HR jargon buster: what’s the difference between FMS, VMS and RPO?

HR software terms can be confusing. Know your MSP from your FMS? How about your RPO? Xenios Thrasyvoulou explains the glossary of today’s HR software systems

With work getting more flexible, the way companies are attracting, onboarding and retaining talent is going through major changes too. Today, managers not only need to work with a team of full-time employees – but they also have the option to engage freelancers, part-time workers and contractors too. However, managing and organising these different kinds of workers can get complicated when using traditional methods like spreadsheets.

The great news is, there are lots of great software and services out there that can help ease the process. Take solutions like FMS, VMS, MSP and RPO. The not-so-great news is that for those unfamiliar with exactly what each option involves, these acronyms and abbreviations can seem extremely confusing. This is especially true since some of these software and services have similar or overlapping capabilities.

So, what exactly do each of these offerings provide and which one would be the perfect fit for your company? Our HR jargon buster is here to help you.

>See also: 7 ways SMBs benefit from using HR software

What is an FMS?

An “FMS” refers to a Freelancer Management System. As the name suggests, it is a software which enables companies to manage every aspect of employing a freelance workforce. An FMS functions as a central repository for all freelancers and contractors in a company’s talent pool, storing all their details in the cloud. It makes it easy for managers to browse through the entire database and filter out specific skills to find the right person for the right job.

An FMS also automates processes like onboarding new talent, maintaining timesheets and processing invoices. This saves managers from having to perform these tasks manually, thereby freeing up time and significantly reducing management costs. With tighter onboarding processes, an FMS facilitates compliance with legislation such as GDPR and IR35.

A robust Freelancer Management System is especially useful for new and growing businesses. It offers collaboration, budget tracking and project management capabilities, thereby bringing multiple diverse processes all under a single system. This proves to be particularly useful for companies that utilise multiple freelancers across different projects and geographies.

What is a VMS?

A Vendor Management System or a VMS is a centralised SaaS platform that helps companies procure temporary and permanent labour. It is particularly useful for companies that have large-scale staffing requirements or frequently need the services of contingent workers — and typically outsource their recruiting needs to agencies and suppliers. A VMS is used to digitally organise multiple recruitment partners like agencies and headhunters.

Though both a VMS and an FMS are centralised systems for organising and managing a company’s relationship with external staff, they capture entirely different sets of data, and, subsequently, cannot be used in place of one another. Whereas an FMS manages relationships with thousands of freelancers and remote workers on an individual level, a VMS manages longer term arrangements with a relatively smaller list of staffing companies, vendors and suppliers. It supports more detailed onboarding and vendor approval processes, and can only track spends done through these suppliers. It is not designed to manage quicker, one-off engagements and it cannot track individual spends.

>See also: 5 easy tech wins to improve SME productivity

What is an MSP?

Unlike the first two offerings, a Managed Service Provider (MSP) is not a software at all — it is an outsourced third-party service that supports an organisation with its complex IT requirements. Its services may include remote management of legacy systems, monitoring networks and servers, and maintaining firewalls, among others. Some MSPs also offer data storage options while others provide vertical offerings like legal, contracting and financial services. Having a robust MSP can be extremely advantageous as it relieves an organisation’s in-house teams from certain administrative tasks, leaving them free to focus on business growth.

Large organisations that work with hundreds of different vendors and contingent workers may sometimes use an MSP to handle contracts or interface with other staffing agencies. However, this adds a new layer to one’s recruitment process. Moreover, an MSP cannot be used to manage a freelance or contingent workforce, so it cannot replace an FMS or a VMS.

What is an RPO?

Recruitment Process Outsourcing (RPO) is yet another third-party service that organisations may utilise when they have large-scale staffing needs. When a company needs to respond to a market change quickly, they may need to attract and hire a large number of professionals (either on a permanent or temporary basis) within a very short span of time. Their in-house HR department may not be able to dedicate enough resources to meet these needs. This is when external RPO experts may be asked to step in.

RPO experts take over the entire process of recruitment — right from forecasting future talent requirements, to actually assessing and hiring professionals. They also help onboard the newly recruited talent, managing documentation and ensuring compliance with contracts and NDAs. This helps companies cut recruitment costs while still improving hiring efficiencies. However, unlike an FMS or a VMS, RPO capabilities do not extend to managing, coordinating and paying the hired talent.

Which one do you need?

The solution or service you invest in depends on the specific requirements of your company. If your in-house tech and administrative teams are currently expending a lot of time and effort on managing internal systems and processes, consider freeing up their time by investing in a good Managed Service Provider (MSP).

If you are looking at large-scale recruitment or massive staffing changes, it might be worthwhile to go for Recruitment Process Outsourcing (RPO). They will enable you to hit your recruitment targets without burdening your in-house HR department.

Alternatively, if your HR team already engages with a handful of recruitment vendors, or if your firm has a global Preferred Supplier List (PSL), then a Vendor Management System (VMS) might be the best option for you. It will help you manage your vendors seamlessly and keep them engaged over the long term.

However, if your business model is such that your firm needs to work with multiple freelancers and contractors across different geographical locations, and your managers find it difficult or time-consuming to manage them all, a Freelancer Management System (FMS) might be just the right choice. It will enable your firm to onboard, manage and pay your entire freelance and contract workforce efficiently. Moreover, an FMS can help you nurture long-term freelancer relationships while also letting you manage one-off engagements.

Xenios Thrasyvoulou is founder and CEO of, a Freelancer Management System (FMS) built by the team behind PeoplePerHour, the UK-based freelance marketplace

Further reading

Five trends in HR to be aware of in 2020 – what you should know

Xenios Thrasyvoulou

Xenios Thrasyvoulou

Xenios is Founder & CEO at PeoplePerHour &

Related Topics

HR software