The MSP (Master Services Provider) penetration in U.S. companies that have over 1,000 employees has grown to 60% since 2014 according to Staffing Industry Analysts.
The benefits to the client include:
- Greater exposure to candidates from larger talent pools
- Operational efficiencies from reducing multiple vendor reconciliations to one
- More uniform compliance for candidate proposals
- Potential for greater leverage in pricing structures
From the vendor side, there are also benefits to becoming a part of an MSP’s network:
- Access to hundreds of clients without the expense of putting “boots on the ground” in target markets
- Pre-negotiated billing rates for quicker candidate pay package calculations
- Clearly defined requirements for candidate proposals
Despite the positives of the MSP growth, many staffing firms are decrying their impact. Some of these complaints are as follows:
- Fees have grown to as much as 5% in some verticals
- Unlike auditable payroll burdens, the 5% is of revenue, not of pay
- A company running a 15% EBITDA for a non MSP account will find that same deal in an MSP account taking 33% of that net income with a fee as high as 5%
- If the MSP provider is also a competitor, the 5% fee may reduce the pay rate to the candidate, potentially driving them to the competitor that may not be paying the 5% fee
- Many agencies have complained that the MSP uses a “Tier” system that may lock out but the largest temp firms. For those up and coming companies, this can become a barrier to entry
- Agencies believe when a competitor owns the MSP, there is an inherent desire to “poach” candidates
Regardless the possible downside of MSPs, they will be a part of the landscape for the near future.