What Is VMS in Staffing?

Last Updated December 27, 2023

New staffing agency owners are likely familiar with vendor management systems (VMS) but might be unsure whether utilizing VMS is necessary for their firm.

VMS can help you grow your staffing business by managing your worker and employer pipeline. However, allowing a software application to guide your recruitment and talent acquisition processes can raise questions.

Will it really increase your staffing firm’s efficiency? What are the advantages and drawbacks of VMS in staffing? Plus, there are always things like costs and impacts on how your staffing firm operates. Keep reading to learn about what goes into a VMS, how it operates, and why it might be the right fit for your agency.

What Is a Vendor Management System (VMS) and How Does It Work?

A VMS is a group of software solutions, systems, or websites that facilitates the recruitment process. These systems typically help manage the recruitment and talent acquisition process for temporary or contingent workers. However, some staffing agencies also hire temp-to-permanent employees or match contingent candidates with job offers.

Vendor management systems aren’t necessarily tied to a single staffing agency. A third-party vendor uses a VMS to let agencies know about positions employers have available. The software electronically distributes job requisition details to all of the staffing firms working with the vendor.

A VMS also can track which agencies submit resumes or applications for open positions. The software produces reports on how many contingent worker candidates from each of the agencies are submitted and how many are hired. Another VMS reporting feature tracks how many contingent candidates from a staffing firm drop out of the hiring process.

VMS applications are usually cloud-based to make them accessible from the Internet. Some advanced VMS solutions can help facilitate the onboarding process. Others have automation tools for distributing open positions.

How a VMS Is Used in Staffing

A VMS plays an important role in an agency’s staffing process. Some key tasks a VMS can assist with include:

• Taking new job requests from your client’s HR team
• Recording the client’s job requirements for your staffing team
• Tracking various metrics related to your company’s recruitment process and performance
• Alerting your team if your staff underperforms in certain metrics

What Is VMS Integration?

VMS integration, also known as VMS automation, ensures your VMS syncs up with your applicant tracking system (ATS), so you do not have to transfer data between the two systems manually. This ensures your processes are streamlined, reducing manual labor and thereby increasing overall productivity.

For clarification, VMS integration is not the same thing as your vendor management system. Your VMS is the general software that helps you manage your vendor management processes, while VMS integration includes the specific tools that automate these processes for you, allowing for the marriage between your VMS and your applicant tracking system. It acts as a feature of the broader VMS.

What Are the Benefits of VMS Integration?

The main benefits of VMS integration include:

• Reduced manual labor
• Lessened chances of human error
• Improved data integrity and accuracy
• Added data that leads to enhanced decision-making
• Streamlined recruitment processes

Can a VMS Help Your Staffing Agency Grow? Pros and Cons

Most staffing agency owners find that using a VMS helps them increase their overall efficiency and productivity, but it’s important to consider a few potential disadvantages before choosing your vendor management system.

Pros Of Using a VMS in Staffing	Cons Of Using a VMS in Staffing
Can reduce your need for having a salesforce, as you’ll have quick, easy access to job openings that companies have posted	Unable to see if other staffing companies have access to the same job requisitions
Greatly assists with data and performance tracking. Companies will notice your firm if you routinely submit qualified, successful candidates, thus leading to potential repeat business	An employer may have already selected a candidate from another agency, and you might not be immediately made aware
Your staffing firm will instantly be granted access to all the details you need regarding a company’s job requisitions, including: skillset, educational requirements, experience levels, position pay, position length, and location	You’re relying on technology, meaning that if the system goes offline or becomes inaccessible, you may experience recruiting delays and setbacks
Can increase your overall efficiency and knowledge of how to properly price your services	Typically requires your staff to be fairly tech-savvy, and your clients must know how to enter accurate information into the requisitions

Pros of VMS in Staffing

One of the advantages of a VMS for staffing vendors is it reduces the need for a sales force. Your staffing organization won’t have to spend as much time “wooing” companies to find out what openings they have. A VMS also cuts down on competitive tactics and unscrupulous sales tactics among various staffing agencies.

Instead of companies letting certain staffing suppliers know about employee needs, a wider variety of staffing firms can get notified. Staffing suppliers gain more of an even playing field when it comes to submitting candidates. Since a VMS tracks staffing firm performance, organizations that consistently submit qualified and successful candidates can get a leg up.

The second advantage of a VMS is that staffing organizations can instantly get details on companies’ job requisitions. You’ll know what the employer is looking for in terms of skills, experience, and educational background. A staffing firm will know what the company can pay, how long positions last, and what location(s) the job openings are in.

This advantage helps staffing firms send qualified candidates that match each employer’s requirements. Plus, when companies know there are open positions, staffing organizations can recruit and select candidates accordingly. A VMS helps a staffing organization become efficient when it comes to finding and submitting suitable workers for employers’ review.

Related: How to Run a Successful Staffing Agency

Cons of VMS in Staffing

The cons of using a VMS include not knowing what other staffing companies are seeing the same job requisitions. You could be viewing jobs that have a lot of competition, meaning other staffing agencies have already sent qualified candidates the employer wants to hire. It’s also possible an employer has already selected a candidate from another agency.

Another con is that technology is known for hiccups. If the system goes offline or is inaccessible, you may experience delays in your recruiting process. A VMS also requires you and your staff to be tech-savvy, and there’s a possibility that employers won’t enter accurate or complete information into the requisitions.

However, a VMS can increase your overall efficiency and knowledge of how to price your services. You will also gain more opportunities to work with a variety of employers and repeat business.

What Is the Difference Between a VMS and MSP?

The difference between a VMS and managed services provider (MSP) is that a VMS is a type of software, while an MSP is usually an agency or another group of people who’ve been assigned to assist with your recruiting. However, these two are not mutually exclusive – a managed service provider can use a VMS to manage the contingent labor recruitment process for an organization.

An MSP typically attracts, screens, and hires temporary contract workers. Depending on local labor laws, the contingent workforce may include 1099 and contract employees.

An MSP can handle the entire recruitment process for a company, from determining a recruitment strategy to onboarding employees to managing separations. These services can also include managing payroll for temporary workers, along with interviewing and coaching applicants.

A managed services provider involves humans assisting throughout the entire process, using technology to support their efforts.

A VMS, on the other hand, only includes the technology piece. Organizations can use a VMS, but they still need to know how to take care of the non-technical aspects of recruiting contingent staff.

Related: What Is Payroll Funding?

The Benefits of Combining MSP with VMS

A VMS is a powerful tool for managing your temp worker recruitment process, but it is still just a tool. To get the most value out of your VMS, you need people who understand how to use it. An MSP has the required experience and network to use a VMS to its full potential.

Here are some benefits of combining a managed services provider’s services with your VMS:

• An MSP has the experience to provide your company with industry insights, helping you make better business decisions.
• An MSP knows the temp staffing market, so they can find the best temporary employees with the most affordable rates.
• An MSP can enforce client and employee compliance to keep your company out of legal trouble.

Key Takeaways

A VMS helps your temporary employee agency by automating several key recruitment and staffing processes. This automation helps you save time because your employees do not have to move data around manually anymore. Additionally, a VMS improves data integrity and accuracy, helping your company make better business decisions.

You can enlist the services of a managed services provider to get even more value out of your VMS. An MSP has the experience and connections needed to find the best contingent employees at the most affordable rates.

Are you looking for more tips to build your staffing agency? Check our articles on how to start a staffing agency and how to price your staffing services.

VMS in Staffing FAQs

Here are some questions about VMS in staffing answered.

What is the meaning of VMS?

VMS means Vendor Management System. It is a technology solution that automates key staffing processes, increasing data accuracy and reducing the costs of operations.

What is the difference between VMS and ATS?

The main difference between VMS and ATS is that a VMS is generally used to hire temporary staff, while an ATS is mostly used for permanent positions.

What are MSP and VMS in staffing?

An MSP is an agency or group that helps staffing agencies manage their workforce. Meanwhile, a VMS is a staffing solution that automates various management processes and is often used by MSPs in their work.