Vendor Management Systems (VMS) have long been associated with large-scale contingent workforce programs, often managing hundreds of millions in payroll spend. But what about smaller programs—those with $50 million or less in payroll? Do they need a full-fledged VMS, or can tech-enabled Employer of Record (EOR) platforms deliver similar functionality without the complexities and costs?
This question is becoming increasingly relevant as smaller organizations seek to streamline contingent workforce management without overextending their budgets or resources. Let’s explore when a program might be considered too small for a VMS and how an EOR platform can offer a viable alternative.
Challenges of Using a VMS for Smaller Programs
While VMS solutions are excellent tools for managing large contingent workforce programs, they often fall short when applied to smaller programs. Here’s why:
- Cost-Prohibitive Licensing Models
Many VMS providers charge high fees, making the ROI less compelling for smaller programs. For a $50 million contingent workforce, these fees can eat into already-tight budgets. - Lack of Vendor Prioritization
VMS vendors tend to focus on high-value clients with hundreds of millions in spend. Smaller programs often find themselves deprioritized in terms of support and customization. - Complexity of Implementation
VMS platforms are typically designed with large enterprises in mind, offering extensive functionality that can overwhelm smaller teams. The learning curve and setup time might not align with the resources available for smaller programs.
When Is a Program “Too Small” for a VMS?
The decision to invest in a VMS often depends on several factors beyond just payroll spend:
- Staffing Volume and Complexity
If your contingent workforce involves a high volume of hires, multiple staffing agencies, and frequent job orders, a VMS can help organize and streamline these processes. However, for smaller programs with fewer moving parts, simpler solutions may suffice. - Customization Needs
Programs with highly specific workflows or compliance requirements might need the advanced configurability of a VMS. Conversely, smaller programs often have straightforward needs that don’t justify the cost and complexity of VMS customization. - Budgetary Constraints
Smaller programs with limited budgets often find that the cost of a VMS outweighs its benefits. In these cases, other tools, like tech-enabled EOR platforms, can be a better fit.
How Tech-Enabled EOR Platforms Bridge the Gap
For contingent workforce programs that fall below the traditional VMS threshold, tech-enabled EOR platforms can deliver many of the same benefits, minus the red tape and high costs.
- Centralized Workforce Management
EOR platforms provide centralized tools for managing payroll, onboarding, compliance, and benefits. These functions align with key VMS capabilities, ensuring streamlined processes for smaller programs. - Standardized Onboarding: EORs can provide a clear and compliant onboarding process for all temporary and contract employees. This streamlined processes for program managers and removes the back and forth communications required for onboarding workers from multiple suppliers.
- Cost Efficiency
Unlike VMS solutions with hefty licensing fees, EOR platforms often operate on a pay-as-you-go model, reducing upfront costs while offering scalable support. - Simplified Compliance and Risk Management
EOR platforms specialize in handling complex employment laws and regulations, offering real-time support to mitigate risks associated with contingent workforce management. - Support for Direct Sourcing
Direct sourcing can be a big part of smaller contingent workforce programs. However, most VMS solutions have limited support for direct sourcing, and usually have to outsource the EOR requirement anyways. A tech enabled EOR can deliver the management functionality along with the EOR solution necessary to help direct sourcing functions.
Conclusion: The Right Tool for the Job
For contingent workforce programs with $50 million or less in payroll spend, a full-fledged VMS may not always be the best solution. This is especially true for programs that leverage direct sourcing functions rather than solely rely on staffing suppliers. The high costs, complexity, and lack of vendor prioritization can make these platforms less practical.
Tech-enabled EOR platforms offer a compelling alternative, providing many of the same benefits—such as centralized management, compliance support, and scalability—at a fraction of the cost and complexity. For program managers looking to streamline their processes without the burdens of traditional VMS solutions, an EOR platform could be the perfect fit.
Looking to optimize your contingent workforce management? Explore how FoxHire’s tech-forward EOR platform can simplify your processes and reduce costs without sacrificing functionality.
