Buyers Guide: FMS or VMS

Understanding the difference between Freelancer Management Systems and Vendor Management Systems

HR managers in large organisations are already comfortable using Vendor Management Systems (VMS) to handle the processes of onboarding and working with third party contractors, sourced through agencies. However, using a VMS to manage freelancers creates friction.

This guide explores the differences between a VMS and an FMS and why it is become increasingly important for an organisation to use a dedicated FMS for managing its freelance and contingent workforce.

In this guide:

The issue of shoehorning freelancers into a VMS

The VMS was the answer to managing a large number of resourcing and recruitment partners (agencies). Their key features are geared toward organising and controlling the spend of multiple vendors.

Typically a vendor is a recruitment agency or partner, approved onto a preferred suppliers list, or at least a relatively short list of vendors.

By the very nature of the relationship with these 'preferred' vendors, the VMS is designed to support long-term, 'engage once, use multiple times' arrangements - usually requiring detailed setup and approval of each vendor.

Unlike vendor relationships, an organisation can have several thousand freelancer relationships at any one time. The active engagements can also be extremely short, intermittent and in a lot of cases, one-offs.

This requirement to onboard freelancers at speed coupled with the need to capture very different data, makes it extremely difficult to use a VMS to manage a freelancer workforce.

Managing freelancers with a VMS causes friction

When a tool doesn't quite meet the requirements to handle a process, it causes friction with its users. Users who experience friction with a system look for shortcuts and other 'easier' alternatives.

freelancers bypassing hr

Friction causes users to bypassing important processes

Most often, in the case of freelancers, this results in freelancer details being stored and saved in an Excel Spreadsheet - and the inevitable chaos that ensues when there's no visibility of spend, risk or utilisation.

Engaging people not vendors

VMS are good at managing vendors. Freelancers, however, are people. Ultimately, a system designed to engage and manage a vendor organisation is not necessarily the right tool to engage, onboard and manage individuals.

Freelancer Management Systems are designed to specifically address the challenges with working with a large number of individual, independent professionals.

Engagement happens at an individual level

The fast, fluid process of hiring a freelancer happens at an individual level. The hirer deals directly with the freelancer. This individual level engagement doesn't fit with the standard VMS, which is designed for all hiring activity to go through a central department, like HR.

VMS process

Standard VMS process

Using a VMS to manage freelancers, is an example of how shoe-horning a process into a VMS rather than using a dedicated FMS could create friction for both freelancers and the hirer.

In contrast, the FMS is designed to provide simplicity for the hiring manager, as well as reporting clarity for HR

FMS process

Standard FMS process

Freelancers deserve an FMS

Some industries depend on freelancers. Media companies, publishers, construction firms, software development houses, and marketing agencies would find it difficult to remain competitive without being able to access skills on-demand and at short notice.

To compound the issue, in most of the industries where the use of freelancers is prevalent, there is also a skills shortage and organisations are competing to attract - and more importantly - retain the best people.

So, where this is an abundance of projects, freelancers can be selective about who they choose to work with. Given the choice, freelancers will prefer to work with an employer who is easy to do business with and has a system that's freelancer friendly.

As organisations start developing Freelance Value Propositions, one of the key foundations should be to engage freelancers through a flexible, bespoke freelancer management system.

Integrating an FMS with an VMS

Running two seperate systems when managing a workforce that contains both permanent employees and freelancers might not be ideal.

However, it is possible to integrate the two for complete end-to-end visibility of an entire workforce. The diagram below shows the minimum required integration points to effectively share freelancer engagement information with a VMS.

FMS integrating with a VMS

Integrating FMS with VMS: Cloud-based platforms make integration simpler.

Summary: The 5 must haves for your Freelancer Management System RFI

To shortlist the right vendors in your RFI process, you should look for the following must haves:


Related resources

The Importance of Brand in Direct Sourcing Software

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IR35 in the Private Sector

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What is a freelancer management system?

Discover what a freelancer management system is and how you can use it to effectively manage the freelancers engaged by your organisation.