A managed service provider (MSP) is a firm that runs a company’s contingent workforce program. It manages the staffing suppliers, bill rates, timesheets and compliance for temporary and contract workers, usually through a vendor management system (VMS).
Staffing and agenciestopic
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A firm that runs a company's contingent workforce program, managing suppliers, rates and compliance, usually through a VMS.
Large employers can use dozens of staffing agencies at once. An MSP brings order to that. It sets rate cards, decides which agencies can work on which roles, sends job orders out through the VMS, tracks supplier performance and makes sure workers are properly onboarded and paid. For the employer, the aim is lower cost, better visibility and less risk.
MSPs can be independent firms or divisions of large staffing companies. Some programs are vendor neutral, where the MSP does not fill roles itself. Others have a master vendor that fills most roles and passes the rest to subcontracted agencies. An MSP is different from recruitment process outsourcing (RPO). An MSP manages contingent workers; an RPO runs hiring for permanent employees. Some providers offer both as a total talent program.
Why it matters to recruiters
For staffing agencies, many of the biggest contract buyers can only be reached through an MSP program. Getting onto a supplier list, then performing well on fill speed and quality, decides how many job orders you see. Understanding how MSPs score suppliers, and the fees they take from your bill rate, helps you price correctly and decide which programs are worth the effort.
An example from a recruiting desk
A mid sized IT staffing firm wins a spot on a bank’s MSP program. Job orders arrive through the VMS with a fixed rate card and a 48 hour window to submit. In the first quarter, the firm submits slowly and ranks near the bottom of the supplier scorecard. It assigns one recruiter to watch the VMS all day, and by the third quarter its submittals and fills put it in the top tier.
Tips that help
Learn the program’s supplier scorecard and what moves your ranking.
Factor the MSP fee into your rates before you accept the rate card.
Respond to new job orders within hours, since early submittals often win.
Build a relationship with the MSP program manager, not just the hiring managers.
Mistakes to avoid
Contacting hiring managers directly when the program rules forbid it.
Joining every MSP program without checking whether the volume and margins justify it.
Frequently asked questions
What is the difference between an MSP and a VMS?
An MSP is a service company that runs the contingent workforce program. A VMS is the software that program runs on, handling job orders, submittals, timesheets and invoices. Most MSPs operate through a VMS.
How do MSPs make money?
Commonly through a fee charged as a percentage of contingent spend, often deducted from what suppliers bill. Arrangements vary by program, so read the supplier agreement closely.
Is an MSP the same as RPO?
No. An MSP manages temporary and contract workers and the agencies that supply them. RPO handles permanent hiring on the employer’s behalf. Some providers combine both.
