Contingent Workforce Management (CWM) partners are committed to delivering exceptional workforce management services that prioritize both cost reduction and efficiency enhancement. Within this blog post, LevelUP will offer insight into the pricing models employed in a CWM program. Additionally, we reveal how CWM providers harness their expertise to drive hard cost savings, soft cost efficiencies, and effective cost avoidance measures.
Understanding What Goes into the Cost of a CWM Program
The cost of a CWM program encompasses expenses for the CWM team, their services, and VMS technology. The overall cost can vary depending on the scope and sophistication of the program, with more extensive and complex programs typically incurring higher expenses. Factors like program scale, industry-specific requirements, and geographic scope can also influence costs.
CWM Pricing Models
In a client-funded model, the client pays for the management of their CWM solution, either through a flat fee or a percentage of spend.
Percentage of Spend (PoS): The CWM provider charges the client a percentage of the total spend on contingent labor or recruitment services. This percentage can vary depending on the volume of hiring and other factors.
Fixed Fee: Some CWMs charge a fixed fee for their services, regardless of the total spend on recruitment. This can be a monthly or annual fee, and it is negotiated based on the expected level of service and the complexity of the client's needs.
In a client-funded model, cost is tied to the CWM provider's performance, with charges based on measurable outcomes like volume of successful hires, interview to hire ratio, and more. This pay-as-you-go approach incentivizes the CWM provider to achieve results, ensuring a strong focus on meeting recruitment goals and delivering value.
Also known as Vendor-Funded
Under a supplier-funded model, the CWM provider deducts a fee from supplier invoices, before remitting payment, to cover program management and technology costs. A maximum bill rate card is often used, constructed based on market data and designed to ensure that supplier rates are kept either at or below market rates.
In exchange for accepting a fee deduction, suppliers benefit from streamlined invoicing, standardized processes, and increased recognition with the CWM provider. They may also secure the privilege of being a preferred supplier, leading to increased hiring opportunities.
The supplier-funded model benefits the client by ensuring cost predictability. Suppliers financing the program creates a zero-sum situation for the client, eliminating unexpected future costs.
In a hybrid CWM model, costs are shared between the client and suppliers, combining aspects of both client- and supplier-funded models. The specific allocation of costs and the percentage each party covers are typically negotiated based on the program's unique requirements and mutually agreed-upon terms.
For large and complex organizations with unique needs, CWMs may offer custom pricing based on a detailed assessment of the client's requirements and objectives.
CWM Cost Savings
When you partner with a CWM program provider, they harness their investments in staff, training, and methodologies to reduce costs while maintaining service excellence. Moreover, when handling your contingent workforce, they excel in negotiating rates, optimizing sourcing approaches, and using data-driven insights for smarter decision-making. Your CWM provider will formulate strategic goals that cover tangible savings, intangible benefits, and strategies to avoid unnecessary expenses.
Hard Cost Savings
- Direct Sourcing: Focusing on direct recruitment to reduce intermediary costs
- Supplier Base Optimization: Right-sizing your supplier network for efficiency
- Tackling Untracked Spending: Identifying and addressing unmonitored expenditures to avoid wastage.
- Financial Approval Automation: Implementing automated approval processes for budget management
- Job Description Rationalization: Ensuring job descriptions are in line with appropriate compensation rates
- Rate Normalization: Standardizing rates based on industry benchmarks
- Overtime Expense Control: Managing and minimizing overtime costs
- Holiday Furlough Program: Implementing strategies to manage costs during holiday periods
Soft Cost Savings
- Reduced Cycle Times: Speeding up the hiring process for quicker time to productivity
- Effective Benchmarking: Enhancing resource planning and placement by using benchmark data
- Streamlined Processes: Managing various aspects like invoicing, payments, contracts, and onboarding to free up resources in procurement, Accounts Payable, legal, and operations for increased efficiency
- Comprehensive Reporting: Using detailed reports to drive ongoing program improvements
- Enhanced Hiring Processes: Simplifying processes for hiring managers and candidates
- Co-Employment Risk Mitigation: Reducing risks related co-employment issues
- Contractor Classification: Properly classifying independent contractors to avoid financial liabilities
- Accurate Invoicing: Reducing inaccuracies in invoices and payments
- Regular Audits: Periodic audits to identify risks and opportunities for corrective action
It's important for organizations to work closely with their CWM provider to define the scope, objectives, and budget of the program and to ensure that all costs and considerations are transparent and well-documented in the contract. Additionally, organizations should regularly evaluate the cost-effectiveness and performance of the CWM program to make adjustments as needed.