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Effectively managing temporary labour supply costs

Posted on 16/10/2013 by Jamie Horton in Category Managed Services
I was recently invited to write a blog for Supply Management to outline how employers might go about facing the challenge of making scarce resources go further. As temporary recruitment becomes a permanent feature of the business landscape, this is one area that can make a significant contribution to improving cost efficiencies.

Now, more than ever, uncovering the details on exactly what they are spending on temporary workers is critical for procurement professionals.

My blog post focused on the costs of supply. Typically the first place a business will look in order to gain greater value for money from temporary worker spend. The costs of supply include:

  • ​Temporary worker pay – such as the hourly pay or salary and also include overtime, bonuses or other expenses such as travel, accommodation and subsistence

  • Temporary worker costs – such as income tax contributions, national insurance and contributions towards pensions auto enrolment

  • Supplier margins – the fees charged to you be an agency for them to supply you with a temporary worker

Without careful management, these three areas can mean that the total amount you are charged for a temporary worker can vary massively by job category, skill set, location, recruitment agency and can often be subject to interpretation. As an employer, if you lack clear visibility and don’t fully understand how and why each element is applied, you may well be paying over the odds.

In my experience most large employers still don’t have a good grasp of their overall spend on temporary workers. To really make savings, it is essential to have a more granular insight into the costs of supply in order to understand how total spend is broken down across the entire business. There are a number of key areas that every employer should take the time to understand and have high visibility of in order to gain value for money.

One of these areas is to understand the supplier margins for each job category and then try to standardise them. Re-procuring your suppliers to standardised margins can deliver some ‘quick-win’ savings. It’s also important that you seek absolute transparency from suppliers about their pricing approach.  It sounds simple, but many businesses still don’t understand how some managed services and recruitment agency margins are calculated.

When it comes to temporary worker pay and costs, compliance is absolutely essential. Aligning temporary worker and permanent worker pay rates to remain compliant with Agency Worker Regulations (AWR). This will ensure that temporary workers are given a comparable pay rate to permanent workers undertaking the same or similar role.

The pressure is on for businesses to reduce costs without impacting service levels for customers. With temporary workers now a permanent feature of the business landscape, for cost efficiencies to be achieved, large businesses need to have greater control of temporary worker spend.

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