Labour costs are rising and the transient workforce is growing. In response, many organisations are relying on labour hire and recruitment agencies more than at any other time. This has its advantages – and its risks.
If you’re the average organisation, you aren’t doing enough to manage these risks. Of the business costs pie, labour takes up around 70%. The amount of their time that HR dedicates to managing it is around 15%. It’s not enough.
But dedicating more time isn’t the key – redistribution is. Instead of relying solely on HR as is traditionally the case, you need to bring Procurement into the fold and the powerful technology at its disposal.
ProcureTRAK gives you vital visibility
When it comes to your workforce, ProcureTRAK drills down into the details of your labour hire practice. What’s its percentage of your workforce company-wide? By department? Who are we buying from – is more than one recruitment agency engaged? Which is offering the better margins? What are the oncosts? Which suppliers are outside of contract and how much are we spending with them? Are suppliers charging us agreed rates? How much have we paid? For how long has the temporary staff been with us? The answers to these questions are provided at a glance, giving you the chance to make a range of informed decisions that will bulletproof and streamline your labour hire practices.
4 ways procurement can better manage labour hire
1. Benchmark internally
Business is in the process of tearing down the siloes, but there are still many instances in which departments are ignorant of each other’s activities – even when they overlap. Without the proper oversight, different departments will secure labour hire services independently and often for a similar role, such as project manager. Different recruitment agencies will be used, and some will offer better rates than others. Or the same recruitment agency is being used and they charge one department more than the other. ProcureTRAK can not only see where all the labour hire contracts exist but can benchmark the results and show you where the best contracts lie in your organisation.
So you’ve found multiple labour hire contracts spread across your organisation, with several agencies involved. A basic tenet of procurement is that rationalising your supply base and consolidating spend with fewer suppliers will often lead to more favourable rates and terms of service.
Instead of allowing individual departments to negotiate their own labour hire contracts, see if it can be done organisation-wide with as few recruitment agencies as possible (obviously this depends on the skill areas you’re targeting). The cost savings will be significant.
3. Stay on top of compliance governance requirements
Labour hire comes with certain caveats, particularly for the public sector. For instance, there may be a requirement that those working at your organisation under a labour hire agreement for eight months or more must be brought on as a permanent employee.
The problem is, organisations typically don’t have the ability to keep track of these agreements per person. Right now, there will be many operating under labour hire contracts that have exceeded eight months which contravenes your governance measures, and is likely costing the business a fortune.
Another example is those hiring managers who don’t use the preferred panel suppliers. Often this is because they feel they are not getting the talent they want, or not quickly enough. So, they take calls, make calls, and hire from other agencies to meet the need they have. This is especially prevalent in project environments where talent is crucial to delivering ‘in full and on time’. The trouble is that not only are these agencies likely charging full rate (or certainly not working at the discounts your panel has offered), the Terms of Agreement are often dictated by the agency and not the other way around. Their terms & conditions may contravene yours.
Tracking this is super easy with ProcureTrak. Using data from disparate sources our AI and our Procurement Analysts in concertina, clean, consolidate and sort the data. Your dashboards keep you informed of where non-compliance hot-spots exists.
4. Pay your employees what they’re owed
Chronic underpayment of employees has been in the headlines a bit recently. And when we say chronic, we mean in the vicinity of nine figures. How does this happen?
For large corporations, it doesn’t take much. Underpaying thousands of employees a few bucks an hour over several years adds up to an awful lot of backpay. But this is a problem that afflicts small business, too.
In nearly every case, it’s the result of poor oversight. Without adequate technology, many organisations are at risk of not paying their employees what they’re owed, or underpaying super contributions and then having to pay the shortfall, plus interest and an administration fee.
With cutting-edge software like ProcureTRAK, proper visibility of employees’ and labour hire contracts is never a problem.
Labour Hire with ProcureTRAK – take the advantages, leave the risks
All businesses are looking to minimise costs while reducing risk, particularly at a time of high inflation. While many organisations know that there are savings to be had in the area of labour hire, they don’t have the visibility to realise them.
ProcureTRAK takes a deep dive into your workforce, breaking it down and identifying where your labour hire exists, its value and the risks it may expose you to. This is the data needed to make strategic hiring decisions that can make a tangible difference to your bottom line and reduce your risk exposure.