Parts of British business have become agency worker reliant in recent years

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While the majority of firms use agency workers to plug short term gaps, a significant minority view them as a core part of their business model, according to new Resolution Foundation (RF) research published  on 10 February 2018.

RF argues that the government should pay more attention to this part of the workforce, while firms themselves may need to rethink their approach in a tight labour market with lower migration.

The past ten years have seen a marked increase of more than 40 per cent in the agency workforce. There are now more than 800,000 agency workers across the UK. Understanding why firms choose to use this type of worker is crucial to the wider conversation about a changing world of work.

In a survey commissioned by Resolution Foundation, 500 HR decision makers at private sector firms already using agency workers were polled to explore for the first time what has driven the rise in demand for agency workers.

The survey reveals that most firms using agency workers do so for traditional reasons such as filling gaps in staffing (46 per cent) or as a last resort (19 per cent). This is consistent with firms saying that covering holidays and absence was a key reason for using agency workers, which was cited by 43 per cent of firms as one of their main reasons for hiring agency workers. The Foundation also found that firms overall do not use agency workers as a cost control device, with an identical 29 per cent believing they are cheaper or more expensive than direct employees.

However, a significant number of firms (34 per cent) appear to be using agency workers more strategically to fill as many posts as possible or for particular parts of their workforce.

Firms that are heavily reliant on agency workers (with over a quarter of their workforce made up of agency workers) were more likely to take a strategic approach (42 per cent of such firms compared to 18 per cent of firms that hired less than five per cent of their workforce via agencies). Those firms that have increased their use of agency workers in recent years were also a third more likely to use agency workers strategically.

Firms that were agency worker reliant were much more likely to believe agency workers were cheaper than directly employed staff (39 per cent compared to 26 per cent of firms that hired less than five per cent of their workforce via agencies). And while covering absence was still their chief motivation (36 per cent) for using agency staff, managing uncertain or seasonal demand (31 per cent and 30 per cent respectively) and using agencies to outsource training and payroll were key considerations for this group.

Unsurprisingly in a tighter labour market firms, one-quarter of firms (25 per cent) indicate they plan to increase their use of agency workers over the next five years, and over half (55 per cent) expect to maintain current levels. The recent plateau in agency worker numbers, with no increase since 2015, suggests, however, that they may be disappointed. As employee jobs with better rights become more available, and migration levels fall, firms that rely heavily on agency workers may need to rethink their business models urgently.

While some firms may adjust their business models as flexible, cheap labour becomes less readily available, it is equally important that the rights of those who remain in agency work are improved. Repealing the Swedish Derogation, which allows firms to pay agency workers less than directly comparable employees should be key. While the government stopped short of committing to this in its response to the Taylor Review this week, the Foundation argues that the time is ripe for action in this area.

Lindsay Judge, Senior Policy Analyst at the Resolution Foundation, said: “Demand for agency workers grew significantly over the last five years – particularly among firms who use them as a core part of their business model and have become agency worker reliant. But with the latest data suggesting the growth in agency workers has tailed off, such businesses may find that they have to rethink their plans.

Our survey of firms busts a number of myths. Agency workers are still used largely as a stop-gap measure. But for a significant minority of firms, costs, convenience and control all play an important part in explaining their reliance on agency workers.

“With demand for staff high, now is the time for the government to follow through on its response to the Taylor Review and end the abuse of agency workers’ rights.”

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