It’s not likely to change soon; more and more staffing agencies are getting cornered into working with middlemen-vendor manager staffing organizations. One day you’re sending temporary staffing employees to an end user and directly billing the end user. The next day a MSP/VMS 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 getburned by MSP’s Managed Service Providers and VMS staffing Vendor Manager services and systems.
Whatever software or web system the temporary staffing industry vendor manager 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 temporary staffing vendor manager MSP/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 staffing agency vendor manager 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 VMSsystem. This can be true whether it is in the normal course of business or even in a dispute. Most staffing vendor management organizations 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 staffing industry vendor manager VMS every week, don’t even start in with a MSP/VMS.” Payment reports from the temporary staffing vendor manager 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 staffing agency vendor manager creates confusion and holds payments, or doesn’t pay the correct amounts, the staffing agency usually ends up taking it in the shorts. All of this can wreak havoc with any staffing industry payroll funding program and the cash that is available through them.
Many agencies keep paying employees that are not fully approved, turned on, or activated on the staffing vendor management organization’s VMS system. The MSP/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 a temporary 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 staffing industry vendor manager VMS, it is safest to log in and reconcile constantly.
Import the hours from the temporary staffing vendor manager VMS software to your payroll and billing software if possible. If the first check you receive from the staffing agency 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. Payroll funding formulas and general cash availability will be adversely affected. 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 staffing industry vendor management organization MSP/VMS can also cause you financial losses and higher risk, especially in bankruptcy situations. When working directly with a client, a staffing agency or their payroll funding company would normally pull a credit report on that direct client before sending in workers. When working with a staffing agency vendor manager MSP/VMS the real debtor becomes the MSP/VMS, not the end user of the temps. In staffing industry vendor manager MSP/VMS contracts the staffing agency usually has no rights to collect from the company that used the temporaries. It is necessary for you or your staffing payroll funding provider 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 temporary staffing vendor manager paid to you within the ninety day period before the MSP/VMS bankruptcy. If the end user of the temps declares bankruptcy, you do not have to return monies paid to you by the MSP/VMS; your customer is the MSP/VMS. In that case, the MSP/VMS would take the bankruptcy hit. Beware, …that scenario is changing now. Study carefully the clauses in any MSP/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 MSP/VMS if the end user of the temps ever declares bankruptcy. That means you or your staffing agency payroll funding provider must pull credit reports on, and continually track, both the MSP/VMS and the end user. Increasingly, staffing industry payroll funding companies will examine the details of your contracts with MSP/VMS before financing them. And some temporary staffing agency payroll factoring companies will not fund any MSP/VMS at all.
For more practical information on dealing with MSP / VMS see Working with VMS/MSP.