Defining MSP Fees

Objectives

After completing this lesson, you will be able to:

  • Describe the funding models that determine who pays for an MSP service.
  • Differentiate between the Markup and Discount methods of calculating the MSP fee.
  • Describe the MSP fee configuration and Custom Lookup functionality.

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, WorkingNet may see a different final bill rate than reCrewIT. 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 WorkingNet uses an MSP—CoLabor8—to manage its external workforce procurement program. CoLabor8 will add a percentage for each transaction. So if reCrewIT presents their Bill Rate as 97.09, CoLabor8 will add 3% to that (2.91) and add it to the WorkingNet’s Bill Rate (100.00). The difference is because of CoLabor8’s service fee.

Supplier-funded MSP

In a Supplier-Funded program, the MSP fee is paid for by the supplier. So if reCrewIT is paying Colabor8, their bill rate will be higher than WorkingNet’s.

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.

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.

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.

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.

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 from the MSP Supplier’s tenant in SAP Fieldglass. Here we can see where the details can be configured:

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.

The supplier's MSP configuration can be set through the buyer's administrative view of the supplier's record.

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.

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.

WorkingNet needs a unique MSP Fee value based on a combination of Business Unit and Supplier. Adding data to this custom lookup allows the SAP Fieldglass application to use this lookup table to assign the appropriate MSP Fee.

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