In today’s dynamic business environment, staffing firms are increasingly partnering with Managed Service Providers (MSPs) to streamline and enhance their talent acquisition processes. Understanding the role of an MSP and how to effectively collaborate with one can significantly impact the success of your staffing firm. This blog post delves into what an MSP is within the staffing and contingent workforce industry and outlines the expectations MSPs have regarding the Employer of Record (EOR) relationship between contracted staff and staffing agencies.
What is an MSP?
A Managed Service Provider (MSP) in the staffing and contingent workforce industry is a third-party company that manages the contingent workforce program of an organization. MSPs are responsible for overseeing all aspects of contingent labor, from sourcing and procurement to onboarding, compliance, and offboarding. They act as intermediaries between the hiring organization and various staffing suppliers, ensuring that the organization’s contingent workforce needs are met efficiently and cost-effectively.
Key Responsibilities of an MSP
- Vendor Management: MSPs manage relationships with multiple staffing suppliers (i.e. staffing agencies), ensuring that the organization has access to a diverse pool of talent.
- Compliance and Risk Management: MSPs ensure that all contingent workers meet legal and regulatory requirements, reducing the risk of non-compliance for the hiring organization.
- Process Optimization: MSPs streamline and standardize the hiring process, making it more efficient and cost-effective.
- Reporting and Analytics: MSPs provide detailed insights into the contingent workforce program, helping organizations make data-driven decisions.
The Role of Staffing Firms in MSP Programs
Staffing firms play a crucial role in MSP programs by supplying the talent needed to fill contingent workforce positions. To be successful in this partnership, staffing firms must understand and align with the MSP’s expectations and processes. One critical aspect is the requirement for staffing firms to be the Employer of Record (EOR) for their staff or to work with a reputable EOR platform.
Being the legal employer of contracted staff requires staffing firms to meet all the compliance related requirements imposed by MSPs. These requirements can be over and above government mandated requirements, and can create high barriers of entry, especially for small to midsize firms. These requirements include onboarding, credentialing, insurance limits, worker compensation, and more. That is why many staffing agencies partner with EOR platforms to help make their organizations better suited to work with MSPs, as EOR platforms can enable scale for mid-size firms.
What is an Employer of Record (EOR) platform?
An Employer of Record (EOR) platform is a third-party organization that takes on the legal responsibility of employing workers on behalf of another company. The EOR handles all employment-related tasks, including payroll, taxes, benefits administration, onboarding, compliance, and more. This allows the staffing firm to focus on sourcing and placing talent without worrying about the complexities of employment administration.
Why MSPs Expect Staffing Firms to Use EOR Services
- Compliance Assurance: By using an EOR, staffing firms can ensure that all employment-related laws and regulations are followed, reducing the risk of non-compliance for both the staffing firm and the MSP.
- Streamlined Processes: EORs manage all employment administration tasks, allowing staffing firms to focus on their core competencies—sourcing and placing talent. This results in a more efficient and effective partnership with the MSP.
- Risk Mitigation: EORs take on the liability associated with employment, protecting staffing firms and MSPs from potential legal and financial risks.
- Consistency and Standardization: EORs provide consistent and standardized employment processes, which is crucial for MSPs managing large and diverse contingent workforce programs.
What to Expect When Working with a MSP
Staffing firms that choose to work through MSPs to support their clients can expect quite a different experience than working with clients directly. There are benefits and drawbacks to working with MSPs, which include the following:
Benefits of Working with MSPs
- Increased Opportunities: MSPs can provide staffing firms access to thousands of job orders. This access drastically increases opportunities for staffing firms to make placements and earn income.
- Consistent Demand: Because MSPs support multiple clients, demand is more constant for staffing firms. This enables them to spend more time focusing on finding talent, and less time on business development.
- Program Support: Unlike working directly with a hiring manager, the program managers at MSPs can deliver more support and are tasked with ensuring programs are successful. In some cases, this can create a better dynamic between staffing firms and clients.
Challenges of Working with MSPs
- Increased Competition: Due to the access to clients that MSPs have, many staffing firms attempt to work with them. Once approved, staffing leaders should expect a high amount of competition for every job order. This can drive some staffing leaders to “spin their wheels” sourcing candidates for roles they will not be able to fill quickly enough.
- Risky and One-Sided Contract Terms: In order to work with MSPs, staffing agencies will be forced to sign highly risky contract terms. These contracts typically put heavy risks on the staffing agencies, and defer them from clients. This is one benefit to clients of using MSPs. However, it can create financial strain on staffing agencies, who already have up front costs to consider, like payroll funding. Staffing leaders should review agreements with their legal professional and look for things like “no show penalties” and indemnification language, prior to signing any MSP contracts.
- Administrative Burden: Because MSPs are tasked with providing organization to their clients, they will force staffing agencies to leverage specific tools and processes in order to work with them. These tools may not always be easy, efficient, or modern. Additionally they may not integrate or be compatible with the tools the staffing agencies already use. Understanding how this burden will impact operations is critical to deciding which MSPs to work with.
Conclusion
Partnering with an MSP can significantly enhance the reach and opportunities of a staffing firm’s operations. However, there are legal and administrative burdens that will need to be addressed as well. By understanding the role of an MSP and meeting their expectations, staffing firms can position themselves as valuable partners in the contingent workforce ecosystem. Leveraging a reputable EOR platform, such as FoxHire, can further streamline processes, ensure compliance, and mitigate risks, ultimately contributing to the success of both the staffing firm and the MSP.
