2019 looks to be an interesting year for procurement in the contingent labour / services category in the UK.
The recruitment market continues to grow, with some reports suggesting that total expenditure on recruitment has hit £39bn per annum, up from an estimated £23bn in 2010. There are numerous technology solutions emerging, and the number of recruitment agencies operating is by all accounts 35,000.
This can most likely be explained by the simple fact that demand for staff is vastly outstripping supply, particularly for specialist skilled workers. A number of businesses are now focusing their attentions on retaining the people that they have, given the challenges that recruitment can bring. Unemployment is at a 44 year low, at 4% of the total workforce. With markets evolving at a rapid pace, the need for flexible workforces continues to accelerate.
Within this article, we explore some of the emerging trends in contingent worker attraction, and try to keep a level head in the face of new, potentially disruptive technologies which promise a lot, but at this stage, are perhaps not the complete article in replacing the more established recruitment avenues.
Direct sourcing applications / private talent pools
The idea behind direct sourcing apps / private talent pools is a good one that on paper makes a lot of sense: candidates register for work and business users contact them to arrange bookings. You cut out the agencies, save money, and take control of the recruitment process – what could go wrong?
Unfortunately, the reality is that recruitment is a people based service, so the idea of an app completely replacing an agency is at this stage questionable. Recruitment agencies are sales people that sell opportunities to their candidates. They manage pay rate expectations. They (should) manage worker compliance. They control their candidates by making sure they turn up for work or interview. If the candidate or worker has any doubts about the booking, they can assuage their fears. Agencies also have extensive databases of workers developed over years through thousands of job adverts and market positioning.
The apps do of course deliver, particularly where the booking is attractive and the candidate is available, but agencies continue to thrive so we’d suggest that a multi-channel recruitment approach be adopted if you have significant contingent staff requirements - this is certainly the approach that we are taking within our managed service programs.
It will be interesting to see how these apps/systems develop – there are several providers in what already seems to be a crowded and competitive market which should hopefully result in future innovation.
Statement of Work
We’re seeing growing levels of demand for statement of work (SOW) packages, and have managed several packages on behalf of our customers. SOW is used to address specific projects and to ensure they are fulfilled against agreed value for money and qualitative measures.
SOW has grown in popularity because it provides an outcome-based approach to getting a project or piece of work completed to exacting timelines. Typically payments are set against mutually agreed milestones. This approach often provides greater transparency of the payment process and focuses on qualitative and measurable outputs.
Given that the packages themselves may require definition and market testing we’d suggest that a significant element of the procurement process be carried out through human interaction rather than purely via systems, which is the approach that we normally adopt.
The use of managed services providers – intermediaries such as Comensura whose role is to manage contingent worker spend on behalf of a customer – continues to grow. Organisations that we speak with or engage are however increasingly looking for partners who can offer flexible solutions that align to their requirements.
This includes providing stripped back solutions, such as the provision of technology and ‘add on services’ such as procurement and contract management, or adaptive models, where the specific needs of the organisation and its stakeholders are catered for, with enhanced account management and partnership working.
In our own model we’re also seeing far greater use of multi-channel recruitment – agency, referred workers for payroll, direct sourcing applications etc – and expect to see more inter-operability happening (for example with video interview / AI apps) in the future.
We’ve seen a definite increase in the number of customers asking us to manage independent contractors on their behalf, generated through referral schemes, direct applications and private talent pools. We expect this to continue for both traditional contingent and SOW bookings as contractors move from organisation to organisation where workers are used on a project basis, and use their networks to generate opportunities.
The use of independent contractors eliminates the need to pay an agency margin, although it’s important to agree a pay rate that reflects the market – an uplift of £50 a day above market rate for example could negate any saving made through not using agencies, and can potentially cost more.
Naturally you will need to ensure that the right contractual arrangements are put into place and appropriate levels of vetting are carried out.