First of all, I have to give full credit for this post to the Californai Staffing Association. The information written by them below is one of the BEST descriptions of what staffing firms many times deal with when they interact with a corporate VMS. It is important for all parties; 1) the corporate client, 2) the VMS/MSP and 3) the staffing firm to better understand the common frustrations of interfacing with a VMS environment. Happy Reading !!!
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It’s not likely to change soon; more and more staffing agencies are getting cornered into working with middlemen-vendor managers. One day you’re sending temps to an end user and directly billing the end user. The next day a vendor manager-accounts payable service has been installed between you and the customer. You’re told, “Take it or leave it!” If you must “take it”, at least do it with eyes wide open. There are a number of things you must understand, and do, to make sure you don’t get burned by VMS vendor managers.
Whatever software or web system the VMS uses to interact with the staffing agencies, subcontractors, and temps, you had better understand it extremely well from the very beginning (before you send the first employee). In most cases, if you are not set up perfectly on their system you will not get paid by the VMS no matter how much you have already paid your temps. It does not matter how much of your own internal paperwork or documentation you have. You can send the VMS your invoices, timesheets and payroll data until you are blue in the face, but they will usually only pay the hours recorded perfectly on their system. This can be true whether it is in the normal course of business or even in a dispute. Most VMS will never look at your invoices and never see your time sheets. Never pay employees from your own internal time sheets.
The payment information that vendor manager systems provide staffing agencies is often confusing. Many can tell you, “if you don’t have a good deal of time to reconcile all of the data provided by the VMS every week, don’t even start in with a VMS.” Payment reports from the VMS might include payments from different week endings; payments are not clear cut and may not be tied into one specific week. Confused and overloaded, agency operators just keep erroneously applying payments to the oldest invoices. When a VMS creates confusion and holds payments, or doesn’t pay the correct amounts, the staffing agency usually ends up taking it in the shorts.
Many agencies keep paying employees that are not fully approved, turned on, or activated on the VMS system. The VMS can say the temp did not send their resume, complete a background check or drug screening, meet some educational requirement, etc., etc. Before you find out some element of “fully approved” has not been met, you lose a week or more of pay. And then you may spend countless hours fighting to recover.
In some cases, by contract you only have two or three weeks to find out if an employee is not turned on in their system, to correct hour variances, and handle disputes. You may not even know something is wrong for almost six weeks, until you get a shorted check. When working with a VMS, it is safest to log in and reconcile constantly. Import the hours from the VMS software to your payroll and billing software if possible. If the first check you receive from the VMS does not exactly match your imported data, stop everything. Know that it will never be correct going forward and you will probably lose money in future confusion. Too many staffing agency owners, especially start-up operations, are just so happy to get a check, they ignore the early warning signs.
New developments at the macro level of working with a VMS can also cause you financial losses and higher risk, especially in bankruptcy situations. When working directly with a client, a staffing agency would normally pull a credit report on that direct client before sending in workers. When working with a VMS the real debtor becomes the VMS, not the end user of the temps. In VMS contracts the staffing agency usually has no rights to collect from the company that used the temporaries. It is necessary to pull a credit report on the vendor manager. Normally if the vendor manager ever goes bankrupt, you the staffing agency must return to the court any monies that the VMS paid to you within the ninety day period before the VMS bankruptcy. If the end user of the temps declares bankruptcy, you do not have to return monies paid to you by the VMS; your customer is the VMS. In that case, the VMS would take the bankruptcy hit. Beware…that scenario is changing now. Study carefully the clauses in any VMS contracts you may be given. In some of them you will now see paragraphs that obligate you to return monies paid to you by the VMS if the end user of the temps ever declares bankruptcy. That means you must pull credit reports on, and continually track, both the VMS and the end user.
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SOOOOOO right!
How can the Staffing Industry lobby to get the middlemen out of the loop? They eat your margins. they cost you more in indirect costs to manage their confused procedures, and they cost you more in financial burden in delaying payment and reconciliation.
The Hell with them, Yes!
The growth trend of VMS/MSPs seems to be in direct opposition to another growing trend. That trend being measuring your staffing suppliers based on “quality of hire.” If you can’t forge a relationship with the hiring manager and counsel them to truly convey what performance and outcomes they expect from the consultant, than you’re simply staffing to keywords. Talk about commoditization. Doesn’t that then make VMS systems glorified search engines?
It would be interesting to hear pros and cons of VMS systems from the buyer’s side. We are on the supplier end and are seeing job go unfilled because the system does not adequately identify desired outcomes and performance requirements. I’m not suggesting that anyone say that the emperor has no clothes. I merely submit that his fly might be open.
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This is a awesome read with some helpful points to digest. I will be keeping an eye on your future posts to see how this pans out.