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6 Tips on saving money when procuring contingent workers.

20 April 2022

The trend of hiring temporary workers is here to stay and more than likely will increase over the next few years. The contingent workforce in the United Kingdom, which includes non-permanent labour known as contractors, temps, consultants, and freelancers, is growing year after year. Contingent workers make up 24 percent of the UK labour force, according to the Office for National Statistics. Furthermore, the number of temporary workers in the United Kingdom was estimated to be just under 1.7 million in January 2022, compared to just over 1.45 million in January 2020. Between July 2019 and March 2020, the number of temporary workers in the UK increased in general, with the arrival of the Coronavirus pandemic a possible cause of a drop in April.

How can you save money when procuring contingent workers?

1. Understand your contingent labour costs

Most businesses do not have an accurate picture of the going market rate for the various categories of non-permanent workers that they retain. As a result, they may be consistently paying far more than the prudent rate for their contingent talent. Even though the differences may appear minor on an hourly basis, they can easily add up to tens of thousands of pounds for each worker over the course of a one-year contract.

Second, because the hiring of contingent workers is generally disparate, organisations discover that they are paying varying rates for the same category of resources. Occasionally, the same worker is offered at vastly different rates by multiple vendors.

Therefore, it is essential for you to understand:

● The job title
● The job description
● The average, low, and high rates currently paid for these positions
● Evaluate these rates to determine if they are in line with the going market rates for similar positions

Once this is completed, you will have an educated baseline cost from which to manage pay rates more effectively. This may make it easier to implement a pay rate strategy that balances pay with working conditions in order to achieve the desired cost savings.

2. Keep track of margins and pay rates

It is unnecessary for agency margins to begin to spiral out of control due to poor management. The solution is to standardise pay rates and establish agreed-upon margins for all suppliers.

If worker pay rates are not visible, a slew of issues can arise, including a lack of pay parity, budget overspending, and internal conflict. You could save 6-12 percent of your total spend by gaining control over pay rates and margins, as well as managing your employer's national insurance, holiday pay, and other deductions.

Work toward pay rate harmonisation by identifying the pay and charge rates in place in your organisation.Once this is established, you can work toward a formal set of agreed-upon terms and conditions, with fixed pay and charge rates for specific roles.

3. Make sure you have the right talent pool

It is essential that you have easy access to the best possible talent for the job you need to fill. Otherwise, you'll always be scrambling at the last minute to find qualified talent and, as a result, overpay for the employees you keep.

To access your talent, you must also use the right resources at the right time. When you source through agencies, you obviously pay a hefty premium.

A strong internal talent attraction strategy: Internally sourced candidates are typically your best hires because employees will only refer to someone who has a strong work ethic and is a good fit for your organisation.
Internal hires are also the most cost-effective.

Better workforce planning: To properly manage your workforce strategy, you must identify upcoming workloads and ramp up the hiring process well in advance of the planned start date. To manage your sourcing strategy, you must map contingent workforce requirements to the business plan using predictive insights.

3. Manage your supply chains

How can you ensure that you are always getting the most out of your supply chain if you use too many agency providers to fulfil your recruitment needs?

You can benchmark one supplier against another when you manage your supply chains. Measure and monitor indicators of engagement and commitment to your business by examining and comparing suppliers based on comparable data such as documentation, legal compliance, response time, cost comparisons, and more.

You must nurture relationships with your suppliers, just as you would any other workplace relationship, in order to get the most out of them.

4. Evaluate agency performance

Contract and temporary workers account for 5% of the total workforce in the UK, and the country has the largest temporary workforce in Europe, with 81% of companies using recruitment agencies to help them hire temporary workers.

However, 59% of these businesses do not have a process in place to evaluate agency performance and due diligence.

While evaluating agency performance may be time consuming, it may save your company from unwanted legal risks. While your agencies should adhere with all the relevant legislation, our research shows that 27% of agencies even fail to issue a professional contract.

By evaluating agency performance you can ensure you are compliant with a host of legislation such as:

● Agency Worker Regulations
● National Minimum Wage
● False Self-Employment
● The Modern Slavery Act
● Rights to Work
● And more…

Enlisting the help of a recruitment agency does not give you a pass on complying with the law. Neglecting legislation has serious consequences, especially now that the government has announced that it will resume the 'naming and shaming' of employers who fail to pay the national minimum wage – and impose a penalty.

This significant penalty could cost you 200 percent of owed arrears, up to a maximum of £20,000 per worker.

Employers who knowingly hire illegal workers or are found guilty of failing to conduct proper right-to-work checks face a 5-year prison sentence and a civil penalty of up to £20,000 per illegal worker.

5. Improve the worker experience

Your temporary employees are walking, talking brand ambassadors. If these employees were subjected to an inefficient enrollment and engagement process, they may end up doing more harm than good.

If your temporary worker's enrollment process fails, your brand fails. You could be putting untrained, unenthusiastic temporary workers in your business and relying on their work to meet your company's standards.

Your brand, and how it is perceived by those around it, is an important component of your sales funnel - and it is critical that your temporary employees understand and have invested in your brand values and attitudes.

6. Analyse your contingent management process & bring in a neutral vendor solution

Analyse all contingent workforce management activity and bring in a neutral vendor solution to handle the entire sourcing function, manage job requisitions, execute on-boarding and off-boarding, and provide a single consolidated invoice for all non-permanent workers that is properly coded and reported in a meaningful way to the organisation.

Direct cost savings of 6% to 12% are then realised by standardising pay rates and margins and eliminating overcharging on Employers National Insurance and Holiday Pay, which agencies frequently miscalculate!
Indirect Savings – Indirect savings will be delivered by consolidating all invoices into a single weekly invoice. The invoice is then pre-approved and will be downloaded automatically via CSV into a client's back-office system.

Get In Touch!

By partnering with a technology driven RPO company, organisations have real time visibility and control which provide the foundation for effective management of a contingent workforce. Recruitment Process Outsourcing has emerged as a major new business service that helps organisations increase earnings per share, protect operating profit and free up more money to reinvest in the company, its technologies and growth. New technologies and RPO services now make spend and agency management simple across an entire organisation — not just a single cost centre.


Download our 'Enabling Visibility & Control in Our temporary Supply chain' eGuide.

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