Key takeaways
This guide walks through six areas where hidden costs can build up in a contingent workforce program, from rates and admin to visibility and risk, and gives you a quick way to check each one using records you already have. It also explains why consolidating through one supplier that’s able to cover multiple worker types can bring costs and visibility under one roof.
Hidden costs in a contingent workforce program rarely show up on a single line. They tend to sit in six places: uneven rates, repeated admin, split spend data, workarounds that follow slow hiring, risk that surfaces late, and a separate supplier for each worker type.
Some fragmentation is generally healthy, so the goal shouldn’t be to have as few suppliers as possible. Instead, understand where costs accumulate, then decide where consolidation makes sense.
Most programs didn’t become fragmented by accident. A supplier was added for a skills gap, another for a new country, another for independent contractors, and each choice made sense at the time. Over the years, contingent talent ends up managed in silos: one team hires freelancers directly while another uses a staffing agency, with nobody seeing both sets of invoices side by side. With no single owner, the full cost is hard to see in one place.
Every program looks a little different. Some run through a vendor management system (VMS) or a managed service provider (MSP), some don’t, and some work with one supplier while others work with many. The hidden costs tend to build up in the same six areas either way.
Below are those six areas. Each section explains why a cost area matters, what it can look like in practice, and a quick way to check it using records you already have. The guide then covers why bringing contingent talent under one supplier that can do multiple things, with one contract, one rate card and one source of truth, can address many of them at once.
Rates: are you paying different amounts for the same role?
If you hire the same kinds of roles regularly, rates are a good place to start. When more than one supplier fills them, each sets its own rates and markups, so the same skill can carry different prices. That’s common in larger programs, where suppliers are added for different teams or regions, and splitting volume leaves you less to negotiate with.
Small differences can easily add up at scale. In an illustrative example from Staffing Industry Analysts, a program moves from 20 suppliers averaging $60 an hour to 10 averaging $57. Say that program has 50 contractors working 40 hours a week for 44 weeks: that $3 an hour difference comes to about $264,000 a year. SIA notes its figures are for demonstration only, but the same math can help you size up your own program.
What to look at: pick three roles you hire often and pull last quarter’s invoices or rate cards for them. If more than one supplier filled the same role, line the bill rates up side by side and ask what explains any difference. If you only use one supplier, compare what you pay now with the rate in your contract. Any difference you can’t explain is a good place to start a conversation. For example, Lifted, an Upwork Company, is typically 10-30% cheaper than standard legacy suppliers, so comparing quotes can be worthwhile.
Continue reading: Contingent workforce cost optimization: how to reduce rates, markups, and total spend
Admin: how much time goes into managing each supplier?
If you work with multiple suppliers, each one usually brings its own contract, onboarding steps, security review and invoice. Across procurement, HR, finance, legal and the information security team, that paperwork adds up, and it rarely shows up as a cost anywhere. With one supplier, the same work exists on a smaller scale.
Say your program works with five suppliers and a hiring manager needs a data analyst. Depending on which supplier fills the request, the contractor arrives with a different contract template, onboarding checklist and invoice format. Accounts payable reconciles five formats each month, and the information security team reviews each supplier again at renewal. None of that work shows up on a supplier invoice, but it’s paid for in staff hours across several teams, and it repeats with every new hire and every renewal.
What to look at: list every supplier with its contract renewal date, last security review and invoice format, then ask procurement, accounts payable and the information security team for a rough estimate of hours per supplier per year. The total is often larger than expected, and it shows how many staff hours the paperwork takes.
Visibility: can you see all your spend and headcount in one place?
Contingent talent often gets tracked differently from permanent employees, and different worker types can end up in different places. Even a simple question like what the business spends on contingent talent can then take manual work to answer. Total workforce visibility, the ability to see and report on all your labor from one place, is meant to close that gap.
If your program uses a vendor management system (VMS), it usually tracks the suppliers and worker types that flow through it, such as agency temps and staff augmentation. Independent contractors engaged directly, SOW work and EOR or AOR engagements can sit in other systems or spreadsheets, which can leave a gap between what the VMS reports and what the business actually spends. If you don’t use a VMS, a similar gap can show up between whichever systems or spreadsheets you do use.
What to look at: ask for total contingent spend for last quarter, broken out by worker type. Note how many systems and people it took, and how long. If the answer is “a few people and a spreadsheet,” you’ve found a hidden cost: the time spent reconciling, and the decisions made on partial numbers.
Continue reading: How much is your contingent workforce really costing you? A practical guide to controlling spend
Speed: is slow hiring pushing managers to work around your program?
When hiring takes too long, managers rarely wait. If each supplier runs its own search for the same request, or requests stall in approvals and handoffs, a manager who needs someone now will often find another route, such as a freelancer paid by card, an untagged SOW or an off-contract hire.
Say a marketing lead needs a freelance designer before a launch, and the approved route is too slow. They pay through a card or an expense report. The work gets done, but there’s no standard contract and the spend never shows up in program reports. The cost is usually double: slower hiring first, then spend outside your approved channels that’s easy to miss. This spend is rarely careless, but it tends to follow the path of least friction.
For example, a leading food distribution company’s hiring and compliance practices were fragmented across regions, with no central way to track hiring activity and onboarding lags of up to three weeks. After moving to a streamlined Agent of Record model through Lifted, an Upwork Company, with real-time reporting, it reduced time-to-fill for key projects by 40%.
What to look at: pull time-to-fill by supplier for last quarter, from request to start date, and ask two hiring managers what they do when a request stalls. Then ask accounts payable for last quarter’s payments to individuals and small firms under professional services, and compare them with the contractors your program reports. Gaps show where speed is costing you and where managers go around the process.
Continue reading: How enterprise leaders can reduce contingent workforce costs without slowing down hiring
Risk: could you show how every worker was hired and classified?
Compliance is one of the least visible costs in a contingent program. When workers are engaged through different suppliers and routes, nobody has one view of how each person was hired, classified and onboarded. Problems tend to surface late, in an audit or a dispute, and fixing them costs time and legal fees.
Worker classification is a good example. Whether someone is treated as an independent contractor or an employee generally depends on the totality of the circumstances in a particular engagement, not any single factor, and different authorities apply different frameworks. If the records behind each engagement are scattered, it’s hard to show how a decision was made.
Say someone asks you to confirm how every contractor engaged last year was classified and onboarded. If the records sit with different suppliers or in different folders, pulling them together can take weeks, and anything missing or inconsistent can mean extra review time and legal fees.
What to look at: pick five recent engagements across your suppliers and try to pull the contract, scope document and onboarding record for each, and note how each worker was classified. If the formats differ or a piece is hard to find, a review would take longer than it needs to. When one supplier handles engagements under a single compliance model, the records can follow one format and sit in one place. For example, at Lifted, every AOR engagement is backed by contractual indemnification under Lifted’s compliance model.
Structure: does every added supplier multiply the costs above?
The first five hidden costs are often symptoms. The underlying cause is usually how supply is structured: every time you add a supplier for a new region, skill or worker type, you add another set of rates, paperwork, data and handoffs, so the costs multiply rather than add up.
Say a hiring manager worked with a great independent contractor last year. This year the project grows and the same person has to be engaged through an Employer of Record (EOR) because the evolving scope of their work now means they’re working with the company like an employee. If each worker type sits with a different supplier, the manager has to find the right route, sign a new contract and wait through onboarding again. Ernesto Lamaina, GM at Lifted, puts the problem this way:
“Typically needs are not stale. If you are a hiring manager and you worked with John in the past and you still want to work with John, what happens if John is not available? What happens if now you have five more projects and you need to source more people?”
Ernesto Lamaina
GM, Lifted
Each handoff between suppliers costs time, and sometimes momentum on the project. A supplier that works across worker types, such as one that stays neutral about how you engage talent, can help you change engagement types without starting over.
What to look at: map each worker type to its supplier and mark where a single request had to change hands in the last year. The more handoffs you find, the more of the costs above are likely to be repeating.
How can you tell if your program has hidden costs or is running in silos?
You can get a useful first read in about an hour. Pull rates for three roles, your supplier list, one quarter’s spend by worker type and request-to-start times, then note where an answer takes longer than expected. Those are the areas worth a closer look first.
Hidden-cost self-check: where to look and what to compare
If several rows below sound familiar, those are the areas worth a closer look first. Each row pairs a warning sign with the records to pull and what they tell you, so you can start with data you already have.
Hidden-cost area | Warning sign | Records to pull | What it tells you |
|---|---|---|---|
Rates | The same role is billed at different rates by different suppliers | Invoices or rate cards for three roles you hire often | Whether the same work costs different amounts, and by how much |
Admin | Each supplier has its own contract, security review and invoice format | Supplier list with renewal dates, security review dates and invoice formats | How many separate processes your teams keep running, and roughly how many hours they take |
Visibility | Total spend takes several people and a spreadsheet to produce | Last quarter’s spend by worker type, plus the systems and people it took | How much of your spend you can see, and how long it takes to see it |
Speed and workarounds | Requests stall and managers hire outside the approved route | Request-to-start time by supplier, plus accounts payable payments to individuals and small firms compared with program reports | Where hiring slows down, and how much contractor spend sits outside your program |
Risk | Records for past engagements are hard to find or incomplete | Contract, scope document and onboarding record for five recent engagements | How easily you can produce complete records for a review |
Structure | A different supplier handles each worker type | A map of worker types to suppliers, plus requests that changed hands in the last year | Where requests restart or change hands |
What does consolidating contingent workforce suppliers look like in practice?
Consolidating suppliers can start smaller than most teams expect. The idea is a unified supplier model: one accountable supplier covers several worker types, so you work to one set of terms and see your spend, headcount and records in one place. Many teams keep their MSP and VMS in place and add it alongside them.
In general, some fragmentation is healthy. Plenty of enterprises run staff augmentation through an MSP and VMS and handle other worker types through a separate path, which can work well as long as reporting still flows back to one place. The trouble usually starts when no one has a plan for the rest, which is where a clear operating model helps.
A practical way to start:
Map your suppliers by worker type, spend and time-to-fill, using the records you pulled for the self-check above.
Decide what should stay put. For example, staff augmentation that already runs well through your MSP and VMS.
Look for places where one supplier could cover several worker types, such as independent contractors, EOR and AOR.
Pilot with one business unit, compare against your baseline, and sync reporting back to your VMS.
A tech-enabled contingent workforce supplier like Lifted, an Upwork Company, can be that one partner, with consistent rates and reporting that fits the program you already run. See how Lifted fits into the program you already run, and what that could mean for your total cost.
Frequently asked questions
Why do fragmented contingent workforces cost more than consolidated ones?
Fragmented contingent workforces can cost more than consolidated ones because nobody owns the whole picture. Each supplier negotiates, onboards and invoices on its own terms, and spend and records end up in different places, so you pay for the same coordination work repeatedly and find problems later. Consolidated programs tend to do that work once.
What are the hidden costs of using multiple staffing suppliers, and how do you find them?
The most common hidden costs of using multiple staffing suppliers are the ones nobody invoices you for: staff time on repeated paperwork, hours spent reconciling spend, hiring that happens outside the program and records you can’t find quickly. To find them, start with the checks above, beginning with invoices for three roles and the hours your teams spend per supplier.
How do you consolidate contingent workforce suppliers without disrupting your program?
To consolidate contingent workforce suppliers without disrupting your program, many teams start with a small pilot: one business unit or worker type moves to a single accountable supplier, and they compare time-to-fill, rates and manager feedback against their baseline before expanding. Your legal, tax and HR advisors can weigh in early.
Do you have to replace your VMS or MSP to consolidate suppliers?
You don’t have to replace your VMS or MSP to consolidate suppliers. In many setups, the VMS or MSP keeps running requisitions, timesheets, reporting and policy, while consolidation shows up as fewer contracts, consistent rates and supplier reporting that syncs back to the system you already use.
How do you know if your contingent workforce is being managed in silos?
You can tell your contingent workforce is being managed in silos when the same role costs different amounts by supplier, total spend takes several people and a spreadsheet to report, managers hire outside the approved route, and a different supplier handles each worker type. If three or more sound familiar, the self-check above shows which records to compare first.
Author
Lee Willoughby
Senior Marketing Director, Lifted
Lee Willoughby is the Senior Marketing Director at Lifted, an Upwork company helping enterprises source, engage, and manage contingent talent across every contract type. With a background as a co-founder and workforce technology entrepreneur, Lee focuses on the future of contingent workforce management, helping organizations navigate the complexities of global talent, compliance, and workforce transformation.
This content is for general informational purposes only, and is not intended to be and should not be viewed as legal or tax advice. Readers should contact their attorney or tax professional to obtain advice with respect to any particular legal or tax matter. Information discussed can change frequently, and Lifted cannot guarantee that all information is current at all times.
