How to Procure a Future-Proof Contingent Workforce VMS
  • 7 min read

How to Procure a Future-Proof Contingent Workforce VMS

Have you taken a step back to consider what software is now available to drive your external workforce talent agenda? If you’re using a VMS, or planning to invest in one, it’s worth finding out what the state of the art is. The answer is a software platform that can cater for your changing needs to hire and manage top external workforce talent that adapts along with your business. But WHAT EXACTLY are you buying? We’ve put together a list of the top features to include in your VMS procurement plan.

Industry expectations have moved beyond the features of a traditional VMS

The term Vendor Management System (VMS) is two decades old and refers to the indirect staffing software used by procurement teams to manage staffing vendor supply chains. Back in the day the procurement department was the only team interested in hiring contingent workers to fulfil services resourcing tasks.

While many people in the staffing industry attribute the term ‘VMS’ to the hiring of contingent talent, procurement teams employ various VMS solutions across their entire procurement agenda—not just for hiring.

Companies today expect VMS features and capabilities to move beyond the traditional requirements of procurement teams.

External Workforce Management software is expected to serve the needs of all stakeholders who rely on these systems to find, hire and manage external talent—and that includes finance, HR, IT, compliance, departmental (hiring) managers, staffing suppliers, and of course candidates!

What a fit-for-purpose VMS looks like in 2022

Expect any of the top 10 VMS platforms that feature in Staffing Industry Analysts’ excellent Global Landscape Summary to offer the core capabilities that procurement teams would expect from a VMS to design and manage the performance, compliance, management, and payroll of staffing
vendors. But, that’s where the similarities end. Duck under the hood to inspect VMS engines, and you will find vendors target different stakeholders with very differing solutions.

The way that companies manage their workforce is changing with a growing proportion of roles being fulfilled by self-employed contractors, freelancers, gig workers and the so-called external workforce.

This has caused business leaders to rethink how they control this change. With an increasing number of stakeholders being involved in the workforce management process, many of them are turning towards a Total Talent Management (TTM) strategy.

Fundamentally, some VMS offerings round out on the features that appeal to procurement teams – those who arguably represent the largest voice in VMS selection decisions. Others focus more on a balance between HR and procurement needs. With HR and hiring managers taking ever more interest in external workforce management software procurements, selection decisions are increasingly becoming a team sport. 

More youthful VMS platforms were born in the cloud-native era. They’re better able to embrace new innovations including AI, blockchain, augmented reality, chatbots, big data, graph technology, etc.

From VMS to External Workforce Management software

If you want to invest in a future-proof VMS, you need to be looking for one that caters to ALL stakeholders and is designed to support end-to-end total talent solutions, not just the discerning needs of procurement heads.

Companies hiring out one in every three roles to external workforce resources need a robust and scalable resource management solution to support this business-critical process. To future-proof your VMS purchase, a VMS focused solely on procurement department wants is no good. What’s needed is an end-to-end total talent solution. The thing to do is consider what constitutes the management life cycle of the external workforce, and the building blocks of technology needed to digitalize it. 

For a VMS to be future-proof, you’ll want to make sure it covers these bases:

  1. Hire contingent workers through staffing vendors
  2. Hire gig workers to get tasks done
  3. Resource against a Statement of Work to get projects done
  4. Source candidates direct to recession-proof your talent supply
  5. Manage hiring compliance and installing safeguarding
  6. Integrate with your existing HR and Finance systems
  7. Meet DE&I aspirations and targets
  8. Bring performance and decisioning clarity to stakeholders
  9. Cater for the wellbeing of workers
  10.  To recognize the crucial role of engagement

1. Hire contingent workers through staffing vendors

It probably goes without saying, but your VMS will need to offer the fundamental capabilities that procurement teams need. The good news is any of the top 10 products recommended by SIA will accomplish these capabilities well.

2.  Hire gig workers to get tasks done

Some, not all of the top 10 VMS offer talent engagement portal solutions for hiring gig workers. You have a choice – you can either use a third-party platform provider (or tool), or you look for a VMS that includes this capability. Most VMS providers will say they integrate with third-party solutions. As a general rule, cloud-native VMS tend to be easier to integrate with.

3.   Resource against a Statement of Work to get projects done

You will want to use Statement of Work (SOW) to hire out projects and reward suppliers/contractors based on the achievement of outcomes, rather than paying for hours worked. Most top 10 VMS providers will offer a SOW module, although the completeness and versatility of these modules vary.

4.  Source candidates direct to recession-proof your talent supply

Direct Sourcing talent through a digital job board is a great way to cut 15% off your indirect labour spend instantly. It lets firms to build their own talent pool of people that have previously attended an interview, shown interest in their brand, have been recommended by employees, or come from their alumni of previous workers. Evidence suggests that workers who were sourced direct are more reliable and engaged—good news when finding ‘vetted for work’ talent is getting harder.

5.  Manage hiring compliance and installing safeguarding

You need your VMS to manage compliance and safeguard your business from legal and compliance risks. The last thing you need is to hire workers who are wrongly classified or are not legally allowed to work in your country. Even when hired workers are on your premises, there are obligations your employer of record has to take seriously, such as insurances. Furthermore, you want to avoid contractors walking away with your data, or not respecting company policy. 

7.  Meet DE&I goals and targets

Creating a diverse and inclusive workforce culture is good for business. It also offers tax benefits not to be ignored. Technology plays an important role to measure quotients for various diversity groups; those that demand close attention. Additionally, a VMS helps procurement professionals design a supply chain that recognizes the diversity credentials of suppliers to maximize the effectiveness of your DE&I agenda.

8.  Bring performance and decisioning clarity to stakeholders

Reporting and analytics used to be something teams did at the end of the month to see if their plans were on track. Today, dashboards and analytics are at the very front of good user interfaces. They allow VMS users to understand the system insights that matter most to them, and provide actionable insights that drive decision-making and help focus their effort on what brings maximum reward.

9.  Cater to worker wellbeing

While the external workforce is not directly employed by your business, they represent a cornerstone of your workforce. As part of your duty of care, it’s important to ensure that their emotional and physical wellbeing is protected to a comparable extent offered to your internal workforce. Technology can play a key role that underpins wellbeing and healthcare initiatives for external workers, although services need ultimately to be delivered through the Employer of Record.

10.  Recognize the crucial role of engagement

Ultimately, if your talent platform fails to engage workers, it won’t attract the talent you need, nor will it keep it. Your chosen solution needs to offer ‘stickability’ so workers have good reasons to keep returning to your talent portal.

Final thoughts

Selecting the right VMS for your business is tricky. If you’ve ever been involved in selecting software for your business before, I’m sure you know how the absence of comparative data on solutions makes it tough to compare ‘apples with apples.’ It’s also easy to get distracted by impressive sales pitches and demonstrators that show the bells and whistles of a particular solution.

To cut down the time needed to make an informed selection decision, I advise you to put together a list of the features you will need to manage the life cycle of running an external workforce at scale, and form this into a scorecard—to then see how the answers of VMS providers compare.