Defining MSP Fees

Objective

After completing this lesson, you will be able to describe the funding models that determine who pays for an MSP service.

MSP Fees

A managed service provider, or MSP, is a third-party vendor that an organization can engage to help manage certain aspects of the organization’s business processes, such as an external worker procurement program.

If a Managed Service Provider, or MSP, is involved in SAP Fieldglass transactions, a buyer may see a different final bill rate than the supplier. This is because the MSP charges a fee for its service, and that fee is reflected in the final bill.

Buyer-Funded MSP

The MSP fee is only seen by the organization that is paying that fee.

In a Buyer-Funded program, the configured MSP fee is paid for by the buyer. So if the buyer uses an MSP to manage its external workforce procurement program, the MSP will add a percentage for each transaction. So if the supplier presents their Bill Rate as 97.09, the MSP will add 3% to that (2.91) and add it to the buyer’s Bill Rate (100.00). The difference is because of the MSP’s service fee.

Depiction of a Buyer-Funded model as a buyer's Bill Rate of 103 as greater because of the MSP fee of 2.91 plus the invoiced rate of 97.09.

Supplier-Funded MSP

In a Supplier-Funded program, the MSP fee is paid for by the supplier. So if the supplier is paying the MSP, their bill rate will be higher than the buyer’s.

Depiction of a Supplier-funded model as a supplier's Bill Rate of 97.09 as greater because of the 2.91 MSP fee plus the invoice rate of 103.

Multiple suppliers can participate in a supplier-funded model. Each of the suppliers engaged in the program can then pay a portion of the fee, spreading out the cost.

If a customer wants to pursue a supplier-funded model, it’s important that this be negotiated in each of their supplier agreements.

Markup vs Discount

There are two common methods for calculating an MSP Fee: the Markup method and the Discount method. Both methods can be used for either the buyer-funded or supplier-funded models. Let’s look at how they’d work in a buyer-funded model:

Markup Calculation

In the Markup method, the MSP Fee is added to the supplier bill rate.

Let’s say we have a supplier bill rate that is 97.09. The MSP fee is set to 3%. We will multiply the supplier bill rate by the MSP Fee percentage to get 2.91. We then add this fee to the supplier bill rate to get the buyer bill rate of 100.

With the Markup method, the MSP fee is a percentage of the supplier’s bill rate added onto the buyer's bill rate.

Depiction of the markup calculation as a supplier bill rate of 97.09 multiplied by the MSP fee of 3% equaling the markup of 2.91 plus the 97.09 equaling the buyer bill rate of 100.

Discount Calculation

In the Discount method, the MSP fee is subtracted from the buyer bill rate.

So we start with the same buyer bill rate at 100 and the MSP fee is still set to 3%. We will multiply the buyer bill rate by the MSP Fee percentage to get 3. We then subtract the 3 from the buyer bill rate to get the supplier bill rate of 97.

With the Discount method, the MSP fee is a percentage of the buyer’s bill rate subtracted from the supplier's bill rate.

Depiction of the buyer presented rate of 100 multiplied by the 3% discount equaling 3 minus the 100 equaling the 97 supplier bill rate.

MSP Configurations

Buyer’s MSP Configuration

The only deciding factor in which type of MSP Fee Calculation should be enabled and configured for a tenant in SAP Fieldglass is what the agreed upon terms have been negotiated between the customer and their MSP Supplier.

When a buyer uses an MSP, the "MSP Calculation for Contingent" configuration option is enabled to specify which method should be used to calculate the MSP fee for all applicable contingent modules.

The MSP configuration options are set when the buyer tenant is configured in SAP Fieldglass.

A company configuration page showing the MSP calculation rows, listing Does buyer have MSP?, MAP Calculation for Contingent, Disallow MSP fee on Expense Sheets, and Display Warning Message when MSP fee value is zero at Work Order Submit. Another item, Manage MSP Fee of Miscellaneous Invoice and SOW Line Items is marked as inactive.

Additionally, when a customer’s MSP is used to manage their Services program, the company configuration ‘MSP Calculation for Services’ must be enabled and either a Markup or Discount calculation method must be chosen.

Supplier’s MSP Configuration

The final configuration that must be in place for an MSP Fee to be used in a program is to set the Supplier's MSP configuration through the Buyer's administrative view of the supplier record. Here we can see where the details can be configured:

A supplier’s record highlighting the Services Provided section with ‘Supplier-funded’ as the selected MSP Service Fee.

Rate Component or Non-rate Component Configurations

MSPs can configure their fee specifics for both non-rate components and rate components. The benefit of configuring both is so that an MSP fee is calculated in their workflow whether a rate that’s being used has a rate component group associated to it or not.

MSPs can configure both non-rate and rate components for their individual clients. Here the MSP is configuring their rates for WorkingNet.

MSP’s buyer configuration page showing the Non-Rate Components and Rate Components sections. These are where the MSP percentage are determined and whether it will be a percentage or a flat fee, and the rate components are added per currency by either percentage or flat fee.

If a customer plans to configure their MSP Fee outside of the Rate Component functionality, they would populate their MSP Fee details in the Non-Rate Components section. Here they can enter a % for the application to calculate, or a flat fee per transaction that must be broken out per currency that’s enabled.

If a customer wants to build their MSP Fee calculation into their Rate Component structure, they will fill in the details here- in the Rate Components section. Each currency would require its own designation of either Percentage or Flat Fee depending on which types are enabled at the company configuration level. The specific percentage or flat fee values are not configured here because they would be built out within the rate components in the tenant.

Lookups (SOW & Different Fees)

For some global customers that use SAP Fieldglass across multiple regions and countries, the native options for capturing MSP Fee values don’t allow enough flexibility for their MSP Fee allocation. In these instances, buyers can create an MSP Fee Custom Lookup- one for contingent and one for services, as needed. This allows them to control what criteria from the application drives specific MSP Fees.

A custom lookup admin object created to catalog MSP fees. The page contains a grid divided into columns for lookup number, header type, and lookup headers. The grid contains three rows, the first two being key values for business unit and supplier code, respectively. The third row is a value for MSP Fee percentage.

Summary

There are two common methods to calculate MSP Fee: Markup and Discount, usable in buyer-funded or supplier-funded models. The Markup method adds MSP Fee to supplier bill rate, while Discount method subtracts it from buyer bill rate. MSP configurations are set based on agreed terms between the customer and MSP supplier, with options for both buyers and suppliers.

Key Points:

  • Markup Method: MSP Fee is calculated as a percentage of the supplier's bill rate to determine the buyer bill rate.
  • Discount Method: MSP Fee is calculated as a percentage of the buyer's bill rate then subtracted from it.
  • Buyer's MSP Configuration: Configuration set based on negotiated terms, which are then enabled and specified in SAP Fieldglass during tenant setup.
  • Supplier's MSP Configuration: Final configuration happens in the administrative settings of the supplier record, ensuring alignment with the selected MSP fee method.
  • Rate Component Configurations: MSPs configure fees for both non-rate and rate components. Allows calculation in workflow regardless of rate component group association.
  • MSP Fee Custom Lookups: Used by global customers for flexibility in MSP fees across different regions and criteria, based on business units or suppliers.

Learning

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