How indirect procurement leaders can optimise costs and ensure ethical compliance
There is widespread non-compliance in the UK labour market. Last year 900,000 employees did not receive their full paid holiday entitlement and 366,000 workers were underpaid the National Minimum Wage, according to the Resolution Foundation thinktank. The report highlighted temporary workers and employees on zero hours contracts were at the sharp end with significantly higher risk of violations and estimated the underpayment was costing UK workers more than £2 billion a year.
In response, the Labour government has plans to establish a Fair Work Agency, with powers to prosecute and fine companies that are in breach. Good news for temporary workers and for those agencies and end-hirers who are compliant with employment rights legislation. But what about end-hirers who genuinely don’t realise they have non compliance within their labour supply chain?
Within the temporary staffing industry there are structural drivers of non-compliance, even for labour providers and end-hirers who are acting in good faith. Long supply chains, the use of large volumes of temporary staff, fixed hourly charge rates and the lack of transparency in workforce data, all contribute to complexity and heightened risk to contract governance and non-compliance.
How did we get here?
Sharp practitioners compete freely with ethical labour providers
There is little to no IP within the temporary recruitment industry, where one labour supplier can demand a higher price for their unique service offering backed by evidential service delivery statistics. Competitiveness has largely been driven through price, leading to a race to the bottom on perceived agency ‘surface’ margins.
The lack of transparency on true agency margins and clean workforce data to compare service performance in a fair and consistent manner, has made it impossible for end-hirers to fully gauge whether they have procured the best deal on the table and selected the right supplier that represents overall best value within their industry sector.
The way contract labour is procured within the UK is fundamentally flawed, caused through fixed hourly charge rates that assume all temporary colleagues work full time hours. This means fully loaded employer costs such as National Insurance and Pension are passed through to end-hirers despite these being a weekly variable cost to agencies.
Holiday pay is also fully built into hourly charge rates, yet end-hirers have no visibility as to whether their labour providers pay the full accrued entitlement to their employees.
This all results in the ongoing merry-go-round of low quoted margins being concealed by hidden so-called ‘grey margins,’ leading to substantial additional agency revenues and enabling rogue recruiters to undercut ethical suppliers by retaining holiday pay as profit.
Why dynamic pricing alone won’t fix the problem
Fixed rate charges are antiquated. Contingent labour workforces ebb and flow throughout the seasonality of an end-hirers business cycle, yet despite organisations waking up to the need of dynamic pricing models, this alone won’t fix the inherent flaws within the industry.
The next evolution to temporary staffing
The temporary staffing industry needs a level playing field where rogue operators are exposed and ethical labour providers are rewarded. This can only come from an independent source of truth, in a platform that automates the monitoring of workforce data.
Access to unbiased data will benefit agencies and end-hirers alike. Contracts should be won and lost through commercial transparency and service delivery.
Procurement professionals and operational leaders with access to clean workforce data including productivity metrics, should be able to score and rank their providers based on service delivery performance.
How indirect procurement managers can optimise costs and ensure compliance
The ClearVue is the only independent provider of supplier-focused audit and workforce analytics within the UK, auditing £300m (and counting) of annual agency spend for some of the UK’s largest businesses. The cloud-based platform is simple to use and can be aligned to operational excellence within weeks. Agencies simply upload their workforce data using a .csv file and the information is automatically processed and displayed on dashboards. The platform provides superior insight and analytics information on key metrics, so you can:
Increase control with commercial transparency
The ClearVue is an independent source of truth, allowing you to compare agency performance in real time. You can ensure accurate costs of employment are being applied, providing the opportunity to remove the hidden margins made by agencies. The automated weekly monitoring of invoice rate charges ensures adherence to contractual and commercial governance is managed and maintained.
Automate workforce data for better optimisation and decision-making
The ClearVue platform gathers and processes 12 different points of data on each individual worker and records and displays more than 50 pieces of data within the workforce and compliance dashboard. The platform provides superior insight and analytics information on key metrics including workforce pool utilisation, attrition, shift fulfilment and spend and hours.
Manage compliance to reduce risk of modern slavery in the supply chain
The workforce and compliance dashboard highlights multi-supplier / location modern slavery risks, manages worker documentation and communications and provides insights into demographics and BAME reporting.