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In the three years to 2016, the price of contingent workforce management services has been rising an estimated 0.5 percentage points to reach 10.2% of contingent workforce spend. Growing demand has been the primary cause of price growth, which has made it more difficult for buyers to secure favorable contract terms. Fortunately, stable trends in input costs and most demand drivers have resulted in a low level of price volatility, which has helped ensure that buyers can accurately budget for these services.

Demand for contingent workforce management services generally fluctuates in line with the size of the contingent workforce. The recession brought about broad change to the labor market; unemployment rose, and many of the remaining jobs became temporary positions because temporary labor poses a lower risk to employers than permanent labor. Furthermore, by using temporary labor, businesses are able to scale their workforce in line with demand without the hassle and expense of having to regularly hire or downsize permanent positions. Although economic conditions have been improving from 2013 to 2016, businesses have continued to hire temporary employees to improve their operational efficiency. As a result, the number of temporary employees has maintained considerable growth during the period. As the contingent workforce has expanded, businesses have faced more regulatory compliance and vendor management concerns, leading them to increasingly demand for contingent workforce management services. As a result, suppliers have had the ability to raise prices without sacrificing profit.

Despite growing demand, buyers have benefited from providers' falling wage costs. Because wages represent the largest cost to suppliers, declining wages have helped them maintain control of their internal costs and slow price growth. Nevertheless, buyers should consider establishing long-term contracts with vendors soon to lock in prices before they grow further.

The average price of contingent workforce management services is forecast to continue rising an estimated 0.5 percentage points to reach 10.7% of contingent workforce spend in the three years to 2019. Further growth in the contingent workforce and rising corporate profit will drive up demand, leading to further price growth.

A recent shift in employer preferences has led to rapid growth in the number of temporary workers, which is projected to continue rising through 2019. As the contingent workforce grows, more companies will turn to MSPs for help with recruitment, onboarding, administrative management and, increasingly, regulatory compliance. The Affordable Care Act (ACA) has contributed to rising temporary staffing costs and compliance concerns by increasing health insurance requirements for temporary employees. Therefore, by outsourcing contingent workforce management services to experts, buyers will free up internal resources and reduce their risk of noncompliance.

Additionally, corporate profit is expected to grow, providing buyers with more resources to dedicate to professional services and driving up demand and prices in this market. An increase in the number of US businesses will also expand the potential customer base for services as small to medium-size companies purchase these services. However, steady declines in wage costs will continue to slow price growth.

Price volatility will remain low during the period, enabling buyers to assess their current contingent workforce strategy and budget for program implementation. Because of the broad use of the vendor-funded pricing model in this market, rising prices can impact buyers in one of two ways: suppliers could pass a smaller share of cost savings to buyers or increase their vendor fees. Regardless, by contracting services prior to price increases, buyers may be able to negotiate to retain a greater portion of the cost savings achieved by suppliers. Buyers paying a fixed fee will benefit from purchasing services now as well, before prices rise further.