What Is MSP in Staffing?

managed services provider

Last Updated May 6, 2024

You’ve been thinking about using a managed services provider (MSP) to help expand your staffing agency. But like with any investment, you don’t want to make a rash decision. Taking the time to do your due diligence in research and asking questions is important to you.

Although there isn’t a “one size fits all” approach to selecting (or not selecting) an MSP, there are some things you should consider before making a decision. Below are some discussions on what an MSP is, how it can fit into your operations, what it can do to help your agency, and some of the pros and cons of using one.

What Is a Managed Service Provider (MSP) in Staffing?

A managed service provider (MSP) in staffing is an outside organization with expertise in recruiting temporary employees. An MSP provides a dedicated team to manage the entire talent acquisition and recruitment process for a client or a series of clients. The MSP is in charge of raising awareness of temporary positions within local labor markets.

People who work for an MSP also are charged with receiving applications, screening those applications against employer requirements, interviewing candidates, and hiring them on behalf of organizations.

How Does an MSP in Staffing Work?

Managed service providers work as an intermediary between staffing firms and clients. MSPs connect a staffing firm’s contingent workforce teams with employers that need them. For instance, many retailers need to ramp up their in-store staff during the holidays. Some may take charge of their own hiring process, but many also rely on staffing agencies and MSPs to find temporary workers.

MSPs may use vendor management systems (VMS) to work with clients and staffing firms in providing contingent workers. A VMS consists of technology and tech applications.

What Do Managed Service Providers Do?

A managed service provider’s main role in the staffing process is to be a bridge between your agency and the client. Your MSP will assist in key staffing activities like:

  • Receiving job offers from clients
  • Compiling work requirements for your staffing agency
  • Selecting and onboarding the external workforce
  • Collecting payments from clients
  • Tracking external workforce performance

What Is the Difference Between an MSP and a VMS?

The key difference between an MSP and VMS (vendor management system) is that the latter does not necessarily involve a human element. A VMS is a technology solution that organizes data and automates staffing processes, improving efficiency and leading to cost savings. Meanwhile, an MSP is typically an agency that bridges clients and staffing companies.

Unlike an MSP, a VMS does not include a human component. Vendor management systems are simply a set of online interfaces or applications that allow staffing agencies and employers to communicate with each other. A VMS can send job openings and requirements to several staffing agencies at once.

Vendor management systems also use analytics to determine which staffing agencies are sending over the most qualified candidates. These systems also track the success rate and performance of various staffing agencies. It is a way of gaining an unbiased, data-driven perspective of which firms are helping clients meet their temporary staffing goals.

In contrast, an MSP is based on human intervention and management. An MSP doesn’t necessarily take the place of a VMS, but it does not rely on technology to manage the recruitment process. Managed service providers have in-depth knowledge and expertise on how to recruit and manage temporary workers for assignments.

The Benefits of Combining VMS with an MSP

While they are two different things, VMS and MSP can be combined for maximum effect. In fact, some managed service providers use VMS in their daily operations to serve their clients better. An MSP’s staffing industry experience and connections can help you get more value out of your VMS.

Here are some benefits you can get by combining VMS automation with a managed service provider’s expertise:

  • Find talented candidates with affordable labor costs
  • Acquire new clients through the MSP’s connections
  • Prevent legal trouble by enforcing temporary staff and client compliance
  • Improve your staffing agency through expert insight gleaned from data

How Can an MSP Help Staffing Agencies Operate and Grow?

An MSP can help staffing agencies operate and grow by exposing them to more opportunities. Managed service providers can also make the process of finding and matching candidates more efficient. As MSPs serve as intermediaries, they can help clarify job openings, requirements, and employers’ minimum and preferred qualifications.

MSPs can use VMS software to sort through the number of openings different employers have. A staffing agency no longer has to do this by themselves or devote staff that spends hours on finding out whether positions are available. Staffing agencies that are just starting out and do not have a lot of established relationships with employers can get their foot in the door with an MSP.

Related: Invoice Factoring for Staffing Companies

During periods of high volume, MSPs can make staffing agencies more efficient. Similar to other businesses, staffing firms are limited by the size of their contingent workforce and their expertise. Budgets may also restrict the resources staffing firms can acquire.

An MSP can bring in knowledge, expertise, manpower, and resources that growing staffing vendors don’t have yet. These advantages can help them compete with larger staffing agencies and those agencies with established histories of success with employers. An MSP can even form as a branch of an established staffing firm, giving other firms access to some of that expertise.

Pros and Cons of Companies Using an MSP

Companies that use an MSP are handing over control of their staffing and outreach efforts to a vendor. Organizations may lose some of the benefits that come with 100% control, such as complete oversight when it comes to quality and decision-making. While there are ways to monitor quality and establish processes for a vendor to follow, an MSP will ultimately manage critical aspects of your agency’s operations.

When a staffing firm doesn’t have the time or the resources to manage everything, an MSP can be a godsend. They can offer knowledge and insights your staffing firm can learn from, especially if you eventually want to do what an MSP does on your own. An MSP can also expand your reach, both in terms of employees you can recruit and employers with which you can connect.

In-Summary: What Is an MSP in Staffing?

Thanks to its experience in dealing with clients, a managed service provider can benefit your business immensely. An MSP can pursue payment, negotiate better temp employee rates, and provide business insights to improve your staffing agency, making them one of the best contingent workforce management solutions around. You can further leverage an MSP’s expertise by combining their services with a robust VMS.

Are you planning to create a new staffing agency? Read our guides to starting a staffing agency and pricing staffing services for more tips.

MSP in Staffing FAQs

Here are some common questions about managed service providers in staffing answered.

What is MSP in staffing?

A managed service provider (MSP) in staffing refers to an outsourced group or agency that bridges your staffing agency and clients. It takes client requirements, solves staffing issues, looks for temporary staff on your behalf, and helps you manage more clients at once.

What does MSP stand for in staffing?

An MSP in staffing stands for “managed services provider.” MSPs are third-party companies that specialize in recruiting temporary employees for all types of businesses.

Is an MSP right for my organization?

Whether an MSP is right for your organization depends on your staff agency’s needs and budget. If you need help with contingent workforce management and have the money to afford its services, a managed service provider can help you immensely.

How much does an MSP cost?

An MSP’s cost differs from company to company. Generally, MSPs charge a fixed fee for temp staff recruitment, although some offer volume-based discounts if you recruit multiple people at once.