Staffing MSPs: Draining Workers, Clients, and Agencies Alike

Imagine this: you have a strong, long-standing relationship with a valued client. You know their needs inside and out, and they trust your agency completely. But one day, that trust is broken—not by anything you did, but by a Managed Service Provider (MSP) who promises your client’s corporate headquarters streamlined staffing processes, easy billing, and centralized agency screening. Some executive, eager to make their mark, decides to bring the MSP on board, thinking, “What could go wrong?”

Overnight, everything changes. The client you once worked so closely with now directs all staffing needs through the MSP, leaving you out in the cold. Your relationship, built over years, is suddenly replaced by a faceless portal where candidate submissions are approved (or rejected) with no real insight into the client’s unique needs. As a result, job orders are now subject to layers of red tape, and by the time a candidate is approved, they’ve often found work elsewhere.

The Hidden Costs of MSPs to Staffing Agencies

Billing, once straightforward, has become a headache. Instead of direct invoices with a quick turnaround, payments now take up to 90 days and arrive piecemeal, forcing your team to hire additional staff just to manage this administrative maze. Your profit margins are slashed by the MSP’s service fees—fees that cost the client nothing upfront but come directly from your bottom line. Worse yet, your financial risk doubles because you’re now dependent on both the MSP and the client to get paid. If either party falters, it’s your agency left holding the bag.

The MSP’s claim is that this arrangement ultimately benefits the client. But let’s be real: when an exceptional candidate comes along, agencies are likely to prioritize clients with direct relationships over those using MSPs. After all, why take a gamble on an MSP where you face lower margins and lengthy payment delays when you could place that candidate with a client that values direct service?

A Lose-Lose Situation for Clients and Staffing Agencies

MSPs often result in subpar outcomes for clients, too. Agencies may deprioritize MSP-managed clients in favor of those willing to pay a premium for quality employees. The end result? Clients relying on MSPs may find themselves at the bottom of the priority list, getting only what’s left after other clients have been served.

A Staffing Talk parody highlights this dynamic well: “Every year, some agency would step up to take the abuse—low rates, ridiculous data re-entry, slow payments, and one-sided contracts. Other agencies had moved on to clients who actually valued quality service.”

The Reality of MSPs in the Staffing Industry

From experience as a Branch Manager, I saw firsthand how damaging MSPs can be. Thankfully, in that case, we convinced our client that the MSP was harming rather than helping them, restoring our direct relationship. But many staffing agencies aren’t as fortunate.

MSPs, for many in the staffing industry, are a needless burden. If you can avoid working with an MSP, do so. If you’re already in an MSP arrangement, assess if you can shift your focus to direct clients who value your work. With enough resistance from staffing agencies, clients may begin to see the real impact of MSPs—and we can all move toward a future with stronger, more rewarding client relationships.