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Furlough Scheme is Coming to an End... Strategies to Save Money on Agency Labour

29 September 2020

The furlough scheme is coming to an end at the end of October and it will be replaced with the Job Support Scheme from November 2020 until 30th April 2021.

The furlough scheme truly helped businesses that could not operate during lockdown by reducing overhead costs and keeping stuff on payroll. Although the scheme was open to all, the industries that benefited the most from the scheme were hospitality, entertainment and travel.

 The scheme was announced back in March and on its first day 185,000 employers submitted claims totalling £1.5bn on behalf of 1.3 million staff. By April 2020 70% of UK firms were already taking advantage of the scheme. Latest statistics indicate that by August 2020, approximately 9.6 million jobs, from 1.2 million different employers, were still on furlough.

 It is worth mentioning that many companies such as IKEA, Redrow, B&Q and Games Workshop are voluntarily paying back any furlough money that they took from the scheme, although not everyone is lucky enough to be able to afford to do this.

 Many employees have already returned to work either on a full time or part time basis and many others are due to return in late October/ early November. Nonetheless, about 203,000 people have been made redundant whilst on furlough by September 2020 and many more redundancies are yet to come as the scheme comes to and end and transforms into the Job Support Scheme.

 The Job Support Scheme will be applicable to businesses that show they have been adversely affected by the pandemic with a turnover of less than £25m, fewer than 250 employees, and gross assets of less than £12.5m and the eligibility will be assessed by a financial test.

Like on the furlough scheme, employees do not automatically qualify, but will have to have been in the company’s payroll on or before 23rd September 2020.Employees will need to work at least 33 per cent of their usual hours in order to access the JSS. The government will consider whether to increase this minimum requirement from February 2021 and the maximum government contribution is 22%.

With the changes coming into place in the first few weeks, organisations need to reassess their money saving strategies and look for ways to reduce costs within their businesses and one of the areas in which you can save money as a business is in your agency labour spend.

 The key aspects of saving money on recruitment agency spend are:

1. Know your suppliers

It may sound obvious, but the first step of control is to understand who you are currently using. Many businesses do not know which recruitment agencies they are engaged with. Formulate a list of agency suppliers who have robust processes and procedures, and who are financially stable. Then communicate this list of suppliers with the business so they understand who to go to when needed. Also, take time to understand if you are being charged appropriate market rates and are getting the most value out of the temporary workers and services provided

2. Understand your charges

It is rare for an organisation to truly understand the rates of pay that their temporary workers are receiving in their payslips, instead knowledge is often limited to the hourly or daily charge rate that appears on the invoice presented by the recruitment agency.

Having a lack of pay rate visibility can result in a host of problems, impacting both cost control and legal compliance. Issues such as breaching minimum wage requirements and agency worker regulations can lead to large fines and negative press, whilst lack of pay parity across temporary workers can cause disharmony and even result in budget overspend and conflict within the business.

3.Understand relevant legislation

It is essential to understand how your agency suppliers manage their responsibilities towards payment of holiday pay, employer’s national insurance, sick pay, pension auto-enrolment and apprenticeship levy. Some unscrupulous agency suppliers will inflate their profits by incorrectly applying calculations for these items to overcharge their clients or underpay their workers.

Neglecting legislation comes with serious consequences - particularly as the government has announced that they will resume the ‘naming and shaming’ of employers who fail to comply, whilst also imposing financial penalties.

4.Safeguard your brand reputation

Are you aware of how your temporary and permanent employees feel about working for your company? Both temporary and permanent workers are advocates for your business – they are either happy, satisfied and feel valued or they feel completely the opposite. If your temporary workers have experienced a poorly structured on-boarding and engagement process, they could end up damaging your brand.

According to a Harvard Business Review, bad brand reputation can increase costs per hire by 10%. This is because in order to attract employees you might have to offer higher salaries as an incentive to potential employees in order to overcome bad reputation. Do not underestimate the power of brand reputation.

5.Consider temp to perm roles

Temporary workers often become overlooked and ignored, whereas they should be considered as a vital asset of your business. Those temporary workers who have been within your business for some time have become proficient in their role and have a good understanding of your business. This would make them a good candidate to become a permanent employee.

What can you do if you are concerned about the temporary recruitment within your organisation?

Datum RPO can help you to manage your agency providers, ensuring that the workers they provide are legally compliant, as well as deliver significant cost savings.

If you need support please contact:

Jarrod Mollison – Sales Director – jarrod.mollison@datumrpo.com or 07872 870 996.



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