News

EVENTS

30th September

Octobers implementation of the Agency Worker Regulations (AWR) will see the costs of agency labour in the supply chain rise at a time when business needs less employment legislation and more flexibility to cope with uncertain demand patterns and a tedious continuation of business uncertainty. In a recent survey as many as x% of businesses have still not addressed the issue at the heart of the AWR which in summary is “All temporary workers will be entitled to equal treatment to your existing employees in relation to rates of pay, holiday entitlements and working conditions once they have worked with you for a twelve week qualifying period”.

The cost of compliance for many organisations utilising temporary agency labour as a strategic element of their workforce could have an enormous impact on the operational bottom line making many contracts unviable overnight and also has the potential for conflict in later months if the compliance solution swerves towards avoidance from a badly concocted or ill advised solution.

Equal pay lies at the heart of the issue and potentially raises the question that if they (the temporary worker receives equal pay, they might as well be employed direct) but in todays climate this not only goes against the grain but also destroys the labour flexibility needed to match the seasonal peaks and troughs of the typical retail or seasonally orientated business.

What options has an Operations Director got that ensures compliance, retained flexibility and preserves commercial sanity?

Adrian Hobbs, Managing Director of FlexPlus an innovative recruitment business at the heart of the distribution industry in the midlands commented,

“ Unfortunately the solutions are limited and non compliance risk will be high, particularly if agencies misinterpret the regulations or design a cheapskate solution driven purely by cost without looking at the longer term impact. We believe there is an enormous opportunity for the logistics industry to redesign the way it works with temporary labour and to refocus on some challenging issues in-house like productivity, warehouse labour outsourcing and managed services within functional areas. The days of cheap agency labour will be replaced by retained, productive flexible labour with permanent contracts with the emerging professional employment organisation (PEO) overtaking the traditional agency model and taking full employment and deployment risk on behalf of the 3PL or shed operator”

AWR goes live on October 1^st and the first thing the business needs to do is undertake a full impact assessment to determine what the current labour costs are in every department regardless of what agency labour is used at the moment. This determines what the comparator cost might be and whether or not a “new starter” rate should be included. Secondly look at the current differences between the incumbent workforce and agency pay rates and define the cost Impact. An easy to use cost calculator can be found here www.flexplus/cost calculator.

With this critical information in place you can now look at the options available, which include:

Do nothing and accept the additional cost burden!
Employ all staff directly accepting additional recruitment burden, increased cost, liability and reduced flexibility.
If assignment lengths are no longer than 12 weeks the agency workers are only entitled to “Day 1 Rights”. (Requires 6 week break to reset clock and if you specifically tailor assignments using 12 weeks on 6 weeks off, this could be viewed as avoidance)
Managed services arrangements are also out of scope. In these situations your agency provides a complete outsourced service rather than simply providing staff.
Agency employs temporary workers direct on “pay between assignments contracts” (Swedish Derogation). The workers move out of scope of the regulations with regard to equal pay. They are however still entitled to all non- pay related benefits, as well as “Day 1 Rights”.
A tailored approach using some or all of the above options to meet your strategic and operational needs in conjunction with your labour provider.

Our view from months of work with our clients and lawyers on the subject is that we will build upon the Swedish derogation model and fully absorb the employment risk by fully employing our own Flexible workforce and building clusters of business so that we can fully deploy them continuously throughout the year. With our own permanent flexible employees we can then provide them with performance and industry relevant training on and off site, and manage the full suite of employment related risks and issues to guarantee our clients a no risk employment solution.The benefits to our clients are transparent with comparators removed, hr issues removed, full operational flexibility retained and costs lower, and for the workforce permanent status to help with obtaining mortgages as a consequence of permanent status and continuity of work guarantees that remove the uncertainty of irregular income. We believe the rewards will outweigh the associated risks and more importantly so do our key customers who have made the necessary commitments to us to proceed.