Budget cuts don’t need to mean temporary staff cuts…

New research reveals that temporary workers in the NHS have borne the brunt of budget cuts.

Laing and Benson, a healthcare market intelligence agency, found that in order to cut costs temporary staffing resources had been reduced by 7.4%. Spending for 2009/2010 came to £4.01bn, compare to £3.7bn in 2010/2011. Conversely, they saw a 4.3% increase in permanent hires.

According to egovmonitor.com, “The most drastic cuts were seen in Primary Care Trusts in England, which on average reduced their use of temporary staff from 7.1% to 6.2% of the total staff costs.”

Whilst significant savings have obviously been made, any business aiming to reduce costs through cutting the use temporary agency workers should bare in mind the consequences of doing so and also that there are ways to continue to use temporary agency workers in a more cost effective manner.

Temporary agency workers are a flexible option to staffing problems. Particularly in the NHS employees may be required at very short notice, to cover sickness or holiday or at an unusually busy time. Whereas these situations could be solved by permanent members of staff working time regulations and contractual obligations may prevent this from happening. Temps can also prove irreplaceable in times of skills shortages.

There are ways to reduce the cost of temporary agency labour, without cutting usage. For example moving to an electronic management system reduces admin and allows resources to be used elsewhere. Take a look at our blog ‘Gaining Control of your Agency Costs’ for more details.

Cutting Costs on Temporary Agency Labour – Quids in, Quality out?

With the threat of a “double-dip recession”, organisations are having to seize an even tighter control of their spend than in previous years. One of the departments within a company that has been hardest hit with these cut-backs is HR and the associated costs with recruitment.

Findings from a survey conducted by XpertHR have shown that only 5.1% of employers in the past 12 months have not taken any measures to reduce their expenditure on recruitment.

We have seen the increase in use of temporary agency labour over recent years as companies strive to reduce costs whilst also maintaining productivity. However, with the focus being on reducing recruitment expenditure, employers run the risk of paying the price in terms of quality.

de Poel provides companies with a solution to the obstacles faced by having a temporary agency workforce. This is achieved through a combination of 4 key components:

• Standardised pay and charge matrix
• Standardised service level agreement with key performance indicators
• A reduced panel of agency suppliers
• Dedicated account management team

Not only can we assist with reducing and managing costs, de Poel works closely with supplying agencies to ensure that quality prevails.

Whilst reducing costs is understandably a required measure to survive the current recruitment environment, de Poel argues that this does not necessarily have to impact on the quality of your temporary agency workforce. Understanding and having visibility of your temporary agency usage and spend alongside an effective management system, can ensure that costs are reduced but productivity and quality service remains.

Going for green – eco friendly procurement

Whilst sustainable procurement has previously largely been relevant in the public sector, it is becoming more imperative in the private sector as companies look to incorporate their procurement strategies into their CSR.

When it comes to temporary agceny labour recruitment going green can be difficult – you can hardly judge workers on their environmental impact or sustainability! But, using an electronic management system can significantly reduce paper, saving costs and the environment.

Managing recruitment agencies and your temporary agency workers is a lengthy and difficult process, often the central procurement team will have minimal control over spend, as the actual process of recruitment is left to hiring managers at individual sites. Through the use of technology procurement managers are able to keep costs under control and work out how they can be streamlined to improve savings year on year.

Not only is the management information they provide essential, the savings can be boosted in other ways. Although initial investment can sometimes be prohibitive, cost reductions achieved through reduced administration and use of paper can easily recoup this. Handling multiple time sheets and the collation, reconciliation and payment of invoices adds about 12% to agency costs. It also requires significant administration and storage costs in house – the Chartered Institute of Purchasing and Supply calculates that the processing of each invoice equates to £50.06. Add to that an average error rate of 15% and it becomes clear that an electronic system is essential.

de Poel’s electronic, timesheet and invoice processing system, e-tips® gives a complete overview of all temporary agency labour within your company. Different levels of administration are provided to ensure that central procurement can see the vital management information needed to achieve targets, but so that hiring managers and agencies at local levels can use the system for effective management of temporary agency staff.

On top of these features e-tips® can provide Agency Workers Regulations data, Right to Work documents and checks, driving license information and unique candidate tracking amongst other things.

To find out more about how e-tips® could help your green procurement policy, visit our website – www.depoel.co.uk

The hidden costs of indirect recruitment

Most organisations have an idea of their “cost per hire” when it comes to permanent staff, but many have little idea when it comes to temporary agency labour – despite it often being seen as a cost effective alternative.

Sieving through piles of agency paperwork and invoices is often the only way to work out such costs, but what about the less obvious costs? Typically a company using a temporary agency workforce will manage recruitment agencies at a local level, often using a number of them, all with different terms. The conventional means of handling multiple time sheets and the collation, reconciliation and payment of invoices typically adds around 12% to agency service costs. It also requires significant administration and storage costs in house. In fact, the Chartered Institute of Purchasing and Supply calculates that the processing of each invoice equates to £50.06 for the receiving company.

On top of that the room for mistakes is significant, with average error rate at 15%.

The overall process and inherent costs could mean that a temporary workforce is costing you more than taking on permanent staff.

de Poel’s electronic timesheet and invoice processing system, e-tips®, helps to streamline administration by producing one consolidated accurate weekly invoice removing the administrative cost and burdens. Not only that but e-tips® can provide key management information and reports ensure costs are clearly visible and easily accessible.

Could you be inadvertently exploiting your temporary workforces pay?

Bad PR is a huge concern to any business and with a weak economy and continually rising unemployment figures a point of contention is workers pay.

Temporary agency workers are a bit of an anomaly –in that they are not paid directly by the employer and often agency invoices don’t show the whole picture. Many companies simply see the amount they pay to their supplying agencies. Once the agency receives this amount they will deduct a number of fees and charges before the workers are paid.

It’s important to understand how your agency charge rates are made up, so you can know exactly how much you’re paying your temporary agency workers.

Request an invoice breakdown from your agencies (including, at a minimum, the points below), and ask the following questions:

• National Insurance & WTR – These are legal requirements, but be certain they are being calculated correctly.
• Agency Fees – how much is your supplier actually charging you?
• Other – Are there any erroneous costs? What are they for?
• Workers Pay – Finally, what is your worker actually being paid? Is it what you thought? Is it above NMW?

The internet has made communication simpler than ever and one temporary agency worker, disgruntled with their pay could land your company with a backlash of bad press.

Read our blog for more advice about taking control of your temporary agency spend or take a look at the de Poel website.

Indirect affects of a downturn on your temporary agency workforce

In times of uncertainty many businesses rely heavily on flexible workers, taking into consideration how they can fluctuate with the market. Often what companies don’t consider are the indirect affects on that temporary agency workforce they rely on so heavily.

What would happen if the agency providing a significant amount of your temporary agency labour were to become a victim of the recession and cease to trade? Or if your agency staff were offered full-time positions or, a more favourable temp role?

Companies must have plans in place to deal with such issues, should they arise; however they often come in second to the plans for issues that have a direct impact on the business.

de Poel works with each of it’s clients to create a preferred agency panel, meaning there is a variety of suppliers available who can respond quickly to needs. We audit them regularly to ensure they are compliant and to forecast any issues that may arise – so, less nasty surprises.

Reliance on a temporary agency workforce is by no means a bad thing; in fact it has no doubt contributed to many companies riding out the recession. Unfortunately though it is often managed poorly, and companies are unaware of how much they’re actually spending – we’ve known estimates to be out by millions! Gaining control of your agency costs is vital to make the case for a flexible workforce, and to ensure you are getting the best value for money.

Introducing a preferred agency panel

The introduction of a preferred agency supplier list, or a ‘panel’ is key to maintaining control over your temporary agency spend.   Once this is in place you can standardise pay and agency margins.

A panel is effectively a list of agencies who supply you exclusively. One reason this is significant in the standardisation process is because you cannot expect a supplying agency to accept reduced, set pay rates and margins unless there is a benefit to them – a panel of supplying agencies is that benefit.

Rather than agencies having to compete with a large number of different suppliers with no guarantee that they will be used at any specific time, a panel reduces competition between agencies and gives key suppliers piece of mind that they are to be used when they have specific expertise or geographical monopoly.

The other reason a panel of suppliers is important for standardisation is because it is an efficient way of ensuring that rates and rules are adhered to. Not only would you, the client, have more control over a smaller list of suppliers, but the size of list itself would generate more positive dealings between the agency and your organization, making for a more genuine and efficient relationship.

Traditionally, companies have established preferred suppliers lists with no operational input or have used a master vendor solution to channel all agency placements, though neither approach allows adequately for operational requirements. On this basis, it is best to have all agencies on a level playing field, and to consult your procurement, HR and operational departments for their ideas. The fact that agencies will be competing on service rather than price (following rate set up) means that the supply of workers is also likely to be improved by introducing a panel, creating further cost-savings for your business.

When setting up your panel – avoid radically changing you supply base. Agencies who have worked with you for a long time are not only more likely to accept standard rates and take an interest in the new supply arrangement, they also know your business better and will be able to supply you accordingly, saving you money. Instead, try to help them to do what they are currently doing more cost effectively through your powers of negotiation and new industry expertise. That said, if you really believe that they are under-performing, waste no further time and offer new suppliers a chance.

Gaining Control of your Agency Costs

Obtaining control of every spend category is essential for 2012, temporary agency labour is now exception, Gaining control also includes two main processes: implementing control and maintaining control

The main way for an organisation to implement control of spend is to improve internal reporting functions. This creates opportunities to oversee, approve and authorise weekly, monthly and yearly expenditure, in turn providing chances for better budgeting at both a national and regional level in the future. Introducing reporting systems to ascertain a clear picture of the amount and cost of supply in the past also allows companies to predict and forecast for the years ahead.

In today’s era of technology there is no excuse to be operating a paper-based system. The best system for gaining control over temporary agency labour spend is a timesheet and invoice-processing system.

• Ensure you choose a software system which is web-based, to remove the need for software installation and create easy training opportunities.
• Check the web-based software is compatible with your back office system and the appropriate support is available.

There are several software packages which you can use to replace the inaccurate, time-consuming and uncontrollable format of paper-based invoices and timesheets, but the most popular and cost-effective system on the market is de Poel’s own system e-tips®,which is unique, web-based, compatible with internal systems and available exclusively to de Poel clients.

 Implementing control is not enough on its own. Control needs to be maintained by continually monitoring spend and supply, as well as any savings made. Whilst constant examination of spend and supply allows you to keep tabs depots and agency suppliers, reducing indirect costs associated with poor performance, monitoring savings creates opportunities to further savings, as you can see which practices are working well. Timesheet and invoice-processing systems are again, the best way to do this.

The value of indirect cost savings

Whilst de Poel reduces direct costs by 6-12%, the service also contributes hugely to indirect recruitment cost savings.

de Poel slashes indirect cost savings by diminishing the administration and invoicing time of using agency workers. For example, in the case of our care client St Annes, we introduced the successful implementation of e-tips® and cut invoices down from 5,000 per year to 52, with vast savings of £175,000.

We also provide the clear visibility of temporary labour spend, so that your organisation is not wasting valuable resources searching through invoice errors or agency spend, a factor that’s instantly visible on e-tips®.

On top of this, with the Agency Workers Regulations now in operation, we have made it easier to Manage the Agency Workers Regulations through e-tips®. We take the hassle out of managing the regulations, so that you have immediate control over the problem.

In summary, de Poel’s neutral vendor solution provides excellent indirect cost savings, through the reduction of administering large quantities of invoices, providing your company with visibility and taking the agitation out of legislation, so your organisation’s resources can be used on other valuable projects.