Benefit from a hiring marketplace’s optimal pricing strategy where you can adjust rates at each requisition level for maximum efficiency — just like an RFP process minus the hassles.
Typically, a vendor management system (VMS) tracks the where, how, and why of a business’ contingent labor spend. For any given role, businesses define the budget by specifying one of the following types of hourly rates they are willing to pay.
Pay rate: Contingent worker’s hourly pay
Bill rate: Pay rate plus markup, inclusive of payroll, statutory, and other costs
Similarly, staffing agencies present their rates to candidates, which businesses can view on the VMS. A staffing agencies’ bill rates are a combination of direct costs and service fees. While direct costs tend to vary based on the location or employee type, service fees compensate staffing suppliers for the time and effort in acquiring and managing your contingent talent. A significant portion of these costs are often associated with their legal responsibilities as an employer — the same costs your organization would be responsible for if it was directly employing the candidate.
To have a thorough understanding of your contingent labor spend, you need to know the big-picture impact of the pricing model of your staffing agencies. By doing so, you can control costs without compromising on the quality of your contingent workforce.
Why Traditional Pricing Models Are Not Effective?
Using bill rates as a standard across a contingent workforce program is a popular pricing practice touted for its simplicity (but only if you consider shopping and comparing the services of multiple staffing agencies an easy process). The downside of this pricing model is the absence of information on tactical cost breakdowns, creating a lack of transparency into actual costs and worker pay rates. Using this approach, staffing suppliers have greater flexibility on the pay rate they provide to candidates and their effective margin, however this can lead to rate variances across a workforce as there is no standard for rates of similar positions based on experience or skills.
Using a “markup over pay rate” pricing model provides greater transparency by giving businesses a detailed breakdown of actual costs. In a markup pricing model, businesses specify a pay rate (fixed or a range) and partner with agencies depending on their quoted markups to find ‘savings’. The markups include statutory costs of employing the worker as well as an agreed-upon fee that the staffing supplier earns for each successful hire. So, is this pricing model truly cost-effective?
Not really – by resorting to this pricing model, businesses tend to favor agencies offering lower markups, assuming that all agencies provide the same quality of candidates and the same levels of service regardless of their quoted markups. In situations where there is a sudden rise in statutory costs, suppliers are forced to absorb the mandatory increases in direct costs, driving away quality staffing agencies from partnering with your business.
Another problem with traditional pricing models is the use of traditional cost-saving measures including volume or spend discounts. Often implementing a volume discount lowers your supplier’s morale and discourages them from performing well because of the decrease in compensation.
How Are Hiring Marketplaces Transforming Traditional Pricing Models?
Hiring marketplaces help you gain greater insight into your requisition rates:
The main advantage of hiring marketplaces over traditional staffing models is the increased transparency into pricing. In a traditional VMS system, you can only see your suppliers’ submitted rates for candidates within your business, whereas, in a marketplace you can view a supplier’s rate for all positions amongst all of their clients.
Thus, hiring marketplaces make sure you don’t miss out on market details and always know whether your market rates are competitive or not. Since a marketplace compares and contrasts rates across the ecosystem, you can compare rates with like kind positions, similar skills, and the exact geography, providing a richer context on whether rates are above or below average or exactly on target for the market. By utilizing marketplaces, your business can attract quality candidates and prevent delays in hiring, because your offers match competitive market rates.
Hiring marketplaces drive down prices through competition:
In a marketplace, there are significantly more suppliers with access to more talent pools, allowing more candidates to be submitted at more competitive rates. The competition drives down costs over time.
You also have greater purchasing power because more suppliers bid to win your business and identify candidates that are competitively priced. This leads to economies of scale in an ever-expanding marketplace ecosystem. As the marketplace grows in terms of talent and suppliers, the greater the cost advantage to clients.
Moreover, in hiring marketplaces the rates are not fixed at the client or program level, but can be adjusted for each job, providing you with greater flexibility. Algorithms help identify the best suppliers for each job, allowing for a dynamic mix of suppliers to support each unique requisition. Rates therefore can be adjusted in real-time as the position details and market demand for candidates is determined based on other similar positions in the marketplace.
Recruit Top Talent in the Market for the Best Prices
Prosperix takes a cost-neutral marketplace approach to pricing. Specify the fees you’re willing to pay for each successful hire while you leverage the cost-competitive pricing of our ever-expanding supplier crowd. Our Crowdstaffing Hiring Marketplace consists of a vetted and diverse supplier-base (independent and international recruiters, boutique staffing agencies, etc) and their talent pools to fulfill your job requisitions with the best talent.
Additionally, The Crowdstaffing Hiring Marketplace is powered by the latest technological advancements like Artificial Intelligence and Machine Learning which monitor the real-time performance of suppliers onboarded on our platform. Our smart algorithms automatically match your job requisitions to the best suppliers with the qualified talent. We also take care of the end-to-end management of your contingent hiring process leaving you with one contract, one invoice, and one relationship governing your partnership with Prosperix. In short, you benefit from our entire VMS functionality while only paying for successful hires.
Start recruiting in 30 minutes or less with Prosperix.