Flexible Pricing

MANAGED SERVICES COST MODELS

Traditional recruitment pricing is usually based on an agreed percentage fee to the supplying agency, either as a percentage of hourly/daily pay rate to temporary worker supplied or a as a percentage of annual salary/package to permanent hire.

This approach to pricing also formed the basis of managed service pricing, typically with a split of fees between managed service provider and all 3rd party agencies within an approved PSL. This approach is simple to understand and apply but in Socium’s view, is a flawed cost model in as much as your managed service provider is inadvertently encouraged to increase your spend. The more you spend the more they earn!

Socium encourages a more flexible approach to pricing, which is aligned to driving behaviours and outputs which have been clearly articulated as the end client’s desired service objectives.

The following cost models are examples of Socium’s flexibility and how we align our services and pricing to be fully aligned with our client’s service and output requirements. In each instance 3rd party agency fees remain as a traditional percentage which negotiate and standardise on your behalf, to achieve the optimum blend of value and fairness for all parties.

All cost models are viable for temporary labour MSP, permanent hire RPO and total talent models (which support a combination of temporary, fixed contract and permanent hires).

Standard Cost Models:

PAYMENT METHOD ADVANTAGES DISADVANTAGES

Flat Fee

A contractually agreed fee paid periodically to the managed service provider.

  • Visibility - Accurate forecasting of recruitment associated costs.
  • Cost control - Costs are aligned to supply volumes, which are controlled by you the client.
  • Consistency - Of managed service provider fees.
  • Inflexible - Fixed cost.
  • Value for money - Is variable, dependant of changing recruitment volumes.
  • Accuracy – Difficult for managed service provider to accurately forecast fair combination of service costs and profit.

Transactional Fees

A contractually agreed managed service fee, calculated as a percentage of temporary pay or permanent hire salary.

  • Simplicity - Easy to incorporate into a traditional PSL cost model.
  • ‘Pay per use’ – Fees are aligned to use (increasing/decreasing in-line with labour needs).
  • Lack of visibility - Especially for Hiring Managers as all costs are rolled into a total charge rate.
  • Can drive wrong ‘behaviours’ - Can inadvertently encourage manager service provider (and agencies) to drive up worker pay rates.

Savings Gain-Share

A pre-agreed percentage split of savings apportioned between the managed service provider and client.

  • True partnership approach - Both parties working towards common service objectives.
  • Cost saving - Geared towards maximum cost savings, particularly during early phase of the service relationship.
  • Motivation - Of managed service provider to deliver savings.
  • Emphasis on cost over quality -Risk of wrong balance between cost reduction and service quality.
  • Sustainability - Can become less effective in mid/end phases of a service period.
  • Cost forecasting - Fees dependant on variable actual savings.

Tailored Cost Models:

Good managed services work best when they simply recruit and align the managed service providers goals with those of the client.
Socium’s flexible approach to pricing supports this positive alignment.

PAYMENT METHOD ADVANTAGES DISADVANTAGES

Flat Fee & Transactional

Fixed managed service fee combined with discounted transactional temporary, fixed contract and permanent hire supplier fees.

  • More visibility - Accurate forecasting of set managed service fee and transactional hiring costs.
  • Transparency – Of fees within the managed service components.
  • Inflexible – Needs an agreed process of fixed cost review (when recruitment volumes increase or decrease significantly).

Flat Fee & Gain-Share

A contractually agreed fixed managed service fee combined with a pre-agreed sharing of cost savings.

  • Simplicity - Easy to incorporate into a traditional PSL cost model.
  • Lower fixed costs - This approach is more suited to a lower fixed fee from the managed service provider.
  • Self-funded (via savings) - Most, if not all of the managed service fees are funded by cashable savings.
  • Sustainability - Can become less effective in mid/end phases of a service period.

Year 1 Gain-Share & Flat Fee Thereafter

A pre-agreed percentage split of savings apportioned between the managed service provider and client in year 1 followed by an agreed flat fee thereafter.

  • True partnership approach - Both parties working towards common service objectives.
  • Transparency - Of fees within the managed service components.
  • Drives positive behaviours - Aligns all parties’ success measures.
  • Emphasis on cost over quality -Risk of wrong balance between cost reduction and service quality.
  • More admin and insight required – in established bench mark costs.

While not our intention, providing multiple pricing options can initially be confusing so we welcome an opportunity to explore which pricing model best suits your organisation’s specific recruitment circumstances, challenges and objectives. To arrange a further discussion please contact:

Anthony Breen – Managing Partner
E: a.breen@sociummsp.co.uk
M: +44 (0)7739 852126
T: +44 (0)1923 470540