Employment Agencies by MaryJeanMenintigar


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									The drive towards agency employment – why employers favour
agency staff
Over the last decade, the use of temporary agency work has increased markedly.
Estimates by the European Confederation of Private Employment Agencies for the
UK suggest that in 2005 there were some 6,000 officially designated employment
agencies operating through 14,400 branches and sourcing 1.2 million workers a day
(5% of the national workforce). These temporary agency workers made up 86% of all
workers on a temporary contract, and the sector turnover was calculated at £24bn or
2% of GDP.1 And these figures themselves are likely to be an under-estimate of the
number of agencies and the size of their GDP. In general it is only the larger, well-
established agencies that join the employment agency federations. Small agencies are
much less likely to take up membership of bodies like the Recruitment and
Employment Confederation (REC), but their presence is increasingly evident in the
High Streets of most UK towns. Their growth can also be evidenced by the available
VAT data, which shows that over 17,000 bodies operating as employment agencies
are VAT registered, suggesting that the number of agencies and consequently the
numbers of agency workers is much higher than the official figures demonstrate. This
growth in agency work in the UK has depended on a variety of dynamics, ranging
from the nature of national regulation to changes in the labour process and industrial

On 20 May 2008 the government signed a joint declaration with the TUC and CBI to
support equal treatment for agency workers, but only after 12 weeks’ employment.
The deal has been hailed as an important advance towards a European directive on
agency working, a directive that has been stalled for a number of years, partly due to
the reluctance of the UK government to sign up to equal treatment for agency
workers. While the deal is welcome, in that it makes it more likely that the EU
directive will go through, the fact that the parties have agreed the 12-week service
requirement, suggests that there will be pressure from some Member States,
particularly those which, like the UK have been opposed to the directive, for the EU
directive to mirror this. It was perhaps for this reason that Vladimir Spidla, EU
Commissioner for Employment, Social Affairs and Equal Opportunities moved
quickly to issue a statement that equal treatment of agency workers ‘as of day one
unless the social partners agree otherwise remains the objective of the Commission2.
On 28 May 2008, shortly after the UK social partners had signed their agreement, an
agreement was reached between Eurociett/Uni-Europa, the European social partners
for the temporary work sector. Unlike the UK deal, this states that the ‘non
discrimination principle will apply from day one of an assignment, unless a qualifying
period is agreed on at national level by social partners and/or tripartite bodies’. This
means that a future EU directive may well result in UK workers having less
comprehensive rights than those that apply to workers in Member States where the
social partners have not stipulated a qualifying period.

Twelve weeks is quite a long period of time for a worker to remain on less favourable
terms and conditions and while the agreement states that there will be anti-avoidance

1         http://www.euro-ciett.org. Arrowsmith (2006) estimated just 2.6% temporary agency workers while a
CBI representative survey of 210 companies estimated 3.1% (CBI, 2 August 2007). The TUC
2         Press release issued on 20 May 2008, see:

measures to prevent employers simply laying off agency workers and then taking
them on again, it does not cover situations where agencies move workers on to new
assignments every 10 or 11 weeks. Furthermore assignments for fewer than three
months are very typical in those sectors that employ agency workers. For example, in
research that WLRI conducted jointly with Ergon Associates for the Ethical Trading
Initiative, on the poultry industry in 2006, we found that a quarter of the employers
surveyed used agency workers for short-term casual work (under three months) while
among the agency workers interviewed half had been working for less than three

The advantages to employers of agency staff
At present it is clear that agency workers represent a cheap source of labour for
employers. In the poultry sector research we found that the terms and conditions for
agency workers were different, even in relation to basic pay. Only 30 per cent of the
sites investigated paid the same hourly rate to agency workers than was paid to
directly employed workers. In fact, except for one site visited, agency workers never
received more than the national minimum wage even where they were working
alongside directly employed workers and doing exactly the same job. More recently,
in research we have conducted for the TUC Commission on Vulnerable Employment
(CoVE) we found that while the employers surveyed claimed that the main reasons
why they used agency labour was to cope with peaks and seasonal work and due to
the lack of locally available labour, the employment agencies painted a different
picture. For them the principle reasons why employers favoured sourcing workers
through them were that they saved on direct and indirect staff costs and they were
more ‘flexible’, in the words of one employment agency respondent, if agency
workers were not ‘obedient or good for the job, they are immediately replaced’. In the
case of migrant workers (who increasingly are the main composition of agency low-
paid work) using agency workers means that employers can avoid the risks of
employing workers who do not have permission to work, by placing that
responsibility on the agencies. Agency workers were therefore seen as a disposable
workforce, the ultimate in flexible employment, which could be hired and fired at
will. For employers who think like this, the new agreement will not provide many
obstacles to their continued use of these ‘flexible’ workers.

In the CoVE research, as in the earlier poultry industry research, agency workers
generally were in minimum wage jobs but what was particularly striking was how
frequently employers claimed not to know the terms and conditions offered to the
agency staff who worked on their premises. And even in the minority of cases where
employers had sought out this information, in general it did not mean that they had
taken steps to ensure that agency workers were treated the same. One food company,
for example, knew that agency workers were being paid at the national minimum
wage, a full 20p an hour less than directly employed staff doing the same work but
had taken no steps to equalise pay. Furthermore agency workers were having
deductions for transport to and from work. These types of deductions are regularly
made, particularly in the case of agency workers who move from one site to another.
Agencies charge for transport and in some cases deductions are made, even when on
arrival at the work site, it transpires that no work is available on the day. Indeed this
was precisely a complaint made by a number of agency workers whom we had
interviewed for the poultry sector research.

Some of the employers participating in the CoVE research were honest as to their
reasons for not wishing to know what the agencies paid. As one food processing
employer admitted, the company played no part in setting the terms and conditions of
agency staff. While it recognised that it was in a position to influence these it believed
that this would inevitably result in increased costs and there was no incentive for the
company to do this.

Contrary to the information provided by employers, agencies stressed that their client
employers did have a major input into wage setting. As one agency noted, while it
could make proposals, it was the client who determined the rates:
‘We formulate our terms and conditions more as a response to the advertisements of
the clients. It is all on the client to decide about payments and working conditions.’
Agencies participating in the CoVE research generally admitted to paying only the
National Minimum, although some paid higher rates for longer serving staff or after a
period of time. Among agencies there was a view that they were constrained in what
they could pay by the conditions imposed on them by their clients and some also
complained that they had no way of confronting employers who were treating agency
staff badly. One agency which generally paid the National Minimum Wage only, did
state that some workers could earn significantly more, with the ‘best’ workers being
offered what it described as ‘peach jobs that pay £8.50 an hour’ while another
proudly boasted of offering reliability bonuses that would boost wages to £6.60 an
hour for ‘reliable’ workers who ‘would not be ‘picky and would not have any
preferences neither for the day nor for the time of the assignment’

Why some employers resist agency staff
Our research also found that there were a number of factors that that might cause
employers to shift away from migrant agency labour and these relate primarily to:
    Training – increased training costs, including English language training, where
       the migrant agency workforce has poor knowledge of the English language
       and/or is continually changing;
    Exploitation – concern that high levels of agency exploitation will result in
       bad press for the end user employer;
    Available labour – where migrant labour reaches a critical mass sufficient to
       source workers for the employer through word of mouth; and
    Turnover – where agency labour provides a turnover rate, which is considered
       disruptive to the production process.

Some employers had also found that agencies were not sufficiently equipped to be
able to supply the numbers and skills of workers that they had needed. Others felt that
the diversities of staff supplied by the agencies were too great to manage effectively.
However, even among those that did use agencies and among the agencies themselves
there was an acknowledgement that the use of agency labour was not un-problematic.
The main difficulties raised related to training and language skills. One food company
noted, as a disadvantage, the amount of induction training, which the employer had to
provide, particularly if each day brought in a lot of new workers, although this
interviewee also pointed out that on balance the advantages outweighed the
disadvantages. Another highlighted the lack of control, which the company had over
agency workers and the fact that they could be in the plant one day and decide to go
off the next day, describing this as ‘a waste of money spent on their training’. Similar
concerns, about the temporary presence of agency migrant workers, were expressed

by another interviewee who had limited its use of agency workers precisely because
they were often students, required to return home at short notice to prepare for exams.
Some employers saw high turnover of agency staff as problematic and that it was
more expensive to recruit agency staff for short-term appointments. Indeed one
cleaning company commented: ‘There are so many problems in working with
agencies. I do not want to know about it any more’.

Regulating agency employment
At present the Gangmasters’ Licensing Authority (GLA), which was set up following
the deaths in February 2004 of at least 23 Chinese workers, who were collecting shell
fish at Morecombe Bay, only has powers of inspection in a limited number of sectors,
agriculture, forestry, horticulture, shellfish gathering and food processing and
packaging. Outside of these sectors the only regulatory mechanism is the Employment
Agency Standards Inspectorate team. The Inspectorate was set up in 1976 and until
recently (when with much flourish the government announced a ‘doubling’ of the
number of inspectors3), there were just 12 inspectors (some of whom are part-time)
for the whole of Great Britain.

In the interviews with employers and with agencies we sought to establish the extent
to which employers exercised any form of check or control over agency procedures.
We asked both employers and agencies for their views on enforcement mechanisms.
Generally we found that while some had detailed knowledge on the current regulatory
mechanisms, others had limited information and were clearly working in breach of
them. Among those that knew about the work of the GLA opinion was divided as to
whether it was effective. Indeed there was a significant amount of criticism of the
GLA, in particular from those employment agencies, which claimed that they were
being ‘undercut’ by unscrupulous agencies that were escaping the investigation of the

While most of the agencies that we interviewed who were supplying labour in the
food processing and agricultural sectors were registered with the GLA only half could
be described as supportive of registration. These agencies could generally be
characterised as either:
    Having a direct relationship with only a small number of employers for whom
       they were the sole suppliers of labour; or
    Offering more generous or supportive arrangements to the labour they

A minority of the employment agency participants expressed strong views in
opposition of any form of regulation. In their view regulation was an interference with
their rights to conduct their business. Those who were critical of GLA regulation
could generally be characterised as having minimal or no involvement in supportive
arrangements for the labour they supplied.

Beyond the GLA few of the research participants were aware of other enforcement
mechanisms, like the national minimum wage inspectorate, the employment agencies
inspectorate, the HSE or the HM Revenue and Customs.

3       See Annual Report of the Employment Agency Standards Inspectorate, March 2008:

The research described in this article suggests that while some employers are using
agency staff to cover for specific peaks in production, in other cases agency
employment has become an alternative method of dealing with staff vacancies that
otherwise, in the absence of agency labour, might have resulted in offers of permanent
posts. This conclusion is based on the differing responses to the questions around
motivations for using agency labour, provided by employers and by agencies. For
while the former often refer to agency labour in relation to their needs for numerical
flexibility, matching labour supply to product and service demand, agencies construe
employer use of agency labour in relation to functional flexibility, in other words the
need for labour that works flexibly.

It is also important to take note of the fact that a number of the employer participants
in the CoVE survey were no longer using agency staff and in some cases had
introduced alternative methods of recruiting, to respond to local labour shortages.
These had sometimes resulted in new and innovative methods of sourcing staff
directly, including direct employment from abroad. This demonstrates that employers,
who are willing to invest in innovative recruitment methods (which could also be at
lower cost), are able to source reliable labour, without the need to engage temporary
agency labour.

The establishment of the GLA has had an impact on employment practices within the
sectors that are covered by the registration scheme. Among employers in the food
processing sector who were using agency staff, there was a general awareness of the
need for agencies to be registered and a willingness to take up issues relating to
registration.   These employers generally did not perceive registration as a
disadvantage; indeed some expressed the desire for more stringent systems of control.
This suggests that there is no particular reason to anticipate that employers would be
opposed to regulation or to the extension of regulatory mechanisms, provided that
they view these as effective and as ensuring that poor employment practices, that
might place the end user employer under media scrutiny, are avoided. The study thus
leads us to conclude that once a licensing scheme is in force a majority of employers
are likely to work with it. At the same time it is also the case that the interviews reveal
a large amount of scepticism about the ability of the GLA, as currently constructed, to
deal with bad employment practices. This points to the need to extend the powers of
the GLA, both in terms of its ability to check on workplaces currently within the
sectors affected and also in terms of the potential for its extension to other sectors
where agency labour and in particular low-paid agency labour, is heavily utilised.

Sonia McKay
Working Lives Research Institute


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