Agencies, employers and the new regulations: one year on
In April last year, major changes were made to the law governing employment agencies. Drawing on new research, we examine their impact on the service that employers receive from agencies and the ways in which they use them.
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This article examines the impact of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which were implemented in April 2004.
It also highlights the main provisions of the regulations, and draws on new research into employers' practices in using employment agencies.
Our research covers such issues as the factors used by employers to choose an agency, the types of job for which agencies are used and the main problems that employers encounter with their agencies. A checklist, based on employers' feedback, highlights the key issues in using agencies successfully.
So far, few employers report that agencies have passed on the costs of complying with the new regulations, and few employers have increased their recruitment of temps as permanent members of staff.
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One of the biggest reforms of the regulation of employment agencies will be one year old next month. The changes to the law were intended to reduce restrictive practices, make agencies more accountable and improve the vetting of candidates - particularly for work with vulnerable people.
How far have these good intentions been realised? Have agencies' services to employers been given a boost? And have agencies passed on the extra costs that they were confidently expected to incur as a result?
In this article, based on specially conducted research among 151 employers that use agencies, we attempt to answer these questions, as well as analysing the feedback from organisations about their use of agencies, and the hints and tips in doing so.
Minimum standards under the law
In April 2004, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the regulations) came into force, implementing some significant changes to the minimum standards required under the law.
"In reviewing the regulatory standards governing the private recruitment industry … our overarching objective has been to promote a more competitive industry and to ensure the creation of a skilled and flexible labour market built upon social partnership and responsibility1."
The above comments from the minister responsible for agency regulation at the time show that the government had two separate aims when drafting the new regulations. First, it wanted to use legislation to make the employment agency marketplace operate more effectively, removing outdated bureaucracy, while sharpening agencies' obligations to undertake basic checks on the people being put forward to employers, and reducing their ability to prevent employers hiring temps supplied by agencies ("temp-to-perm transfers").
Second, the government wanted the regulations to increase the protection given to individuals. In particular, it now requires agencies to pay temps whether or not they themselves have been paid by client employers. And agencies must undertake some basic health and safety checks on behalf of individuals using their services.
The regulations contain 34 pages of detailed measures, which apply to organisations that supply temps (employment agencies), put forward potential permanent recruits (employment businesses) or undertake both activities. For simplicity, we refer throughout to "employment agencies" in this article, but indicate where temps or recruits are specifically affected.
Better checks
The regulations tighten up the requirements concerning pre-employment checking that employment agencies must observe in respect of establishing employers' requirements (reg 18), and individuals' abilities and bona fides (regs 19-21).
Employment agencies must first obtain "sufficient information" from the employer in order to "select a suitable workseeker" (reg 18), and this must include:
the name of the employer and the nature of its activities;
the date on which the temp or recruit is required, and the likely duration of the work;
the position ("including the type of work a workseeker in that position would be required to do"), its location, hours of work, and known health and safety risks;
"the experience, training, qualifications and any authorisation" that the employer considers necessary, and/or are required by law or a professional body; and
in respect of an agency being used to provide potential recruits (rather than temps), the minimum pay and benefits that the employer "would offer to a person in the position", the frequency that the pay and benefits are paid, and the notice period involved.
In addition, reg 19 provides that agencies are expected to confirm the identity of the individual seeking work as a temp or permanent employee, and that the person meets the employer's criteria - the necessary experience, training and other factors set out above. Finally, agencies must confirm that the individual is willing to work in the position concerned.
All this information must then be supplied to the employer in respect of the individuals who are proposed as temps or recruits (reg 21). Additionally, for temps, the business must let the employer know whether the temps are its own employees or are self-employed. In a mirror image, individuals must be given the details covered by reg 18 mentioned above. Both employers and individuals must be given the relevant information in writing (or electronically) at the time at which the individual is offered to the employer, or within three working days of this point.
Agencies' investigations
The above provisions relate to information that the employer and individual provide to agencies, but the regulations also require employment agencies to undertake some investigations themselves (reg 20). First, they must identify any requirements imposed by law or a relevant professional body relating to the job that either the individual or employer must satisfy to do the work - and take all reasonable steps to pass on this information.
Second, they must make all "reasonably practicable" enquiries to ensure that it would not be "detrimental to the interests" of either the individual or the employer if the person were to work in the capacity required by the employer. There is no explanation of this latter provision in the regulations, but guidance issued by the Department of Trade and Industry (DTI)2 says: "This is more than a health and safety issue, and could cover matters such as reasonable suspicion that the company was in severe financial difficulties or was engaged in immoral or illegal practices."
As well as conducting the above checks and investigations before someone is offered to an employer, reg 20 provides that agencies must pass on to the employer any information they later obtain that indicates that the individual might, after all, be unsuitable. For permanent recruits, agencies have this duty for a period of three months after first introducing the person to the prospective employer. For temps, agencies must withdraw the temp from the employer's premises if the information is sufficiently reliable. Where details are more tentative, they must inform the employer of their suspicions, undertake further investigations, and then notify it of the results.
Sensitive posts
All of these provisions concerning employment agencies' matching of temps and recruits to employers, and of basic pre-employment checks, are heightened in the regulations in cases where the work is of a sensitive nature. This is defined as work where professional qualifications are required by law, where it involves working with people aged under 18, or work with vulnerable adults ("caring for or attending any person who by reason of age, infirmity or any other circumstances is in need of care or attention") (reg 22).
Where sensitive work is concerned, not only must employment agencies satisfy regs 18 to 21, but they must also - before an individual is supplied to the employer - obtain copies of any qualifications and two references, and pass copies of them to the employer. The referees must be "persons who are not relatives of the workseeker, and who have agreed that the reference they provide may be disclosed to the hirer" (reg 22).
Additionally, for work with under-18s and vulnerable adults, "all other reasonably practicable steps [must be taken] to confirm that the workseeker is not unsuitable for the position concerned."
Greater clarity
The regulations try to ensure that employers, as well as employees, are clear about the basis of their use of an employment agency - there had previously been criticism that some key issues had not always been spelled out. These issues include the contractual status of individuals, and whether the agency or client employer has ultimate responsibility for paying the temp.
Regulation 17 requires agencies to discuss the following details with the employer, gain its agreement, and supply the information in a single document:
whether the agency is providing temps or potential recruits;
the fee involved, how it will be calculated, and the terms relating to refunds and rebates;
the process to be followed if a temp proves unsatisfactory to the employer; and
where an agency is supplying potential recruits, what authority it has to act on behalf of the employer.
Any variations in the above terms have to be mutually agreed, and a revised document must be supplied to the employer.
Limited company contractors
A late amendment to the regulations inserted an opt-out clause (reg 32) to the effect that people who work as temps via their own limited company or an umbrella company (and others whom they supply) have the right not to be covered by the regulations.
Most limited company contractors are professional and managerial staff, such as many IT specialists and interim managers. So far, it seems that many of them are deciding to opt out of the regulations. To do so, they must inform their employment agency before it puts them in touch with an employer. In other words, client employers should be in no doubt about the status of the temps being put forward by agencies. A temp cannot opt out of the regulations once they have begun an assignment with an employer.
The opt out clause is an all-or-nothing provision; either limited company contractors are fully covered by the regulations or they are entirely excluded from them.
However, there is one important exception: any work with young people aged under 18 or vulnerable adults ("who by reason of age, infirmity or any other circumstance, is in need of care or attention") has the effect of preventing the opt-out clause being used. This means that all the checking and vetting requirements for work with children and adults described above cannot be circumvented in this way.
The jobs for which agencies are used
Generally, the roles or occupations for which employers use agencies to supply temporary workers tend to be different to those for which agencies are used as sources of permanent recruits. For example, while three-quarters (74.2%) of the employers we contacted use agencies to supply temporary workers for clerical and secretarial types of work, far fewer (55.6%) do so when seeking permanent recruits.
There is a similar pattern - where agencies are used much more heavily for temporary workers than permanent recruits - in respect of operatives and assembly work (the Standard Occupational Classification category covering such jobs as process and plant operatives, assemblers, routine operatives and drivers), and personal and protective services (the category covering such jobs as hairdressing and support staff in caring roles).
Conversely, proportionately far fewer employers use agencies to supply managers on a temporary basis than use them to find permanent recruits (17.9% versus 59.6%), although this is partly explained by the lower overall demand by organisations for interim managers. Demand for temps is also far less than permanent recruits in respect of professionals (the Standard Occupational Classification category covering such jobs as engineers, IT professionals, doctors, dentists, vets, teachers, lawyers, business professionals, architects and librarians) and sales staff.
Public sector employers use agencies far less for permanent recruits than their private sector counterparts. This is almost certainly because of the public sector's emphasis on public, open recruitment, usually through advertising, causing it to avoid agencies as they obtain candidates from many sources, often via self-referral.
How employers choose their agencies
Employers rely on what they know when choosing an agency (see table 1 ), our research shows. The proven effectiveness of an agency is of paramount importance. Where they are not personally familiar with an agency, more than half of all employers take account of its reputation when deciding which firm to use. Further, one in four also inform their decision through personal recommendation.
A third factor, in terms of the criteria used by employers to select an agency, involves employers seeking out agencies that offer specialist expertise in their own industry, in the local labour market, in the occupation(s) that the employer is interested in, or a combination of these considerations.
Cost obviously represents a major consideration for would-be users of an employment agency. But it rarely represents the most important factor.
An agency's commitment to ensuring equality of opportunity, however, seems to be of minor importance to employers as a whole (but of much more consequence to the public sector; see below ).
Nor do external quality "kitemarks" carry much weight. An agency's membership of a professional association, such as the Recruitment and Employment Confederation (which has a code of conduct) is of interest to fewer than one in four employers. And an agency's possession of the international quality standard ISO 9000 is important to just one in 14 would-be users.
Turning to differences in employers' behaviour when choosing an agency, we find several marked variations between public sector employers and their private sector counterparts. Most notably, public sector employers are much more likely to be interested in an agency's commitment to equality of opportunity. More than twice as many public sector employers cited it as a factor when choosing an agency than private sector services firms (55.2% versus 20.3%). Greater proportions of public sector employers are also interested in whether an agency has ISO 9000 accreditation (24.1% versus 4.7%), but there is little difference when it comes to an agency's membership of a trade association or professional body (27.6% versus 23.4%).
Recruiting agency temps
Provisions under the new regulations
Employment agencies' ability to levy transfer fees on employers that offer jobs to temps supplied by them is restricted under the new regulations (reg 10), and may be further curtailed should the EU's draft Directive on agency workers come into force. Regulation 10 is "complex", on the DTI's own admission. Its guidance, cited above, explains that the regulations cover three possible scenarios where an agency might impose a transfer fee on an employer:
"temp-to-perm": where the employer offers a job as an employee to a temp supplied to it by the agency;
"temp-to-temp": where the employer puts its supply of temps out to competitive tender, and requires that the new supplier takes over from the previous supplier-agency the temps that currently work with the employer; and
"temp-to-third-party": where the employer acts as an intermediary, introducing a temp to another party that then employs the temp directly - for example, where an employer introduces a temp to a subsidiary or parent company in the same organisation.
In the first two scenarios (temp-to-perm and temp-to-temp), the regulations intervene to prevent employment agencies enforcing clauses in their contracts relating to transfer fees, unless the contract contains an additional clause and the transfer occurs within a specified timescale.
This additional clause must operate to the effect that the employer is able to extend the period for which it pays to use the temp - and, once this extended period is over, to be able to employ the temp without paying any transfer fee to the agency. The agency must include details of the actual length of this extended period in its initial contract with the employer. There is no upper time limit in the regulations, leaving both parties to agree a suitable extension.
The second stipulation in the regulations, which covers transfers of temps within a specified timescale, is 14 weeks from the start of the temp's first assignment with the employer, or eight weeks from the end of the temp's assignment, whichever is later. (Breaks in a temp's continuity of working with the employer affect the calculation of the 14-week period if the gap is longer than 42 days. In these cases, the first day after the gap ends becomes the starting point of the 14 weeks.)
The timescale provision in the regulations means that employers that wish to offer employment to temps are now able to avoid paying any transfer fees, no matter what the contract with the agency says, provided that the temp does not start work as an employee until after this eight- or 14-week period.
The terms set out in the contract with the agency that apply to the extended period, such as the fees charged, must be no less favourable to the employer than those that applied to the period before the employer made the decision to make use of this provision. That is, agencies cannot impose punitive terms for the use of temps during these extended hiring periods.
In the third scenario (temp-to-third party), the regulations do not require agencies to give employers the option of an extended hire period. They can simply levy a transfer fee - providing the above timescale provisions apply. The details of the transfer fee must have been set out in its initial contract with the employer.
Employers' practices in temp-to-perm
The use of temporary workers supplied by an agency provides an ideal opportunity to assess the temps' performance and consider offering them a permanent position, should one arise.
Among the employers giving us feedback for this research, we find that 89% offer at least some of their permanent vacancies to temps supplied to them by an agency. This is almost identical to the proportion (90%) found in our previous research in 2002 among a differently constituted sample of organisations.
Surprisingly, the public sector is not entirely adverse to using this route - almost seven in 10 (67.9%) of these employers engage in temp-to-perm hiring, despite the public sector's far lower incidence (compared with the private sector) of using agencies to help with its recruitment of permanent staff. This percentage compares with 92.6% of manufacturers and 95.3% of private sector services firms.
Impact of the regulations
We have already seen that one of the government's prime intentions when drafting the new regulations was to help agency temps gain permanent jobs with the employers for which they were working as temps. At present, it is too early to say with confidence whether this aim has been met.
However, there are indications that little has changed (this is a theme that is echoed in other findings from our research discussed below). Only one in 20 (5.1%) employers that previously recruited some of their agency temps have since increased this practice because of the greater ease and reduced costs that the new regulations have given to employers. The majority (93.2%) of employers have not changed their practices as a result of the legislative changes.
The regulations' restrictions on temp-to-perm clauses in agencies' contracts give employers two ways of avoiding paying a transfer fee to an agency, as we saw above. Which of these new methods do employers prefer?
Again, the changes to the law do not seem to have greatly affected employers' practices. Cooling-off periods are very unpopular; just 3.3% of employers that recruit temps make use of them. Around half (47.8%) of would-be recruiters negotiate contract extensions that increase the period that they pay the agency for the use of the temp's time.
The remainder, again almost half (48.9%) of those that recruit temps, adopt a range of different methods and approaches, although it is likely that many of this group simply follow existing practice and pay a transfer fee. As we saw above, such fees continue to be lawful provided the agency has included a contractual clause permitting a cooling-off period, and that the transfer has taken place before this period has ended.
Who pays for the new regulations?
A "regulatory impact assessment" undertaken by the DTI3 estimated that the financial impact of the regulations would be marginal. For example, the restrictions on agencies' ability to charge temp-to-perm fees were estimated to reduce their income by between £6.3 million and £15.4 million a year (2002 prices), or between just 0.044% and 0.1% of the industry's annual turnover.
So far, the financial impact of the changes introduced by the regulations has been so slight or so complicated that more than half (57.8%) of the employers we contacted were unable to say whether or not charges levied by agencies had risen post-regulations. Of the minority that reported some change in costs, more than twice as many told us that charges had not risen as informed us that they had increased (29.2% against 12.9%).
A troubled relationship?
Problems with agencies are a common occurrence, according to the employers we contacted. More than two-thirds (67.8%) of employers with experience of using agencies have encountered difficulties. However, only 50% of public sector employers have experienced problems with agencies, compared with two-thirds (69.6%) of manufacturers and three-quarters (74.6%) of private sector services firms. The reasons for these differences are unclear - possibly the public sector's emphasis on using agencies for temporary cover, rather than permanent recruits, restricts its exposure to problems.
Encountering problems and finding ways to resolve them may be unwanted and unpleasant experiences for those involved, but they also represent valuable learning opportunities. Box 3 draws on these issues, supplemented by other feedback given to us by those with experience of using agencies. In addition, table 2 highlights the most common problems reported by our contacts.
Above all, once an employer has identified the criteria that it will use to choose an agency, and the type of relationship it wishes to foster, our contacts stress the importance of providing full briefings to the staff of the chosen agency. However, they add that this must be a two-way process. Frequently, employers say that agency staff appear unable or unwilling to absorb this information and use it when selecting temps or potential recruits to put forward to the employer.
Whether these briefings are inadequate, misunderstood or not taken into account, the end result is that by far the most common problem experienced by employers is that agencies put forward individuals who do not meet the specification for the role.
Some agencies send individuals whom the employer considers to be wholly unsuited to the work involved; others consider that the person meets some of their requirements, but does not provide a complete match. Alternatively, agencies may adhere to the brief, but consequently fail to send any, or sufficient, candidates for interview. Some employers complain that agency staff hope that quantity will compensate for quality, in terms of the candidates they put forward.
While the ability of an agency to provide staff to specification represents the fundamental reason for using it, employers sometimes seem to expect the impossible. Where skills are in short supply, even the best agency will struggle to meet employers' demands. In fact, some employers mentioned that they welcomed some honesty; if an agency cannot provide an exact match, they would prefer that they were told of this and be given the chance to consider the individuals on that basis.
Second, many employers complain that agency staff fail adequately to brief jobseekers about the organisation or the job. (Although, as with direct recruitment, lack of preparedness may be because of the jobseeker's lack of interest or motivation.)
Third, cost represents an issue of concern to current and potential clients of agencies. Cost-effectiveness should be established, and monitored. But some employers also experience higher-than-expected bills, sometimes due to overcharging.
Fourth, many employers take pains to brief their agencies about their requirements and wish to establish a relationship with one or more key individuals in their agency. This builds trust, helps the agency staff concerned develop their knowledge of the employer, and should lead to higher levels of service. Unfortunately, some agencies experience high levels of labour turnover, or staff movements within and between offices, with the result that maintaining continuity among their contacts is proving difficult for some employers.
Fifth, employers report concerns about the paperwork that they receive from agencies. It may be incorrect, late or prone to contain errors that lead to overcharging.
Sixth, a potentially great advantage of using agencies, as opposed to recruitment advertising, lies in their responsiveness when recruits or temps are needed. Agencies should have access to a pool of jobseekers that they can draw on as soon as an employer contacts them.
However, some employers told us of untoward delays and, more generally, of agencies failing to meet agreed deadlines for the supply of temps or job interviewees.
Seventh, and finally, one in 10 employers were unhappy that agencies are poaching their own staff; that is, that the agencies they use are recruiting the organisation's own employees as agency temps or as recruits on behalf of other clients. Certainly, the new regulations made it easier for agencies to engage in this practice, but it is not possible to say whether it has increased since the regulations came into force last year.
Where next for agencies?
The shake-up in the legal framework governing employment agencies took five years from start to finish. Its aim was to guarantee minimum standards that agencies would honour, to the benefit of both individuals using agencies and client employers. Almost one year on from their implementation, how far have the regulations shaken up agencies' activities?
So far, all the evidence points to a slight tremor, rather than an earthquake, in terms of the changes to agencies' services. Many of the same problems and issues persist as difficulties for employers as we found in our previous research in 2002. One of the most important changes - intended to free up the transfer of temps to employers' own staff - seems to have had almost no impact so far. But by the same token, there is scant evidence that agencies have passed on to employers their higher overheads, through the loss of temp-to-perm transfer fees and the burden of increased regulation.
It is possible, though, that the impact of the legislative changes will not be fully felt by employers for some time. The phasing in of the new regulations means that some changes will have only been implemented for less than six months at the time we undertook our research. A further study at a future date should provide more information about whether the government's aims for a more accountable, customer-focused marketplace for employment agencies will have been achieved.
More immediately, though, the draft EC directive on agency workers has been waiting in the wings for several years now. Its potential impact on the UK's marketplace for agency temps is unclear, not only because the various interested parties have submitted competing claims and surveys, but also because the draft directive's final shape is still unknown.
The shifting political allegiances and the revolving presidency among member states have served to push the directive up, then down, the European Union's agenda. But the UK's long-standing opposition to it may well be over, according to reports of the understanding that the government and the trade union movement reached last July4.
This article was written by Neil Rankin, editor, Recruitment and Retention, IRS Employment Review, neil.rankin@irseclipse.co.uk.
1Comments made by the Parliamentary Under-Secretary of State for Trade and Industry Gerry Sutcliffe, House of Commons, Delegated Legislation Committee debates, session 2003-2004, Draft Conduct of Employment Agencies and Employment Businesses Regulations 2003, 15 December 2003, www.publications.parliament.uk.
2Guidance on the Conduct of Employment Agencies and Employment Businesses Regulations 2003, Department of Trade and Industry, 2004, free from www.dti.gov.uk.
3Revision of the regulations covering the private recruitment industry - regulatory impact assessment, Department of Trade and Industry, undated, www.dti.gov.uk.
4Labour's third term - voters permitting.
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% of employers |
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Proven effectiveness/employer's experience of the agency |
87.4% |
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The agency specialises in a sector, type of worker or locality |
56.3% |
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Reputation |
53.6% |
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Lowest cost among a group of agencies |
35.1% |
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Commitment to equality of opportunity |
27.1% |
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Personal recommendation |
23.8% |
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Membership of a professional association, such as the Recruitment and Employment Confederation |
23.2% |
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ISO 9000 approval |
7.3% |
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Other |
9.3% |
Employers could choose as many factors as apply to their reasons for using an agency; where more than one agency is used, they were asked about the one that has the largest share of their business. n = 151.
Source: IRS.
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%1 |
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The agency recommends people who do not meet the specification |
84.1% |
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The agency does not brief people adequately on the employer's requirements, business, etc |
69.3% |
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Fees are too high |
62.4% |
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Lack of continuity in the agency staff who manage the employer's account |
37.6% |
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Paperwork problems, such as inaccurate bills and overcharging |
21.8% |
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Delays in supplying temps |
18.8% |
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Poaching the employer's own staff |
9.9% |
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Other |
6.9% |
1% of employers experiencing problems with their use of employment agencies.
n = 101.
Source: IRS.
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The marketplace for employment agency services rose by several times the rate of inflation between 2002-2003 and 2003-2004, reaching £24.5 billion - attaining what is likely to be its highest-ever level so far. This income came from employers in the form of billings for temporary and contract workers - the lion's share, at £22.8 billion - and fees for putting forward permanent recruits (£1.7 billion). Demand from employers grew strongly for both types of worker, according to the Recruitment and Employment Confederation (REC), the industry's trade body and the source of the above figures1. Employers used agencies to recruit 560,000 permanent staff, a rise of 9.1% in a year, and sourced 1.5 million temps and contract workers in the same way. This is a 5.7% annual increase. These latest annual results for the agency industry represent some of the best for some time, certainly since the downturn following 11 September 2001. "Margins in the temporary sector were up from 17.9% in the previous year, to 18.5% in 2003-2004 - the first year not to show a decline since 1999-2000," said REC when launching its report last October. In other words, agencies were able to take advantage of buoyant demand to improve their profit margins after several years of having to cut them to compete for business. Research conducted for the Department of Trade and Industry (DTI) paints a picture of a large, volatile and polarised employment agency industry, one that could well baffle and confuse employers wishing to use its services2. The DTI research estimates that there are around 6,500 companies operating as employment agencies, only a few of which are large high-street names. In fact, three-quarters of this total have no more than a single office somewhere. In all, it estimates that there are between 9,000 and 17,000 agency offices across the UK. Start-ups and closures of agency businesses are widespread. As well as the half-a-million-plus people on agencies' books who find work as permanent recruits each year, according to REC, there are hundreds of thousands of people who work as temps in the UK. Estimates vary, from 200,000 to 600,000 according to government figures, reaching one million or more according to others. There are no reliable data, although a figure in the region of 500,000 to 600,000 seems reasonable as a working assumption. Some temps and contract workers prefer this method of working and remain in this role for several years; others use it as a stepping stone to a job with employee status; while still others move in and out of casual work while they are studying or otherwise outside the labour market. 1"REC Recruitment Industry Survey, 2003/2004", Recruitment and Employment Confederation, 2004, www.rec.uk.com. 2"Revision of the regulations covering the
private recruitment industry - regulatory impact assessment", Department of
Trade and Industry, undated, www.dti.gov.uk. |
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By and large, employers use employment agencies for the same well-known reasons that have always applied. Agencies provide the speed and flexibility to help meet short-term, fluctuating or unpredictable requirements for extra pairs of hands, where the employer does not want the hassle or potential legal complications of hiring members of staff under contracts of employment. According to our research (described in Our research ), temps from agencies are mainly used - in descending order of popularity - to cover short-term vacancies, to meet unexpected or short-term upturns in work, as cover for staff absences, during maternity leave, and when a special project is under way. Only 3.3% of the 151 employers we contacted use agency temps for reasons other than these. There are few significant differences in approach, when employers' sector and workforce size are considered. Public sector employers are more likely to use temps to cover for staff absences, but are relatively much less likely to use temps for maternity cover. Turning to the use of agencies as sources of permanent recruits, the reasons that employers turn to their services are less clear cut, and there are considerable differences between the organisations we contacted. Overall, though, the most common reason is that "our agency (or agencies) represent a good source of candidates", followed by the speed with which agencies can potentially respond to any employer's need for new recruits. At some distance in order of popularity, some employers use agencies because they will undertake the initial sifting of potential candidates, thereby reducing the workload on employers. Finally, one in seven employers prefer agencies because using them "is more cost-effective than other recruitment methods". When cross-tabulated by sector, the feedback we received highlights considerable differences between public sector employers and all others. They are far less likely to use agencies as a source of potential recruits, and far fewer of these employers cited any specific advantages of using agencies. None said that agencies are more cost-effective than other methods of recruiting staff. Smaller employers of all types are, in contrast, relatively more likely to favour agencies as recruitment sources for their ability to put forward good-quality candidates, and for the speed with which they can do so. For associated publishing companies Emap Active and Emap Automotive, cost is less of an advantage than a drawback when using agencies. Online recruitment, for example, is considerably cheaper. But, although online and direct recruitment by the company can produce large volumes of applicants, agencies score because of their ability to provide these employers with high quality candidates. Stroud and Swindon Building Society uses a wide range of recruitment methods alongside eight to 10 employment agencies. But its head office and branch network are based in areas of low unemployment, and it finds that agencies represent the most reliable source of good quality recruits. Overall, it estimates that 80% of recruits are supplied by agencies. Mersey Television Group produces the popular TV soaps Grange Hill and Hollyoaks, and - highly specialised roles aside - finds that it has no difficulty in obtaining applications for permanent jobs. However, the very quantity and the uncertain suitability of the applications mean that agencies provide a valuable role in filtering candidates. Its agencies are expected to conduct the first-stage selection interview, both as a means of determining the individual's potential suitability, and also their expectations. Having attended one interview, the candidates that are then put forward to the employer are more likely to be serious about wishing to join the company. Homelessness
charity St Mungo's mainly uses agencies to supply temps to "shore up gaps in our
resourcing" across a range of roles. It has developed close working
relationships with just three major suppliers, and has been able to
conclude detailed contracts setting out its requirements. For example,
agencies are expected to undertake all the necessary background checks,
including Criminal Records Bureau disclosures, for posts involving contact
with vulnerable people. |
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Choice Identify the services that the agency will provide, and ensure that this represents a more cost-effective alternative to in-house provision. There may be additional or alternative considerations where activities are being outsourced for strategic reasons. Identify the selection criteria that will be used in choosing a suitable agency or agencies, and the relative importance of these factors. Decide the desired form of relationship with the agency: where will it lie on a scale ranging from shorter-term compliance and control at one end, to a longer-term partnership at the other? Many employers recommend giving time and attention to establishing and maintaining effective communication with the agency, including holding regular meetings, providing frank but constructive feedback, and adopting an attitude of openness to the agency's input and the disclosure of information. Productive, informed relationships are easiest to develop where contact is based on just one or two key individuals among the agency staff. This can foster trust, help the agency staff concerned develop their knowledge of the employer, and should lead to higher levels of service. However, an alternative approach may be required given that many agencies experience high turnover of staff. Briefings Employers stress the importance of providing full information and briefings about the employer's culture, business activities and types of work required of recruits and temporary workers. For permanent recruitment, employers emphasise the importance of providing job descriptions, person specifications and key selection criteria. Because some employers find that agency staff have either misunderstood or disregarded their specifications, it is important to follow up any failures to conform to these requirements. The nature of the relationship (see above ) with the agency will influence the tenor and approach taken in raising non-conformance. Agencies should also brief individuals about the employer's requirements, but some companies tell us that they appear not to have done so. When raising this issue, the reason for this lack of preparedness should be established because it may reflect the temp's or candidate's lack of interest or motivation, rather than a failing on the agency's part. Where agencies put forward a shortlist of applicants, or even undertake the selection decision-making, the process that will be used should be understood by the employer - particularly, the selection criteria, the selection methods and the ways in which equality of opportunity will be assured. Realistic expectations In today's tight labour market, even the best agency may struggle to find temps or recruits that completely match the specification. It is important to clarify what should happen in such circumstances. Should the agency put forward individuals who only partly meet the employer's requirements? Should agency staff instead admit that they are unable to help on this occasion? An honest, open relationship can help reduce misunderstandings, and help compensate for the competitive pressures on agencies to promise more than is realistically feasible. Problem areas Some employers have found that the following problems can occur, and advise others to be alert to them: customer focus: agencies giving insufficient attention to the customer by failing to ensure continuity of staff handling the account, and not giving time and attention to understanding the employer's requirements; being unreceptive to feedback on their performance; giving more priority to agency sales targets than meeting customer needs;
candidate suitability: sending temps or potential recruits who do not meet the specification; insufficient candidates; substituting quantity for quality in terms of the candidates sent for interview;
understanding: failing to understand the employer's requirements; failing to impart these details and background information on the employer to jobseekers;
timeliness: delays in supplying staff; not meeting agreed deadlines; not being flexible and responsive where urgent staffing needs arise;
costs: inaccurate billing and overcharging; and
poaching: recruiting the client employer's own staff as agency temps or on behalf of other employers.
Evaluation Establish in advance the ways in which the agency's performance is to be assessed, and communicate this to the agency, because this further clarifies the employer's expectations. Formal
performance monitoring may require benchmarking data against which the
agency can be compared. Decide whether equal opportunities monitoring is
to be used, and, if it is, decide the extent to which the agency will be
involved in the monitoring process. |
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This article is based on research conducted by IRS,
notably feedback from 151 employers with experience of using employment
agencies obtained in November and December 2004. In addition, we have
drawn on a range of other sources. The employers that gave us feedback for
our research have a combined workforce of more than 815,000 people,
ranging from 28 to 145,000 employees. One in three employers fall into the
category of small and medium-sized enterprises, with less than 500
employees. The large employers in our research represent one in 46 of all
those in the UK economy, and employ one in 16 of their total employees. By
sector, more than four in 10 (42.9%) employers are classed as private
sector services; almost four in 10 (37.6%) are in the manufacturing and
production sector; and one in five (19.5%) are in the public
sector. |
