Top tips for managing and reducing temporary labour costs

In an article from The Source Magazine, Mark Bevan, VP at Efficio, outlines the best ways to manage your temporary labour spend.

1. Consider a managed service provider

A managed service provider (MSP) can help manage multiple agency relationships and negotiate with agencies to ensure costs are competitive – thereby removing the need for you to regularly review agency mark-ups.

A MSP can also advise on opportunities, such as wage rate harmonisation and when temps should be used instead of permanents or even consultants. When using a master vendor MSP model, greater volume through the MSP pool will drive down costs.

Set targets to encourage a MSP to use its own resource pool: mark-up for candidates that come through a direct sourcing route should be considerably lower. Margins should also decrease as tenure increases, so rates should fall after three to six months.

2. Anticipate and respond to stakeholder resistance

Some internal stakeholders may feel a degree of loyalty to existing providers, even though agencies often have the same people on their books. Reassure them by showing them sample CVs of temps and gain their confidence by introducing new people in particular roles as test cases. 

3. Devise appropriate performance measurement

Both MSPs and agencies need to be incentivised and measured against goals. Key performance indicators (KPIs) and service level agreements (SLAs) could include metrics such as:

• time taken to fill posts and the time from filling a post to someone starting the role
• adherence to the rate card and maintenance of a job catalogue around wage rates and governance. 

4. Implement effective governance arrangements

Using less temporary labour is the best way to reduce temporary labour costs. MSPs can help put in place appropriate governance processes and structures to control when temps are used, and decide what an appropriate level of temp is.

A review of the governance arrangements for hiring consultants is also strongly advised, as often employers will use consultants as a means of avoiding using temporary labour governance.

5. Consider temp-to-perm

Where temps are working for long periods it may be more cost-effective to employ them permanently. Consider the full costs of taking on permanent staff, including employee benefits, office space and equipment. 

6. Review perks

Some organisations provide additional benefits to staff, such as meal vouchers or extra holiday, which could be reduced. This needs to be balanced against what will attract and motivate employees and ensuring parity with permanent equivalents.

7. Review wage rates

Rather than simply working with the budget you have, make sure the people are hired at the appropriate market rate. Advice from an MSP will enable appropriate rates to be set, in some cases leading to savings of 20%. Rates can be reduced either across the board or gradually, aligning current staff to market rates or recruiting new temps at market rates going forward.

8. Stay on top of regulatory costs

It is not generally possible to reduce regulatory costs, but these are less transparent in some countries than others, and some organisations are paying more than they need to. Getting visibility on the taxes and other costs that must be paid can ensure an effective commercial model and usage strategy is put in place with the MSP and agencies.