keeping track of every detail becomes more challenging without the right system in place. As soon as it becomes difficult to answer questions about your extended workforce, such as how many contractors are active in your company at any given time, it may be time to implement a VMS.
Want to see if a VMS is right for you? Join us for a live demo!
Meet the Expert
Taylor Ramchandani – VP of Strategy
Taylor Ramchandani is responsible for the management and strategic planning of the VectorVMS vendor management system. Taylor is committed to client satisfaction and to ensuring VectorVMS technology meets the current and future needs of clients and managed service providers (MSPs). She uses market research and in-depth industry experience to create products and services that make extended workforce management efficient and intuitive. Taylor oversees product development, marketing, and business partnerships for VectorVMS and is responsible for driving innovation for contingent workforce management. Connect with her on LinkedIn.