Understanding Vendor Management Terminology

Many businesses operate these days with a labor force that has very little extra “meat” on the bone – meaning that they run with the bare minimum of workers to get the job done. When someone quits or is out for an extended period, oftentimes companies simply try to “peanut-butter” the work, or spread it among several other employees while the other person is out. When this is not an option, though, companies can turn to temporary staffing providers for a short-term solution. That’s why vendor management services is becoming an increasingly vital component of how businesses serve other companies’ needs for surge and replacement labor by providing and managing staffing services, contractors, and contingent workforce, whether on a temporary or permanent placement basis.

Operating this type of business prudently means that management should work closely with a professional insurance agent who can analyze and mitigate exposures to third-party risks and provide guidance on the suite of insurance policies that are advisable to fully protect the company and the employees that are dispatched throughout the community. It’s helpful to understand some of the terminology often used in this field.

  • Vendor – a staffing company, independent company, or person that supplies labor or expertise to other organizations, rather than selling it directly.
  • Contingent workforce – also called freelancers, temporary workers, consultants, or independent contractors, these people work for a company on a conditional, non-permanent basis for the purpose of being deployed to other organizations as needed.
  • VMS – a software program that assists staffing companies with interviewing and hiring temporary employees, as well as managing time worked and approving payment. The program also conveys job qualifications throughout the industry to everyone from staffing firms to independent consultants, recruiters, and other such organizations.
  • EOR – short for Employer of Record, this designates the entity that is responsible for handling the various aspects of managing the independent contractor arrangement from a perspective of auditing, compliance, and classification; this in turn helps reduce co-employment risks for companies so they can hire temporary workers and independent contractors without concerns of incurring tax liabilities or running afoul of a government audit.

Ultimately, a vendor management services system is intended to help manage and reduce costs on contingent labor expenditures. To fully address cost-cutting measures, it is important to work with your professional insurance agent, who can review your coverage and ensure you are paying the right premiums for the right coverage. Talk to an agent today to learn more.