Why an MSP Alone Isn’t Enough: How an EOR Can Enhance Your Contingent Workforce Program

The rapid growth of contingent workers has transformed the way companies manage their talent and resources. With an increasing reliance on flexible labor, contingent workforce programs have become essential tools for efficiently overseeing an organization’s temporary or contract workforce. Many companies turn to Managed Service Providers (MSPs) to handle these needs, attracted by the convenience of a one-stop-shop approach.

What Does a Managed Service Provider Do in Contingent Workforce Program Management?

In short, MSPs are third-party businesses that oversee various aspects of workforce management, from recruiting, hiring, and onboarding to payroll and compliance. MSPs typically manage multiple suppliers that provide these services, which can sometimes be internal divisions within their own organization. But relying solely on an MSP can limit a company’s ability to expand into new markets and expose them to challenges such as higher costs, compliance issues, and restricted expertise.

For organizations seeking a truly agile workforce strategy, incorporating specialized providers alongside their MSP may be more effective. This approach can offer better scalability, deeper industry knowledge, and enhanced regional compliance, creating a more robust and adaptable contingent workforce program.

The Benefits of an MSP

?MSPs are essential allies in navigating the complexities of contingent workforce programs. They ?serve as trusted advisors to their clients, ensuring smooth operations and strategic alignment with business goals. While not a one-size-fits-all solution, MSPs bring several practical advantages when integrated thoughtfully into a broader workforce strategy. These benefits are foundational rather than comprehensive, but when paired with a specialized provider, they can help mitigate risks even further.

1. Centralized Coordination: Streamlined point of contact for managing contingent worker needs.
2. Baseline Compliance: MSPs often bring a working knowledge of compliance requirements, reducing some risks associated with managing contingent workers. While their expertise may not be as deep as that of specialized providers in certain regions or industries, MSPs offer a useful foundation to build upon with additional expert partners.
3. Standardized Processes: MSPs excel at creating standardized processes for contingent workforce management. These standards offer consistency and efficiency, though they may need supplementation with specialized approaches to meet unique or evolving business requirements.

Why Pairing an MSP With an EOR is the Smarter Workforce Strategy

Relying solely on an MSP may seem like an efficient choice at first, but it comes with hidden risks. While MSPs often package various services within their MSP offering, such as staffing and payrolling, into convenient bundles, these can sometimes lead to higher costs, limited flexibility, and potential compliance gaps. MSPs partner with external employers of record (EOR) and payrolling firms for a reason: Some MSPs can do it all, but not all of them are equipped to handle EOR services for all workforce types and across all regions.

Pairing an MSP with an external EOR can ensure seamless workforce management, deeper compliance expertise, and greater flexibility across regions and industries. On the other hand, relying on an MSP to also provide the EOR service can lead to:

Higher Costs: Although MSPs position themselves as one-stop solutions, their bundled EOR services may not fully meet a company’s needs. Because MSPs focus primarily on managing services rather than delivering specialized expertise, they might lack the in-depth support required for supplementary services. This can lead to inefficiencies and errors that drive up operational costs. When evaluating providers, it’s essential to go beyond surface-level comparisons to understand what is truly included in the service package.

Limited Flexibility and Expertise: MSPs that provide their own in-house EOR services often prioritize efficiency over specialization, leading to gaps in expertise — particularly in complex industries, niche roles, and global markets. Many MSPs only have EOR capabilities in select regions, so companies expanding into new markets may face coverage limitations and compliance risks. If an MSP’s EOR service lacks regional or global expertise, companies may eventually need to switch providers, leading to delays, increased costs, and operational disruptions.

Compliance Risks: While MSPs incorporate compliance oversight within their workforce programs, their expertise is often limited in key areas, particularly those highlighted above. Most MSPs focus on program-wide compliance processes, such as vendor audits and general workforce governance, rather than deep, region-specific compliance expertise. This limitation becomes evident when navigating complex labor laws, independent contractor classification, or global employment regulations — areas where MSPs may lack the specialized legal knowledge required for full compliance. Without an external EOR partner that specializes in local employment laws and tax regulations, companies may face increased risk exposure, including misclassification, labor law violations, and regulatory penalties. To ensure comprehensive compliance coverage, businesses should consider pairing an MSP with an external EOR that brings dedicated expertise in workforce classification, payroll compliance, and country-specific employment laws, reducing risk while supporting seamless workforce expansion.

By understanding the limitations of a one-stop-shop model, you can better evaluate whether this approach truly meets your organization’s needs or if a more flexible, specialized model would be more beneficial.

A More Effective Workforce Solution

Incorporating independent specialized providers — such as EORs, recruitment process outsourcing (RPO) firms, and payroll service providers — into your contingent workforce program can offer distinct advantages, especially when paired with the foundational support of an MSP. By choosing providers with niche expertise, you can enhance flexibility, compliance, and access to specialized skills critical for an agile workforce strategy.

Equipped to Handle Global Expansion

Many MSPs lack the infrastructure to support global payrolling, onboarding, and compliance across multiple regions. When expanding internationally, companies often face compliance gaps, delays, and limited hiring support if their MSPs do not have the necessary legal entities and regional expertise.

For example, Company X initially worked with an MSP to manage contingent labor. However, the MSP was only equipped to hire and manage workers within the U.S. When Company X needed to onboard 100+ workers in other countries, the MSP lacked the infrastructure and expertise to support global payrolling, onboarding, and compliance. Without legal entities outside the U.S., the MSP was unable to provide guidance on expanding internationally or ensure adherence to regional labor laws. As a result, Company X faced issues such as delayed hiring timelines and noncompliance with local regulations, which led to legal risks and operational inefficiencies.

To address these challenges, they switched to Innovative Employee Solutions (IES), a specialized EOR. With IES, Company X was able to streamline hiring across multiple countries, maintain compliance with local employment laws, and reduce their overall workforce costs by 25%.

Deep Industry Expertise

Specialized providers bring targeted knowledge across industries, regions, or roles, ensuring compliance and efficient talent alignment. Many of these niche providers have decades of experience, demonstrating their ability to adapt to market changes and regulatory shifts. For industries like healthcare, IT, engineering, and government, access to such focused expertise is invaluable. For instance:

• Healthcare – Ensuring compliance with medical regulations and certifications.
• IT – Understanding emerging technologies and specialized technical skills.
• Engineering – Adhering to strict safety standards and regulatory requirements.
• Government – Navigating security clearances and complex compliance requirements like the Service Contract Act.

Because experts can more efficiently identify the right talent, align workers with project requirements, and avoid common pitfalls, organizations spend less on corrective measures, retraining, or replacement hires. Over time, these efficiencies translate into substantial savings on hiring, onboarding, and management costs.

Greater Flexibility and MSP Partnership

Relying on an MSP that provides its own in-house EOR can limit workforce flexibility, as its internal capabilities may be constrained by geography, industry expertise, or workforce type. In contrast, working with specialized providers allows businesses to scale workforce size and composition based on project demands, without being restricted by the limitations of a single bundled MSP-EOR solution.

For MSPs, partnering with external, specialized providers rather than relying solely on an in-house EOR allows them to take a more consultative approach with clients. By recommending the right mix of expert partners, MSPs can help businesses:

• Access diverse talent pools beyond their internal network.
• Ensure regional and industry-specific compliance with specialized expertise.
• Adapt quickly to changing market conditions and workforce demands.

This approach enhances MSPs’ value proposition, positioning them as strategic advisors rather than just service providers. By offering greater flexibility, cost efficiency, and compliance assurance, MSPs can strengthen client relationships, drive long-term partnerships, and differentiate themselves in a competitive market.

Lower Risk, Better Compliance

Working with providers who understand local regulations reduces compliance risks. Specialized providers often have deep knowledge of regional laws, which helps you navigate complex legal requirements and avoid potential penalties. This added oversight ensures that compliance is maintained across all regions, contributing to a more stable and reliable workforce strategy.

Noncompliance can lead to fines, legal fees, and reputational damage, impacting revenue and increasing costs. Specialized providers help mitigate these risks, preventing unnecessary legal expenses, insurance premium hikes, and potential client or talent loss — safeguarding both operations and brand reputation.

Time Savings and Operational Efficiency

Time is a critical resource for businesses, and partnering with specialized providers allows both clients and MSPs to focus on strategic priorities rather than administrative complexities. By integrating expert partners like IES, MSPs can offer faster onboarding, streamlined payrolling, and proactive compliance management, helping clients minimize downtime and optimize workforce operations.

For clients, this means:

• More time to focus on growth, innovation, and core business goals.
• Faster workforce deployment and reduced operational bottlenecks.
• Minimized administrative burden and compliance risks.

For MSPs, leveraging specialized providers allows them to:

• Take a consultative approach, offering tailored workforce solutions.
• Enhance service efficiency and strengthen client relationships.
• Position themselves as trusted advisors.

By proactively addressing potential challenges and ensuring smooth workforce management, MSPs create long-term value for their clients, leading to increased efficiency, stronger partnerships, and a more agile, high-performing workforce program.

5 Key Strategies for an Optimized Workforce Program

To build an effective contingent workforce program that leverages the strengths of both MSPs and specialized providers, you can implement several strategic practices:

1. Adopt a New Approach

An MSP-led model that incorporates specialized providers enhances flexibility, expertise, and operational efficiency. By leveraging external partners, MSPs can maintain program oversight while ensuring best-in-class service delivery across key workforce functions. When implementing this model, it’s important to:

• Select providers based on specific industry, regional, or project requirements to deliver specialized expertise.
• Define clear roles and responsibilities for each provider to ensure seamless collaboration and avoid service gaps.
• Establish integrated communication channels, such as shared platforms, for real-time updates, compliance tracking, and workforce alignment.

2. Conduct Regular Audits

Regular evaluations of each provider’s performance and compliance help identify areas for improvement and ensure that all partners meet company standards. Audits reveal insights into operational efficiencies and can highlight potential compliance gaps, helping you maintain a high-performing, compliant workforce.

3. Align Workforce Strategy With Business Goals

MSPs play a key role in ensuring that an optimized workforce strategy aligns with long-term client objectives. By leveraging external providers for specialized expertise, MSPs can help businesses scale efficiently and adapt to market shifts. Key actions include:

• Identifying core objectives and skill requirements based on current and future business needs.
• Developing a flexible talent acquisition plan that responds quickly to market shifts.
• Setting measurable goals and KPIs to monitor workforce program success and effectiveness.

4. Foster Collaboration Across Providers

To maximize efficiency, encourage open communication and clear goal setting across all providers. This coordination strengthens team alignment and enhances overall workforce strategy outcomes. Best practices for collaboration include setting up centralized communication platforms, like a shared email or project management tool, for consistent updates and conducting regular meetings to align on goals, discuss progress, and address challenges proactively.

5. Monitor Continuously

Real-time tracking of compliance, quality, and efficiency metrics is essential to maintaining a strong contingent workforce program. Continuous monitoring helps ensure that all providers are meeting performance standards and adapting to regulatory changes. Important metrics to track include:

• Time to fill positions: Indicates the responsiveness and efficiency of talent acquisition.
• Quality of hire: Assesses the impact of new hires on team performance.
• Compliance rates: Measures adherence to regulations and industry standards.
• Cost savings: Evaluates financial efficiency and return on investment.

Building a More Agile Workforce Strategy

An MSP-led model that integrates specialized providers in your contingent workforce program ensures the flexibility and expertise needed to stay competitive in a dynamic market. By leveraging the strengths of both MSPs and specialized providers, you can create a workforce strategy that’s responsive, compliant, and capable of meeting diverse project demands.

At IES, we partner with MSPs and enterprise clients as your trusted EOR to deliver compliant, scalable workforce solutions that enhance flexibility and mitigate risk. Contact us today to learn how we can support your journey toward a more flexible, effective workforce.

Key Takeaways:

• Managed Service Providers can streamline contingent workforce management, but their one-size-fits-all approach may limit flexibility, expertise, and cost efficiency.
• Pairing an MSP with specialized providers like EORs enhances workforce agility, ensuring deeper compliance expertise, greater scalability, and better support for global expansion.
• MSPs alone may struggle with hidden costs, compliance risks, and limited regional expertise, making it essential for companies to assess their true workforce needs beyond bundled services.
• A strategic workforce program integrates MSPs with specialized partners to optimize hiring, improve compliance, reduce risks, and create a more adaptable and cost-effective workforce strategy.

Written by: Lynn Ann Overman, CCWP | Director of Strategic Partnership & Enterprise Sales at Innovative Employee Solutions

Lynn Ann Overman, CCWP, is the Director of Strategic Partnership & Enterprise Sales of Innovative Employee Solution (IES), a leading provider of remote and contingent workforce solutions specializing in U.S. and global Employer of Record, Agent of Record, and Independent Contractor compliance services in 150+ countries. Founded in 1974, IES is a woman-owned business, certified by the WBENC, and partners with companies to provide compliant employment solutions that empower people’s lives.