FMS: The Missing Piece of the Contingent Labor Puzzle

ThinkstockPhotos-71264550A year ago, many people had never heard of Freelance Management System (FMS). The term was relatively new and the concept was still gaining traction in HR and contingent workforce circles. Fast forward a year later. The freelance economy is booming. Eighty-three percent of executives are planning to increase their use of freelancers and independent contractors (2014 SAP/Oxford Study), while 63% of CEOs are increasingly worried about availability of key skills (PwC).

Suffice it to say, most professionals in the talent management or online staffing community are now at least familiar with the term. Multiple analyst reports have been penned on the subject. High-profile companies — including the Washington Post — have announced the launch of its own private FMS within the last several months.

We can all mostly agree on one thing. With freelancers and independent contractors comprising one of the fastest-growing segments of the US workforce, technology designed to manage that population (i.e. FMS), is now being recognized as an integral component of any effective contingent workforce strategy.

For those less familiar, here’s a quick recap of what you’ve missed. In the big talent management equation, FMS technology sits alongside human capital management (HCM) software and vendor management systems (VMS). Here’s a quick breakdown of each platform’s respective responsibilities.

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HCM solves talent management for W-2 employees and provides a solution that addresses the entire lifecycle of employee engagement — all the way from recruitment and onboarding to payrolling and performance.

VMS technology is for the procurement of temporary and statement-of-work talent, and automated the governance of sourcing, fulfillment and payment of requisitions. The technology provides access to suppliers who source and often manage talent.

FMS technology is for direct engagement with independent professionals. It’s the contemporary platform for businesses seeking enhanced control, visibility and access to and over their freelance and independent talent. FMS software allows businesses to manage the entire lifecycle of their engagement with independent professionals — all the way from procurement to payment.

Moreover, FMS technology provides direct access to a marketplace of independent talent to source and manage directly. In other words, in addition to using the software to manage your independent workers, you can tap into a directly integrated marketplace and talent pools to source those same independent workers. It’s a one-stop shop.

The benefits of FMS technology are well-documented, but again, in case you weren’t paying attention, here’s a quick recap. Analyst firm Aberdeen Group found that best-in-class companies using freelance management technologies — such as FMS — were able to reduce annual labor costs by 16%, achieve a compliance rate of 93% and improve workforce visibility by 32%.

Gartner’s 2015 “Getting Ready for the Next-Generation Workforce and the Impacts of the Freelance Economy” report even extolled the benefits of FMS technology. The report states that “freelance marketplaces are changing the game by expanding their services to reduce the common barriers to independent contracting.” It also suggests that “market momentum will force VMS vendors to develop next-generation solutions that complement and support freelance marketplaces.

Procurement analyst firm Spend Matters found that businesses using FMS technology can save at least 10% on annual labor costs (and often 20% or more), reduce the hiring of rogue independent workers and can capitalize on additional savings from faster hiring times and the elimination of fragmented spreadsheet record keeping.

It’s no surprise we’re seeing more and more large enterprises begin discussions around the utilization of FMS technology to improve their bottom-line and advance their talent management efforts. FMS software is an integral component of modern workforce management and should continue to see adoption increase as various use cases are born out. Imagine not having HCM software to manage your W-2 workforce. How crazy would that be? The absence of FMS software in large enterprise utilizing thousands of independent workers is no different. One could make the case it’s more dangerous because of the compliance concerns stemming from a 1099 workforce.

No one knows exactly how this market will play out, but one thing is clear: FMS technology is the missing piece of the puzzle for many companies looking to solve the challenge that is modern-day talent management.

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Jeff Wald

Jeff Wald
Jeff Wald is co-Founder and president of Work Market, the leading enterprise-class FMS platform. You can follow him on Twitter at @jeffreywald.

Jeff Wald

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