April 11, 2023
April 11, 2023
Today, the aim is to think about how Purchase-to-Pay (P2P), Human Resources Information Systems (HRIS) and a Vendor Management System (VMS) fit together.
If you work in a Procurement team, you will be very familiar with P2P systems. With sophisticated management of supplier contracts, direct costs, indirect costs, financials, and more, P2P solutions offer mature, capable, and robust functionality.
If you work in Human Resources, the HRIS will be your go-to solution. Whether part of a larger ERP system or a separate application, a modern HRIS encapsulates every aspect of employee management, from advertising for new hires to offboarding retirees.
Large organisations often make extensive use of contingent workers—typically self-employed contractors or agency staff supplied by service providers. These contingent workers make up a much larger proportion of the workforce than most people realise, and can include temporary workers, consultants, independent contractors (ICs), and outsourced service providers.
In fact, a recent article published by Christopher J. Dwyer (Ardent Partners) shows that 49% of the average company's total workforce is already contingent, and 82% of organizations report that skilled contingent workers make up half or more of their contingent labour force.
For full-time employees, the HRIS manages every step of their engagement. For example, training, certification, holidays, insurance, org chart, maternity leave, and more. If a vacancy arises for a qualified professional, the HR team can search and screen internal and external candidates, and create onboarding workflows.
However, contractors and agency staff largely fall outside the remit of the HRIS. Instead, individual business units in the company might call on existing agreements with service providers to supply people for specific work at rates fixed by Procurement. Each week or month, the agency sends its invoice to the company, which the business unit manager and Procurement team review and authorise.
As a result of these two very different approaches, it can be difficult to answer personnel questions. How can you find out how many contingent staff are working in the organisation, who they are, and which business units have hired them? What are the relative levels of contingent and employed staff? Could the business operate more effectively with a different ratio?
If you work in Procurement, you can certainly report on the cost, possibly on the number of people, and perhaps on which department placed the order with the service provider. However, in many cases there is no central record, as each department retains data on isolated systems and spreadsheets.
Additionally, recording what contingent staff actually do and their terms of engagement will be similarly obscured. For many enterprises, this lack of central visibility presents a significant financial and operational risk.
The HR team will be in a similar position, with no insight into staff hired from agencies, as the relationship is company-to-company at the Procurement level, rather than HR-to-employee. For contingent staff hired directly, such as individual IT contactors working within existing teams, details are not always added to the HRIS, which is primarily intended for regular employees, and any reports are therefore inaccurate.
HRIS and Procurement systems are without doubt excellent for their specific tasks. However, asking questions about contingent workers can reveal significant process gaps.
For example, contingent workers are often partially onboarded to the HRIS solution, so that security can issue them with access passes, or add them to the personnel directory used by IT, accounting, and managers. However, as non-employees, they may not be subject to the standard offboarding process. In one case, we discovered an organisation with 15,000 worker IDs, accumulated over the years, that had not been offboarded, presenting a major security and compliance risk.
Similarly, in regulated industries, many workers must possess – and be proved to possess – relevant qualifications. For regular employees, the HRIS will capture and manage certifications and training, yet for contingent staff the process may not be clear. Contingent workers brought in through a contracted agency may bypass the standard HRIS credentials-checking process, creating unrecognised compliance exposure.
A Vendor Management System bridges the process gaps that may occur between the HRIS and Procurement systems. The VMS provides full visibility, such as who is working in which location, for which department, and for how long – with traceability of certifications.
In addition, the VMS enables cost management of both agency and individual workers, providing the Procurement team with unified data to help negotiate improved contract terms. Bearing in mind that contingent workers might account for 20-50% of the staff, companies with VMS solutions may see indirect cost savings of between 5-8%.
On a practical level, integrating VMS data with HRIS and Procurement systems will enhance operational workflows. In many HR and Procurement teams, executives find they spend time copy/pasting data from or into systems and spreadsheets, trying to harmonise data and reporting. With a VMS, Procurement executives gain full visibility into spend, and the HR department gains full visibility into staffing – of all types – based on shared, standard, validated data.
Organisations that rely on the mix of HRIS and Procurement systems may be overlooking a large number of staff, all of whom are essential to company success and yet are not fully managed. A VMS provides the processes and tools to optimise the benefits of a contingent workforce, and provide critical management information to HR and Procurement.
Read this e-book to learn more about the benefits of a VMS and how this technology can help you source and manage your contingent workforce more effectively.