Top Ten Misconceptions of Managed Service Providers (MSP)

1248

A Review of Both Misconceptions and MSP Reality

TAPFIN’s mission is to revolutionize the way in which organizations fulfill and manage their contingent workforce. TAPFIN’s sole focus is working with leading organizations to develop, deploy, and enable an integrated approach to analyzing and managing external talent on a global basis. Below are ten of the most common misconceptions of MSPs.

Misconception:

  1. An MSP will almost always IMPROVE LONG-TERM PROFITABILITY in an account.
  2. A true MSP ABSOLUTELY CAN be delivered in both Europe and the Asia-Pacific.
  3. Vendor neutrality IS LEGAL in every country that ManpowerGroup operates in.
  4. Master Vendor and MSP are two different services.
  5. Tenure limits DO NOT eliminate co-employment risk for our clients.
  6. Worker classification is critical issue in most countries.
  7. Compliance is about more than just contracts.
  8. Localization of MSP models is necessary in most countries.
  9. It is sometimes the countries with less labor regulations that pose higher risk for a global employer or an MSP program.
  10. It CANNOT be assumed that smaller and/or private suppliers of staffing services in various markets around the world are familiar and compliant with all local regulations and processes.

Reality:

1. An MSP will almost always IMPROVE LONG-TERM PROFITABILITY in an account. Because cost efficiency is a key performance metric of most MSPs, lower margins are generally set for staffing suppliers within the program. However, cost efficiency is also delivered through supplier rationalization, where top performing suppliers are given higher volumes of business to achieve higher quality submissions – this balance of higher volume at a lower margin can maintain or even increase revenue. More importantly, when a client is evaluating MSP solutions, failure to deliver the right proposal can result in another staffing company winning the MSP and ultimately reduce or eliminate our staffing business with that client.

2. A true MSP ABSOLUTELY CAN be delivered in both Europe and the Asia-Pacific. “A true MSP” is simply a business process outsourcing solution. The COE is not aware of any situations where it is impossible or illegal to provide a client with a MSP solution. What is very difficult to do, and may be impossible based on the countries involved and the client’s requirements and expectations, is to deliver a “one size fits all” solution that covers each country. Further, there are elements of a traditional (aka US-based) MSP that are not allowed, are impractical, or for some reason will not work in every country. So care must be taken to understand what is permissible, culturally acceptable, and practical in each country – and ensuring that the solution is properly localized to fit local needs while also meeting the global requirements.

3. Vendor neutrality IS LEGAL in every country that ManpowerGroup operates in. Although there are a number of countries that prohibit Master Vendor models, there is no legislation that currently restricts our ability to deliver services to a client that is based on the selection of services providers that best meet their needs. In essence, ‘vendor neutral’ simply means that the MSP is objective in the evaluation of suppliers based on the criteria set by or in collaboration with the client. It does not include or exclude any particular supplier based on anything other than those criteria that are established.

4. Master Vendor and MSP are two different services. A Master Vendor program (MV) is a supply solution where the program management and supply are provided by a single primary vendor whose main objective is to fill orders. MV providers typically have supply capabilities and strive to fill as many requirements as they can themselves. Managed Service Provider programs (MSP) are business process outsourcing solutions that support the full lifecycle (“req to check”) of obtaining contingent workers from a community of vendors. This procurement solution helps to address a strategic workforce need. While MV may be thought of as a form of MSP (in that the solution ensures that requisitions are being filled), it is inaccurate to suggest that either a MV or a MSP do what the other does.

5. Tenure limits DO NOT eliminate co-employment risk for our clients. In fact, tenure limits (required removal of a contingent worker after a specified period of time or a designated ‘away time’) may be less beneficial to an employer than alternative options that mitigate the risk of co-employment in compliance with regulatory guidelines. Depending on the country and legislation, alternatives can include a) deployment of an MSP b) limiting integration of the worker to certain corporate activities c) avoiding direct performance management of the worker d) pre-engagement agreements waiving rights to employee benefits.

6. Worker classification is critical issue in most countries. Labor laws and restrictions often result in employers simply changing the way they contract workers to avoid certain requirements (e.g. freelancer or SOW). The reality is that regardless of how rigid or flexible the labor laws may seem, most countries have detailed definitions of the types of workers that can be engaged. Details can include required documentation for self-employed workers, different tax policies depending on the type of work being done, specified agencies or contracts that must be used depending on the role. As labor regulations are updated and enforced, the penalties for misclassification can range from small fines to retroactive penalties of pay and benefits based on the start date.

7. Compliance is about more than just contracts. Certainly contractual compliance is important – and ensuring contract compliance is part of the key value proposition of an MSP. But there are many other compliance issues that an MSP enforces, including; Independent Contractors, Vendor Enrollment, Vendor Insurance, Employment Eligibility, On-boarding and Off-boarding, and Ensuring Use of Approved Vendors. Validation of relevant labor regulations, incorporation of industry guidelines, and the development of consistent processes to manage every aspect of the hiring process is the only way to mitigate the risk of non-compliance.

8. Localization of MSP models is necessary in most countries. Very few countries share every aspect of their workforce, labor regulations, market conditions, and hiring activity. As a result, careful assessment of local conditions is essential to determine if any processes, initiatives, or policies need to be added, removed, or modified to deliver the services sought by our clients.

9. It is sometimes the countries with less labor regulations that pose higher risk for a global employer or an MSP program. In many cases, a lack of labor regulations will result in minimal distinction between the types of workers that can be engaged – resulting in a higher risk for judgments of misclassification in the future. In addition, more and more of these countries are beginning to establish new definitions and policies around contingent labor – creating a need to modify existing hiring practices. Since ‘doing it right’ the first time is usually more efficient than ‘fixing it later’, monitoring these markets for legislative trends and activity can allow for a more proactive approach to the local hiring processes.

10. It CANNOT be assumed that smaller and/or private suppliers of staffing services in various markets around the world are familiar and compliant with all local regulations and processes. The rigor and vigilance that ManpowerGroup instills in our policies, practices, and legislative analysis are a direct result of our corporate culture, social responsibility, and economic position in the global business world and the staffing industry itself. Our practices are not commonly adopted by others – particularly smaller agencies who may not be able to afford our standards or private organizations who may choose not to follow this path.

To gain control, companies are turning to TAPFIN, ManpowerGroup Solutions’ Managed Service Provider. TAPFIN provides comprehensive global solutions that optimize contingent workforce management and drive performance through people, process and technology. Our MSP has the capability to deliver oversight of your service providers and recruitment vendors. Additionally, TAPFIN is the only MSP vendor to have established and maintained an ISO 9001:2008 certification for all its processes. For more, visit the TAPFIN website.