How does a VMS control contingent workforce spend?

The global contingent workforce is valued at an estimated $10.2 trillion, according to Staffing Industry Analysts (SIA). While some still think of the extended workforce as just contingent labor, it now includes six categories of workers, including independent contractors and even AI agents.

While these resources all bring a distinct advantage, each one adds another blind spot if you're not tracking it. Vendor management system (VMS) technology closes that gap. It centralizes extended workforce management in one place, so you always know where the budget went and why.

Here's what happens without one, and how a VMS fixes it.

What are the risks of ad hoc contingent worker hiring?

Ad hoc hiring looks harmless in the moment. A manager fills a gap through a staffing agency they've used before. Someone in another department skips procurement because it's faster. A contractor whose project wrapped up gets pulled back in for "just a few more weeks" without anyone opening a new requisition. None of that looks like a problem on its own.

The problem is what happens when dozens of small, reasonable decisions like that happen at once with no shared system tracking them. Rates go unchecked, vendors go unvetted, and spend piles up in places nobody's watching. That's rogue spending: money moving through your contingent workforce with no visibility and no one accountable for the total.

That lack of visibility costs you. On the small end, it's paying more than you should for labor, because you can't benchmark rates against your own company, let alone your industry or region. Or, because a manager keeps re-hiring an underperforming vendor out of habit instead of switching to one that produces better outcomes.

On the other end of the spectrum, ad hoc labor management creates compliance risks. Misclassification penalties aren't small, and neither is the tax exposure that comes with them.

How does a VMS improve visibility and reduce costs?

A VMS puts all extended workforce processes in one system, so you can see what's happening and make more cost-effective decisions in real time. Based on our work with 450+ clients over the last 25 years, that visibility alone drives measurable results: a 10% reduction in spend, a 25% reduction in procurement process management, and an 80% reduction in compliance and risk management.

Some of those cost savings are easy to spot. A VMS surfaces overpayments, gives you leverage to negotiate supplier discounts, and cuts down on the billing and time-accounting errors that quietly inflate invoices. It also helps you route each assignment to the most cost-effective option, whether that's a contingent worker, an independent contractor, or a statement of work (SOW)-based service provider, instead of defaulting to whatever's fastest set up.

A VMS can help you mitigate potential compliance risks before they become expensive. When local regulations require specific documentation, like detailed pay slips in the UK, a VMS makes compliance a byproduct of the process instead of a scramble before an audit.

Other savings are less obvious until you're not spending time on them anymore: faster time to fill, fewer steps in candidate screening and approval, quicker supplier negotiations, automated onboarding and offboarding. None of it shows up as a single line item, but it adds up.

Control and manage costs with a VMS

A VMS won't just show you where the money's going. It gives you the leverage to manage it: better rates, better vendors, and a paper trail that holds up if anyone asks.

Want to see what this looks like for your program? Download our free guide to vendor management systems and see what's possible.