effective rate strategies for vms
TRANSCRIPT
2 of 26 © 2014 PeopleFluent | Confidential Effective Rate Strategies for VMS| April 2, 2015
Introduction
• Director, VMS Strategic Services PeopleFluent
• Specializing in driving client satisfaction and value recognition for VMS customers
• 13 years experience in Human Capital Management industry
Cheryl Tracz
3 of 26 © 2014 PeopleFluent | Confidential Effective Rate Strategies for VMS| April 2, 2015
• Leader in Human Capital Management• In over 5,200 organizations• 214 countries and territories• 80% of the Fortune 100• 170 VMS customers• $7B managed spend
About PeopleFluent
4 of 26 © 2014 PeopleFluent | Confidential Effective Rate Strategies for VMS| April 2, 2015
• Components of staffing vendor bill rates• Approaches to vendor rate management• Strategies for rate card management and mark-up • Tactics to align financial and talent goals • Q&A
Agenda
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Bill Rate Components
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Bill Rate• The rate charged to the customer
• $100 per hour• So, if Bob worked 40 hours in a week,
the customer would be invoiced $4000
Pay Rate• The rate a worker received as a wage
• $70 per hour• So, if Bob worked 40 hours in a week,
he would be paid $2800
Burden Rate• Staffing vendor employment cost for each
worker : workers comp insurance; other insurances; taxes; benefits• Burden rate is not typically transparent
to the customer or VMS• Burden rate can be between 13 – 25%
• For Bob, burden rate add $9.10 to $17.50
Bill Rate ComponentsExample:• Bob Worker earns $70/ hour as a software developer for
ABC Staffing• ABC Staffing charges Customer1 $100/hour for the time
worked
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Approaches to vendor rate management
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Open Bill Rates or Bidding • Managers set bill rates based on budget, need or
relationship with the staffing vendor• Vendors can then bid on the bill rate
Mark up• Manages the percentage via contractual relationship that
a staffing vendor charges over the pay rate of their worker• Using our $100 bill rate with our $70 pay rate, this
represents a 42% mark up
Rate card or Not to exceed rates• Manages the bill rate by job title and location that the
staffing vendor can charge the client• Not to exceed rates can be set by a client for all
vendors or managed separately for each vendor
Type of Bill Rate Management
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• Benefits• Allows for fluctuations in the market for high demand
skills set• Allows manager to set rate by budget for position• Creates a competitive market for the vendors
Open Bill Rates or Bidding
• Disadvantages• No standard rates
• Resources of similar skill sets can be at varied bill and pay rates
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Benefits• Visibility to the pay rate• Easier conversion to full time employee• Swifter shifts in the job or skill set market
Maximum Mark Up
Disadvantages• Vendors have more control over pay rate• Difficult to budget or project as the rates are not
established• Hiring Managers do not have ability to set rate directly
with the vendor
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Vendors calculation: (Bill Rate – Pay Rate) / Pay Rate
In this example the mark up is 42%
Costs also included in this mark up• Background checks & Drug
screening costs• Salary & Commission for recruiters
or account managers• Overhead such as office space
Mark Up
Pay Rate = $70/hour
Burden Rate 13-25% =
$79.10 to $87.50
Bill Rate = $100/hour
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Benefits• Accurately control and project cost • Vendors pipeline candidates knowing what the
maximum rates of future positions will be
Rate Card
Disadvantages• Does not allow for market flux• No visibility to pay rates• May loose candidates who want higher rates• Hiring Managers do not have ability to set rate directly
with the vendor
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Client APay &
Bill are equal
3%
Pay is $13%
MarkUp 50-
100%11%
MarkUp 1-50%31%
Pay is $052%
Client B
Pay & Bill rate
equal2%
Pay Rate >
Bill Rate0%
Pay is 011%Mark up 1 -50%
60%
Mark up 50-100%24%
>100.1%3%
Sample Client Data Showing pay rate / mark up
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Strategies for rate card management and mark up
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Gaining benefits and mitigating the
disadvantages by establishing a maximum
mark up and rate card
Rate Control
Rate Card
Maximum Mark
up
Blending the mark up and rate card approach
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Benefits Disadvantages
Blending Mark Up & Rate Card
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Tactics to align financial and talent goals
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Determine mark up
• Overall Program • Job category• Location• Difficulty of skill
Steps to pursue a controlled program for rate card management
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Overall Avg Rate Card Avg* Mark Up Avg38%
40%
42%
44%
46%
48%
50%
46%
49%
42%
Rate card average derived from available pay rate information, over 30% of pay rates were not provided, or misrepre-sented at $1 or equal to the bill rate
What should the Mark Up be?
If you elect to set a maximum mark up, now the key is to find what is appropriate
Several factors go into determining that:
• Location • Job Category or Skill set• Volume of spend
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Adm
in /
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& A
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Hum
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esou
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Lega
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Ligh
t Ind
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Mar
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ales
Med
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Info
rmati
on T
echn
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Engi
neer
ing
Payr
oll0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
41%
46%50%
27%33%
41% 40%47%
41%
17%
Managed Mark Up Average
Mark up by Job Category of PeopleFluent Clients
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Align Talent demand to Rate Goals
60%55%50%45%40%35%
Volume of Spend
Number of Suppliers
Mark Up
Hard to find skill set
Geography
Geography
Main components of managing rates is the volume of spend you can leverage and the number of suppliers
Other factors that can impact, are the hard to find skillsets or geography
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Align Talent Demand to Rate Goals
60%55%50%45%40%35%
Volume of Spend
Number of Suppliers
Mark Up
A high volume of spend drives down prices
Determine highest use job category or skill set leverage a lower mark up
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Align Talent Demand to Rate Goals
60%55%50%45%40%35%
Volume of Spend
Number of Suppliers
Mark Up
A high number of suppliers increases cost
Tier vendors by job category.Reward top performance by aligning vendors to their specialty
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Align Talent demand to Rate Goals
60%55%50%45%40%35%
Volume of Spend
Number of Suppliers
Mark Up
Hard to find skill set
Increased demand or hard to find skills, drive higher rates
Offer higher price points on hard to find roles to allow supplier to attract that talent to your organization
TM
© 2014 PeopleFluent | Confidential Talent Insights. Business Outcomes.TM
ThankYou
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Cheryl TraczDirector – VMS Strategic Services o. 919-645-2986c. 919-812-0824e. [email protected]