Master vendor vs neutral vendor: what’s right for my care home?

If you work in health or social care, you’re probably used to booking agency staff to fill vacant shifts.

In many cases, you might book staff directly with several different agencies, switching between email, phone and tech options like the Florence app.

This can be great for building and maintaining local agency relationships, but not so great for your time.

Juggling multiple agencies also means it’s harder to compare prices and stick to different timesheet and reporting schedules; plus you’re subject to varying compliance standards in your agency staff.

A vendor management tool makes working with multiple agencies much easier.

But how do they work, and which one is right for you?

Here, we’ll explain what vendor management tools are, and explore the differences between master vs. neutral vendors, so you know how each works and how it can help you save time, money and get peace of mind over your staffing.

What is vendor management?

Vendor management tools and services give you a single contact point where you look after your staffing agency relationships, contracts, performance and compliance.

It can come in the form of software (called a vendor management system, or VMS) or as a person-to-person service.

Who uses vendor management?

Care providers with multiple locations often consider using a vendor to help simplify their agency management.

Historically, only larger care providers with 15 or more locations would use vendor management systems like master or neutral vendors, but given the recent progress in technology, smaller care providers can benefit from these too.

What’s the difference between master vs. neutral vendor?

1. Master vendor

A master vendor is when a nursing agency agrees to take on the legal responsibility of filling the majority (>95%) of your vacant shifts via their own workers or via other agencies that they have put in place subcontracting agreements.

Most master vendors will look to fill around 70% of the vacancies and sub-contract the rest to other agencies.

You would only ever speak to the master vendor.

In this model, the master vendor will make money from the staff they supply and usually charges a small fee to the agencies it subcontractors with. Under a master vendor relationship, all the bookings you make are directly with the master vendor.

The cost model of a master vendor

– Master vendors take a margin on all shifts booked with their staff

– Master vendors charges agencies they subcontract with a fee (e.g. 30p per hour for any shifts they work)

– No additional costs to you, the client

Pros of the master vendor model

– Single point of contact

– Single contract and pricing

– Single invoice

Cons of a master vendor

– May disrupt any existing relationships with agencies you have

– The ability for the master to be able to audit its sub-agencies is hard as they are competitors

– Restricted supply as some other agencies may not want to subcontract

– Inability to fill all shifts and all roles means you may need to go off-contract

– The ability to apply the HMRC VAT nursing concession of 20%

2. Neutral vendor

A neutral vendor is different and may or may not be a staffing company, they will provide a platform or service to act on your behalf and book temporary staff across many agencies.

You provide your vacant shifts to the neutral vendor. They’re then communicated out to your selected agencies (based on rules you define). A neutral vendor acts as your agent.

In practice, it feels very much like a master vendor but legally you are still booking with the supporting panel agencies.

Cost model of a neutral vendor

– Neutral vendors charge the care provider per hour for any shifts booked, typically between 25p and £1 per hour plus VAT

– Some may charge agencies an access fee and audit fee

Pros of the neutral vendor model

– By maintaining the legal relationship with the panel agencies it is possible to apply the HMRC VAT nursing concession, which saves you 20% on applicable roles

– You have a single point of contact, but also you can also maintain relationships with agencies

– Standardised contracts and pricing (you will need to sign the same agreement with all the panel agencies)

– Single invoice

– Audit of panel agencies by the neutral vendor

– Capture any off-platform spend for invoicing and reporting

– Ability to create a tiering model to drive competition

 Cons of a neutral vendor

– Some agencies are charged to access a neutral vendor which can limit their willingness to supply

– Often neutral vendors have long payment cycles for agencies

– Some neutral vendors try to prevent the agencies and clients communicating which can lead to frustration

– When something goes wrong the neutral vendor often is too far away from the supply to be able to help

– The quality of some neutral vendor tech platforms is outdated, and not very user friendly

Master vs neutral vendor: which is right for me?

In practice, a good neutral vendor and master vendor will feel very similar.

Your homes and services will be able to book quality workers, and teams such as finance will have a simplified process with great reporting. They will probably both save you time and money and improve quality.

However, for social care and healthcare, the major difference is VAT.

It is not possible for a true master vendor to legally apply HMRC’s VAT concession to any nursing or care roles they subcontract. However, it is allowed for roles they handle directly.

This 20% ‘saving’ means that choosing a neutral vendor will more often than not be the right choice.

If your organisation does not benefit from HMRC’s VAT concession, for example you offer purely residential services, then the choice is harder and it may come down to a number of selection criteria.

So how do you choose?

You could use an independent consultant to help you pick the best service. These consultants usually charge a set fee and support you throughout selection and implementation. Their financial incentives should not in any way be conflicted by the chosen provider.

However, there are many “procurement experts” that push a vendor that results in them being paid a monthly or quarterly fee by the chosen vendor for the entire length of the contract, which may be three years or more. This fee can be quite significant and is something and you should know about before entering an agreement.

The other option is to select a vendor yourself.

In doing your research, the most important things to consider are:

– Is the platform easy to understand and use?

– How do you want to communicate with your panel agencies?

– What information are you looking for in terms of finances and reporting?

Bear these in mind when speaking to potential vendors. If you want to go it alone in selecting your vendor without a consultant, check out our guide to choosing a vendor management tool.

Florence’s vendor management tools are for health and social care providers only, helping you hire only 100% compliant agency staff. Get in touch with our friendly team to find out more about how we can help you.

You also might be interested in:

– How to improve continuity of care at your care home

– 9 harsh truths about bad staffing agencies

– What’s the secret to achieving an outstanding CQC rating?

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