With legislation looming over the use of temporary and agency workers, JimMatthewman, worldwide partner at Mercer Human Resources, looks at how onecompany approached streamlining its management of temporary staffThere are an estimated 1.8 million temporary workers in the UK costingbusinesses about £1.7bn a year. Under new legislation making its way throughthe European Parliament, that cost may rise considerably. Under the current proposals, submitted in November and due for introductionby June 2003, temporary workers would be entitled to the same terms andconditions as the permanent position they are covering. There is still considerabledebate to be had. The UK and Ireland propose that the regulations should onlyapply once a person has been in employment for more than a year, while some ofthe other EU countries want the provisions to apply from day one. But just how widespread is the use of contingent workers – defined astemporaries, agency staff and contractors – within given industries or aspecific skill group? Contingent workers are found at lower skill levels inproduction, packing and labouring roles, semi-skilled and skilled levels inadministration, research and manufacturing and expert levels such as projectmanagement, software design, engineering and interim management. At current average rates, 100 contingent workers will be costing a UK firmclose to £1m a year. Given current market conditions and significant pressureto reduce costs, most firms would do well to undertake an audit to identifywhere the contingent workers are being used, how many are being used, at whatcost and on what terms and what approval processes are being used. Of course, use of contingent workers is highly dependent on organisations’specific business models and associated people strategy. Some industries, suchas consulting engineering, where projects are typically long-standing yetintermittent, contingents might make up a third of the workforce. Others,notably retailers, are high employers of temporary staff for the ‘goldenquarter’ around Christmas and the January sales. The reality of using temps However, experience shows that where organisations might feel they have agood handle on using and deploying temporaries, the reality is often verydifferent. But, why might this be the case? A recent case study, where Mercer HR Consulting conducted a pan-Europeanaudit, highlights some of these points. The organisation has a large contingent workforce operating in more than 10countries across Europe. To our surprise, there were more than 400 separatesupplying organisations ranging from multi-country, large-scale employmentagencies such as Manpower and Adecco, to small boutiques, often providing ahandful of workers. In some countries, HR took responsibility for sourcing the workers, while inothers it was the role of procurement, and in some, the line managers. Thislack of consistency had allowed a whole series of inefficient processes andbehaviours to develop. While the company had a broadly similar approval processacross countries, there was a lack of agreed, formal policies around usage –indeed, some managers saw the use of contingents as a convenient way to bypasslimits (and freezes) on permanent recruitment. The lesson learned was that the processes might be similar but this needsbacking, requiring clear direction and effective implementation. Even where amajor supplier was involved in a number of countries, the service standardprovided was very mixed. The main issue being one of pushing inappropriatecandidates or difficulties in the supplier relationship. Again this points tothe need of a common set of key performance indicators for supplierperformance. It is common that local operating companies create policies framed withinlocal legislative frameworks. These do vary across Europe – for example, inItaly and France there are restrictions in respect of ‘body shops’ and, as aresult, workers are usually supplied under professional service agreements, egcontractors. Varying definitions Internal definitions of contingent workers also varied between countries.The audit also showed the clear need for a single, agreed definition oftemporary, agency and contracting workers, as well as skill definitions inorder to analyse, measure and monitor usage. This then provides the ability toidentify where, how many and the cost of usage. In this particular example, the bulk of contingent workers were either lowskilled or skilled. There was no apparent value in continuing relationshipswith smaller agencies, as there was little difference in the pay rates and nodifference in the quality of worker. Additionally, better bulk terms were available through arrangements withlarge volume suppliers. An added bonus was the reduction in bureaucracy throughmaintaining fewer agency relationships. We also found there was a difference in definition between true specialistsand experts with readily-available skills. As you would expect, a premium ispaid for true specialists, who are mostly sourced from niche agencies. Thesespecialists tend to be critical to the business. However, experts in common fieldsare available from volume suppliers at better rates and hence another area ofpotential savings. Lack of consistency We found there was little consistency in the way the contingent workforcewas managed. The division of responsibilities between procurement and HR wasunclear, and varied between geography and business unit. This, combined withlittle use of automation, resulted in poor management information and fewcontrols. As a result, the organisation was incurring additional costs throughlack of pay rate management and process inefficiencies, resulting in anextended time to hire. Finally, there was little vendor management through theuse of key performance indicators, which could have been used to drive andmonitor cost and quality improvements. The audit – conducted over a period of eight weeks, largely throughquestionnaire but also structured interviews and a workshop – identified somesignificant areas of cost reduction. The main area of potential reduction was smarter sourcing of temporaryworker according to skill level. This was shown to be in the order of £13.7m insix months, with a similar level annually thereafter. To achieve these, theorganisation needed to address three key areas: – Consistent use of technology – Reduced number of suppliers – Strong management information to drive cost and quality improvement ofvendor management. Over the past 10 years, e-procurement and e-recruitment systems haveadvanced significantly. Technology provides the opportunity to achieve hard, bottom-linesavings by automating the business rules and processes to manage therequirement, authorisation, attraction, selection, tracking and payment ofcontingent workers. Today, there are in excess of 20 specialist e-recruitment/vendor managementsuppliers. Some, such as PeopleSoft, Oracle and SAP have recently added newmodules. Not all, however, provide the full functionality or are trulypan-European, especially in language versions. Choosing a supplier However, the use of a single system across an organisation has compellingbenefits. The software operating through a management web-based portal would ensureauthorisation processes are both standardised and adhered to. It can also provide instant updates to line managers as to where candidatesare in the process and, ultimately, be used to monitor invoicing. Clearly, having more than 400 vendor suppliers, each with a degree ofmanagement resources managing the relationship, was highly inefficient. The critical question for any organisation is what is the appropriate numberto provide assurance of both quality and timelines to meet the business need?Three main options should be reviewed: – Insourced versus outsourced – A single master managed service provider – A vendor-neutral option accessing an agreed list of suppliers. There is a strong temptation to opt for a single master vendor solution. Butas we noted, there may significant service variation between geographies and adanger that all the eggs are in one basket, resulting in unsuitable candidatesbeing put forward. The other major problem lies with implementation. If managers have been usedto sourcing key contingents from niche suppliers, there is likely to besignificant resistance if they are told only one source is now available. It alsolikely that the niche suppliers will be reluctant to ‘partner’ with a singlesupplier if this inevitably means their rates and margins are squeezed. In our case study, many of the resourcing managers preferred the idea of twoor three master vendors so they could play one off against another. This isreally avoiding the issue and likely to lead to variable quality. The third alternative is to consider a neutral master supplier – a supplierthat will co-ordinate a preferred list of suppliers without being one of thedominant vendors. The organisation benefits from having just one relationship to manage, andthe line managers feel there is still a reasonable choice of suppliers, albeitthe contact with the suppliers is now removed from day-to-day operations, whilesmaller niche providers will feel the neutral vendor is more objective andunbiased. Probably the hardest and most critical question is how to implementsuch a solution. Given the size of savings, there will be senior management pressure to implementfast – within six months. But in order to realise these gains, there are anumber of steps which need to addressed: – While the business case will be compelling at the most senior levels, itwill be operational managers who will find their current, convenient practicescurtailed or restricted. There will need to be an education exercise to winthese people over – Many of these arrangements are likely to have been built up over manyyears with cosy, personal dealings – the exposure of these arrangements maywell be uncomfortable at all levels of the organisation – Some of the contracts may be long-standing and will need to be reviewed oreven renegotiated, although the likely introduction of new legislation may be aconvenient opener for discussions – The technology solution will require swift implementation, includingconsideration of revised business processes – Irrespective of whether an organisation chooses a master vendor or neutralvendor option, the terms of such a relationship need to be clearly agreed withclarity on expected savings and margins, key performance indicators andreporting schedules. So, in the end, the issue is the balance between clear cost savings andpotential risk to everyday operations. In our experience, managing contingentworkers is as much a behavioural issue as a cost equation. The new legalscenario prompts a re-questioning but it also provides an opportunity to get agrip on a loose process. In today’s climate, this might be a giant quick win. www.mercer.comWhat do employers think?Last year, Personnel Today andManpower surveyed almost 1,000 employers to see what they thought of theDirective. Key findings include:– More than 70 per cent of organisations think it will damagetheir businesses through increased red tape and employment costs– 45 per cent of firms pay their agency staff the same aspermanent staff and 23 per cent pay temps more than permanent employees– 50 per cent of employers surveyed do not provide their tempswith holiday pay, while only 20 per cent of respondents provide agency staffwith maternity leave, 12 per cent provide paternity leave and 10 per centprovide pension provision – 25 per cent of organisations use agency staff for periods ofbetween six weeks and three months, 14 per cent of firms use them for periodsof between three months and six months, and 8 per cent use agency employees forbetween six and 12 months– 3 per cent of respondents use temps for periods of between 12months and 18 months, and 2 per cent employ them for more than 18 monthsSnapshot of the directiveThe European Commission (EC) issued aproposal for a draft Directive on temporary work in March 2002. Changes were proposedby the European Parliament in November and, in response, the EC issued arevised proposal in December.Under the revised proposal, temporary agency workers will beentitled to the same working and employment conditions as if they had beenrecruited directly by the company for the same job. There are three derogations to this “equal treatment”principle. It does not apply to pay where assignments last less than six weeksor where agency workers are employed on permanent contracts with the agency andcontinue to be paid in the time between postings. Collective agreements mayderogate from the principle as long as an “adequate level ofprotection” is provided for the temporary workers.The proposal requires member states to periodically review therestrictions on the use of temporary agency workers and discontinue any thatare not justifiable. It also provides that temporary workers should be informedof any vacant posts in the client organisation and, if recruited, the agencyshould be entitled to compensation.The Greek President is seeking political agreement on theproposed directive at the council meeting in June. Once adopted, member statesare likely to have two years to implement the directive.www.agencyworkersdirective.uk.com Related posts:No related photos. Previous Article Next Article Less is moreOn 29 Apr 2003 in Personnel Today Comments are closed.