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When it comes to managing contingent talent, you have several approaches to choose from. You can consider working with an external party, like a managed service provider (MSP), or manage everything in-house with an internal contingent workforce program. Each approach has its own set of advantages and disadvantages.
If you’re evaluating these options, the right choice will depend on your organisation’s unique needs and goals. Are you focused on cost-efficiency, control, or scalability? Both options bring distinct benefits, and your decision on which route to choose will largely depend on your priorities.
To help you make an informed decision, this blog will explore the pros and cons of both MSPs and internal contingent workforce programs. We’ll talk about how they differ in cost, tech integration, compliance management, and more.
What is a managed service provider (MSP) for a contingent workforce?
An MSP for contingent workforce is a third-party provider that handles various aspects of managing temporary or contract talent. It typically takes charge of sourcing, onboarding, compliance, and sometimes even offboarding talent. When you partner with an MSP to meet your staffing needs, you gain access to specialised experts and a broader talent pool.
What is an internal contingent workforce program?
An internal contingent workforce program relies on your own team to manage contingent talent. This approach can provide more direct control over hiring and workforce decisions, allowing for tailored processes that align closely with your organisation’s culture and standards. However, it also demands more internal resources and often requires specialised knowledge to navigate compliance and talent management effectively.
Comparing global managed services providers and internal contingent workforce programs
From the complexities of managing a contingent workforce to cost and scalability, we’ll compare the two approaches to help you make an informed decision.
Complexity of managing a contingent workforce: MSP vs. internal contingent workforce program
While hiring contingent workers offers many advantages, such as flexibility and access to specialised skills, managing them is not an easy task. Without the right approach, your company can face legal and financial risks that can impact your reputation as a brand and lead to costly fines or legal disputes.
What are the challenges in managing a contingent workforce?
Managing a contingent workforce presents several challenges, particularly when it comes to ensuring compliance with local labour laws. This is even more complex when working across multiple countries, as each region has different regulations. To avoid any legal trouble, it’s essential to understand the local laws and ensure full compliance. Misclassification is another common risk; classifying a contractor as an employee—or vice versa—can expose your company to legal issues.
That’s why it’s important to have the right approach when managing this segment of your workforce. Now, let’s compare your options and see how an MSP and an internal contingent workforce program differ.
MSP on managing contingent workers
Reliable MSPs can offer access to specialised knowledge and best practices in workforce management. If you’re hiring in the Philippines, for example, and you’re not familiar with the local labour laws and regulations, an MSP can help you navigate them and ensure your engagement with contingent talent is compliant. This means possible liability can be reduced through expert oversight.
An MSP can also potentially help you lower costs through vendor negotiation. If your MSP is vendor-neutral, you can gain a wider talent pool, which can help fill open roles quickly, especially for those hard-to fill positions.
However, as an employer, you may feel you have less control over the hiring process. An MSP typically takes care of most of the recruitment process, such as sourcing and onboarding of the talent.
Internal contingent workforce program on managing talent
When managing the entire recruitment process in-house, you have greater control over the entire process and ensure it aligns with your company culture and specific needs. You also have the flexibility to adjust workforce needs and better collaboration and communication within teams.
While an internal contingent workforce program has many advantages, it takes significant investment in time and resources to do this approach effectively. Without the negotiation power of an MSP, organisations may face higher staffing costs. If your organisation lacks the necessary manpower or resources to support your contingent talent, it could potentially jeopardise your company’s compliance.
However, there’s another approach you can leverage if you lack the manpower or resources: partnering with an employer of record (EoR) or Contractor Management Outsourcing company. An EoR allows you to manage your contingent workforce internally without the need to handle time-consuming HR and administrative responsibilties. Trusted EoR providers, like CXC, streamline the process by taking on tasks such as payroll, compliance, tax obligations, and benefits administration.
Cost, scalability, and flexibility considerations
When choosing between a global MSP and an internal contingent workforce program, it’s important to consider factors such as cost, scalability, and flexibility.
What is the risk of a contingent workforce?
While a contingent workforce can offer flexibility, it also carries several risks. Worker misclassification, for example, is one of the compliance or legal risks associated with managing a contingent talent.
Security and data privacy is also a concern, especially when managing cross-border talent. Contingent workers may need access to sensitive information or company systems. Without strict access controls and data management policies, organisations can face data breaches or regulatory violations.
Cost overruns can also occur. Without visibility and standardised rates for contingent labour, it would be challenging to predict and manage costs effectively.
Cost: MSP vs. the internal contingent workforce program
MSPs can leverage their buying power to negotiate better rates with staffing agencies and vendors. Many organisations report cost reductions of 10-20% when using an MSP, according to the Staffing Industry Analysts.
Typically, MSPs provide transparent pricing structures, which helps companies predict costs and manage budgets. By outsourcing the management of your contingent workforce, you can reduce the overhead associated with hiring and training internal staff.
Internal contingent workforce programs, on the other hand, require significant investment in technology, recruitment processes, and personnel. If the internal team struggles with sourcing or compliance, costs may rise. While initial costs may be higher, a well-managed internal program can lead to long-term savings through better integration and reduced turnover.
But if you want to get a head start for your internal contingent workforce program, consider outsourcing parts of the process, such as sourcing and hiring. Doing so can free up your internal teams with time-consuming recruitment duties, allowing them to concentrate on strategic goals and other important aspects of the business.
Outsourcing specific stages of the contractor workforce management process can help prevent your team from becoming overwhelmed. Specialists in contingent workforce solutions, such as CXC, handle complex tasks like candidate sourcing, screening, the initial hiring process, and more.
Flexibility: MSP vs. Internal contingent workforce program
When we talk about flexibility, MSPs can quickly adapt to changing workforce needs. It allows your organisation to scale up or down based on project demands, providing quick access to a larger talent pool. MSPs often have extensive networks and can source specialised talent on short notice, which is especially valuable in industries with fluctuating demands.
Meanwhile, an internal contingent workforce program can offer full control to the organisation. This allows them to tailor their approach to specific project or business needs. Internal teams can adjust staffing levels and processes without waiting for an external provider to respond, which can be crucial in fast-paced environments.
Scalability: MSP vs. internal contingent workforce program
If you’re managing large volumes of contingent workers, MSPs can help meet this requirement. They are particularly useful for companies experiencing rapid growth or seasonal fluctuations. Many MSPs have international capabilities, making it easier for companies to scale their contingent workforce across regions and markets.
On a different note, scaling an internal contingent workforce program can be challenging if you have limited resources, such as technology and internal staff. However, if your company is in the growth mode, you can fulfil this by expanding or hiring additional team members and training your existing team. Alternatively, you can partner with a reliable EoR provider, such as CXC. This allows you to hire talent anywhere in the world without setting up a legal entity.
For example, if your company plans to hire contractors in multiple countries or in locations where you don’t have an established entity, an EoR can support your contingent workforce program by managing payroll, benefits, tax filing, and compliance with local laws. This allows your internal team to focus on core operations while the EoR handles the complex administrative tasks of international hiring.
Technological integration and compliance management
Leveraging tech tools and platforms for your contingent workforce management can help streamline and simplify recruitment processes.
Most MSPs often use tech solutions or platforms to streamline various aspects of workforce management, including sourcing, onboarding, and performance tracking. Typically, an MSP uses a vendor management system (VMS) to streamline coordination and communication with staffing agencies and contingent workers.
On the other hand, an internal contingent workforce program has the flexibility to choose tech solutions for their specific needs. This can include onboarding software, applicant tracking systems (ATS), and other workforce management tools.
Compliance management: MSP vs. internal contingent workforce program
In terms of navigating compliance, MSPs have a team of experts who can support companies in staying updated on legal changes. They also ensure that contingent workers are classified correctly, mitigating the risk of misclassification and related penalties. Many MSPs leverage technology to automate compliance processes, such as background checks, training certifications, and tax regulations, reducing manual effort and minimising errors.
Meanwhile, for organisations managing their own contingent workforce program, they have direct control over compliance management, which can lead to more tailored approaches to meeting industry-specific legal requirements. Compliance management can be complex and may require dedicated staff to stay informed about changing regulations. This can be a challenge for smaller organisations with limited resources.
Nevertheless, fostering a culture of compliance is still possible with an internal contingent workforce program, as long as organisations are willing to invest in training their internal teams. This approach ensures that both permanent and contingent staff understand compliance expectations.
Another way company can do is to seek support from compliance experts, such as CXC, to train their internal teams. Partnering with a workforce solution expert can help companies manage contractor compliance effectively.
Choosing the right workforce management strategy for your business
More and more companies today are relying on contingent workers due to the flexibility and specialised skills they bring in. These workers help businesses handle seasonal workloads or meet specific project needs. Beyond cost savings, contingent workers bring niche expertise that may not be needed full-time but can make a big impact on a project-by-project basis.
Because of this demand, companies need to work on their overall strategy for managing this segment of their workforce—whether that means partnering with a managed service provider or building an internal contingent workforce program. Both MSPs and internal contingent workforce programs offer unique advantages and challenges.
Which is right for your business?
Choosing the right approach will depend on your assessment and your organisation’s specific needs. Here are some guiding questions:
- What is your workforce size and complexity? Larger organisations with diverse needs may benefit more from the expertise and efficiency of an MSP. In contrast, smaller businesses may find an internal program more manageable.
- What is your level of expertise in workforce management? If your organisation lacks the resources or expertise to manage contingent labour effectively, an MSP could provide the necessary support.
- What are your strategic goals? Consider whether maintaining control, long-term success, and customisation are important factors for your business. If so, an internal program might be more suitable.
How CXC can help
Whether you opt for a global managed service provider or an internal contingent workforce program, CXC has the expertise to help you with your specific workforce needs.
With over 30 years of experience in the global employment space, our team of experts is here to provide extra support to fill the knowledge gap for your internal program or manage your entire contingent workforce as your MSP provider.
This means you don’t have to worry about compliance or regulatory changes, and you can focus on what truly matters: growing your business. Speak to our team today
