The agency staff time bomb

2 November 2006
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02 November 2006

As plans to help councils cut spending on agency staff are released, Rebecca Ellinor explores why procurement's help is so vital

Local government accounts for 10 per cent of the UK's overall annual spend on temporary and agency staff. At £2.2 billion it is also by far the biggest chunk of the public-sector's £3.93 billion annual spend on temporary employees. The healthcare sector spends only £973 million a year and central government accounts for a mere £375 million.

This level of council spending was highlighted in July when the GMB's Brian Strutton described it as an "horrific abuse of the public purse" (News, 6 July) . In some authorities temps make up as much as 25 per cent of the workforce.

But with average lead times for permanent employees at between three and six months; demanding requirements for sickness and seasonal cover; and the urgent need for workers, sometimes within hours, it's not surprising they turn to a flexible resource.

Not only is it costly in terms of pay, the lack of information on the true size of the agency workforce means many councils face a potential time-bomb: How many of their temporary staff could be seen as permanent in the eyes of the law?

"No-one knows exactly how many people are in posts, but I've come across cases where workers have been in a role for eight or 10 years," says Christine Morton, category manager for local government temporary staff at the Office of Government Commerce (OGC).

She says one London local authority calculated that if the temp staff it had employed for some time were all deemed permanent they could receive a range of entitlements including redundancy payments to the tune of £1 million.

The general rule is that after a year in a job temporary staff could be considered de facto employees and entitled to increased rights.

Another potential problem is the glare of HM Revenue and Customs (HMRC) over tax and National Insurance (NI) payments. Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants says: "There is no simple definition of an employed person or a self-employed person, it depends on case law. Self-employed individuals pay 8 per cent in NI contributions, employees pay 11 per cent and their employers pay 12.8 per cent."

He says HMRC is coming down hard on firms to ensure they are paying tax. OGC advice is to avoid short-term appointments becoming longer-term fixes because they "do not demonstrate value-for-money for the taxpayer".

Another issue is intellectual property and the loss of it when temporary staff who've been in post for some time leave. This is a potential problem facing the commercial directorate at the Department of Health (see cover story) 9 0 /edit/images/new_window_icon.gif 14 12 Opens a new window 0 false false false false%>]]>.

A toolkit published last month (See this issues News) 9 0 /edit/images/new_window_icon.gif 14 12 Opens a new window 0 false false false false%>]]> describes four ways in which spend on temporary and agency staff can be brought under control. One solution is the "master vendor" arrangement, where the council manages the performance of one supplier and that supplier in turn manages providers further down the chain. Another is the "vendor neutral" approach, where the provider liaises between the council and suppliers but is not a supplier itself.

Whichever approach organisations decide to take, there is no doubt about the potential for savings.


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Bramwith Consulting
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