How a Managed Service Provider Manages External Employees

Pietro Mattina

September 9, 2026
10 minutes

Many companies work with external employees, such as through staffing agencies, as freelancers, or under service or work contracts. However, as the number of external workers increases, so does the organizational burden.

Who submits a request? Which supplier is contacted? Are the contract terms correct? When does an assignment end? What are the actual costs? And who actually keeps track of how many external employees are currently working at the company?

This is exactly where centralized management by a Managed Service Provider (MSP) begins.

The goal here is not to “manage” every single external employee. Rather, the key is to structure the entire process surrounding the external workforce and manage it centrally.

From the request for support to offboarding: Here's how the process works

A professionally managed process consists of several steps that build on one another:

1. Report the need for an external employee

It always starts with a specific department’s staffing needs.

Instead of contacting a staffing agency directly, the staffing needs are first documented in a structured manner. This includes, for example:

” data-aria-posinset=”1″ data-aria-level=”1″>Required Qualifications and Job Responsibilities

” data-aria-posinset=”2″ data-aria-level=”1″>Location

” data-aria-posinset=”3″ data-aria-level=”1″>Desired start date

” data-aria-posinset=”4″ data-aria-level=”1″>planned duration of use

” data-aria-posinset=”5″ data-aria-level=”1″>Working Hours

” data-aria-posinset=”6″ data-aria-level=”1″>Cost Center or Budget

” data-aria-posinset=”7″ data-aria-level=”1″>number of workers needed

” data-aria-posinset=”8″ data-aria-level=”1″>Preferred contract or employment model

This last point is particularly important: Not every external need should be met in the same way. Depending on the nature of the work and the specific circumstances, options such as temporary staffing, a freelancer model, or a project-based service contract may be appropriate.

Structured demand reporting therefore lays an important foundation for further management right from the start.

2. Review and approve the request

Before a request for suppliers is forwarded, it is possible to assess whether it makes sense from a technical, economic, and organizational standpoint.

The following questions, for example, may be relevant:

Is there a budget available?
Is an outside worker really needed?
Which deployment model is appropriate?
Are internal approvals required?
Are there already any suitable external resources?
Are there any specific compliance requirements that need to be taken into account?

A centralized process thus prevents individual departments from developing their own procedures and hiring external workers without a standardized screening process.

3. Selecting Suitable Suppliers

Once the request has been approved, it is forwarded to suitable suppliers.

However, this does not necessarily mean that every supplier must receive every request. The selection can be based, for example, on qualifications, availability, location, past performance, costs, or specialization.

The advantage of centralized management: Suppliers are not selected solely based on who happens to be contacted by the department at any given time. Instead, the existing supplier pool can be systematically utilized and managed based on objective criteria.

You can learn more about how to select, evaluate, and manage suppliers in the Supplier Management section.

4. Compare and select candidates

After the request is made, staffing agencies or other providers submit suitable candidate profiles.

Here, too, a centralized process ensures comparability. Candidates can be assessed according to uniform criteria and submitted to the relevant department for selection.

As a rule, the decision on technical matters remains with the respective department. The MSP coordinates the process and ensures, for example, that:

Receive profiles centrally,
Feedback is recorded in a structured manner,
Selection processes remain transparent,
Suppliers receive the same information—
, and unnecessary
Delays can be avoided.

This turns numerous individual supplier contacts into a transparent staffing process.

5. Review the Contract and Compliance

Before deployment, the contractual and legal framework must be in place.

This is particularly relevant in the context of temporary employment. In this context, the requirements of the Temporary Employment Act (AÜG), among others, apply. At the same time, when it comes to freelancers as well as service and work contracts, care must be taken to ensure that the contractual model aligns with the actual performance of the work.

Therefore, the inspection should not wait until a problem has arisen. It should take place before deployment and as part of the ongoing process.

Depending on the application model, the following, for example, can be tested and documented:

Type of Contract and Contract Terms
Required documentation
Duration of the assignment and relevant deadlines
legal requirements
Approvals
Changes During the Deployment

A distinctive feature of the AÜG: The legal classification is not determined solely by the terms of the contract. If there is a discrepancy between the agreement and how the work is actually performed, the actual performance may be the determining factor.

That is precisely why ongoing management of the project is just as important as the initial contract review.

6. Onboarding the external employee

Once the assignment is approved, the onboarding process begins.

There are numerous points of interaction here as well: The external employee may need access, information about the workplace, safety training, a point of contact, or a time-tracking system.

A centralized process ensures that these steps are not handled differently by individual people or departments.

Typical examples of such information include:

Start Date and Location
responsible department
contact
Supplier
Contract and Assignment Data
Required documents
Access and Permissions
Time Tracking
Required training

This ensures that the external employee is not simply “hired,” but is properly integrated into the designated process.

7. Continuously monitor the operation

The real challenge often doesn’t begin until after the start.

After all, many things can change during an assignment: the assignment may be extended, the number of hours may change, the employee may be reassigned to a different location, or the department’s needs may change.

A centralized control system provides an overview of who is assigned to which supplier, in which area, at which location, under what terms, and for what period of time.

This does not mean taking on the employer’s role under labor law. An MSP manages the process and the parties involved. In the case of temporary staffing, for example, the external employee remains employed by the staffing agency.

Transparency across the entire external workforce is crucial.

8. Manage contract extensions and offboarding in a timely manner

Many risks don’t arise at the start of an operation, but at the end.

Is a contract expiring? Will the assignment be extended? Does a new review need to be conducted? Or has the need ended?

These decisions should not be made just a few days before the scheduled end date.

A central process can alert users to upcoming deadlines early on and, for example, trigger a decision to extend them.

9. Review Invoices and Expenses

The end of a mission does not mean the end of financial management.

Time periods, agreed-upon hourly rates, surcharges, and other billing components must be consistent with the agreed-upon terms.

A centralized control system, also known as a labor audit, makes it possible, for example, to compare:

Service ordered → Time recorded → Agreed price → Invoice received

This makes it possible to identify and resolve discrepancies more quickly.

At the same time, for the first time, a consistent overview of the actual costs of the external workforce is emerging.

10. Analyze Data and Improve Processes

Valuable data is generated from individual transactions.

For example, companies can analyze:

How long does it take from the initial inquiry to the hiring of a candidate?
Which suppliers deliver particularly quickly?
Which providers have the highest placement rate?
How much does each service call cost?
How many external employees are currently working at the company?
How many operations are set to end soon?
How often are assignments extended?
Where do delays occur in the process?

This transforms the management of external employees from a purely administrative task into an ongoing optimization process.

Who is in charge of which part of the process?

Centralized control does not mean that a single entity makes all decisions.

Rather, responsibilities are clearly separated from one another:

Party to the proceedings	Typical Responsibilities
Department	Needs, Technical Requirements, and Selection
HR	Workforce and Human Resources Processes, Policies, and Governance
Shopping	Suppliers, Terms, and Negotiations
MSP	Process management, coordination, supplier communication, and transparency
VMS	Digital Representation, Workflows, Data, and Documentation

The MSP thus serves as a central interface between the parties involved. The goal is not to centralize decisions that are best made within the department or by the purchasing function. The goal is to standardize the process between them and make it manageable.

What role does a VMS play in traffic control?

When dealing with a larger external workforce, manual management via email, Excel spreadsheets, and disparate systems quickly becomes insufficient.

A Vendor Management System (VMS) can digitally map the process from the initial request for personnel through supplier inquiries and candidate management all the way to contract data, assignment management, and time and billing processes.

The key point here is not the software alone. Above all, a VMS establishes a common data and process foundation for all parties involved. For example, it allows you to track at any time which external employee is being deployed, which supplier is behind the assignment, when the assignment ends, and what costs are associated with it.

To this end, EMS integrates and implements solutions such as SAP Fieldglass and MAVES, among others.

When is it worthwhile to centrally manage external employees?

An MSP process can be particularly interesting when several factors come together:

several staffing agencies or other external suppliers
a larger number of external workers
Various contract and deployment models
multiple locations or countries
significant administrative burden
complex compliance requirements
Lack of transparency regarding costs and the external workforce
Significantly different processes across departments
Regular renewals and changes

However, there is no fixed threshold beyond which an MSP is absolutely required.

However, the more complex the external workforce ecosystem becomes, the greater the benefits of centralized process management.

Conclusion: External employees can be managed through processes

Managing an external workforce involves much more than simply placing individual employees.

The entire process is crucial: identifying needs, selecting suppliers, placing candidates, reviewing contracts, overseeing assignments, monitoring deadlines, controlling costs, and properly concluding assignments.

A managed service provider creates a centralized framework for this and connects business units, HR, procurement, suppliers, and technology.

In this way, numerous individual external assignments are transformed into a manageable workforce system with clear processes, responsibilities, and data.

Frequently Asked Questions

What happens to a temporary employee after a staffing request is submitted?

The need is first reviewed and approved. Next, suitable suppliers are contacted, candidates are submitted, and the right candidate is selected. Contract, compliance, and onboarding processes follow before the candidate starts.

Who decides which external employee to hire?

The technical selection is generally the responsibility of the relevant department. The MSP coordinates the process, ensures comparability, and manages communication with the participating suppliers.

Can existing staffing agencies be integrated into an MSP process?

Yes. An MSP does not automatically mean replacing existing suppliers. Existing partners can be integrated into a centralized supplier and management process and evaluated based on uniform criteria.

How are extensions to external assignments managed?

Assignment and contract data are recorded centrally. Before an assignment ends, an extension can be reviewed, approved, and—if necessary—re-evaluated in light of the current framework conditions.

Can an MSP also manage freelancers and service providers?

Yes. In addition to temporary staffing, centralized process management can also encompass other forms of external workforce, such as freelancers and service and contract agreements. It is crucial to take into account the different legal and organizational requirements of the respective deployment models.