Brief

Fair’s Fair Agency Labour Procurement Practice Labour Provider Survey Results – February 2022

INTRODUCTION

The Association of Labour Providers (ALP) conducted its first Fair’s Fair labour provider survey in February 2020 and two years on it was time to repeat the survey to find out whether or not procurement of agency workers has become any fairer. 70 labour provider respondents completed the survey in February 2022.

Graphs compare the results from the 2020 survey in green with the 2022 results in red.

HEADLINES

  • It continues to be difficult for labour providers to achieve a sustainable invoice rate
  • The majority of labour providers have not seen any improvement in margins
  • Poor procurement practice has been subject to marginal improvement over the last two years, but is still widespread
  • There is a significant reluctance to report issues to the GLAA
  • More labour providers are using the ALP/GLAA charge rate guidance
  • There are some encouraging signs of improvement in the way workers are treated, but significant challenges remain

LABOUR PROVIDER SURVEY SUMMARY


FAIR’S FAIR LABOUR PROVIDER SURVEY RESULTS – FEBRUARY 2022

1. How have your margins (profitability) changed over the last 12 months?Feb 2022
Increased23%
Decreased30%
Remained broadly the same47%

Respondent comments:

  • Regularly told that we are the most expensive supplier and some rates are considerably lower than we would expect.
  • We are frequently compared to another agency, and clients will ask us to lower our rates to match and we have refused.
  • We have refused longer payment terms or have charged for the facility – and whilst asked for additional services, we have passed the costs on. We have also walked away from some business at poor rates or onerous payment terms being enforced.

2. Is achieving a commercially sustainable charge rate with your clients?Feb 2020Feb 2022
Becoming harder66%50%
Same as it ever was32%40%
Becoming easier2%10%


3. Which of the following practices have you been subject to in the last 12 months by any of your clients?Feb 2020Feb 2022
Payment terms of 30 days or more85%83%
Repeated late payment76%75%
Requiring added services at no extra cost after agreeing a charge – for example provision of training, PPE or on-site services70%68%
Payment terms of 60 days or more78%63%
Payment terms of 90 of labour providers days or more43%38%
Retrospective discounts – seeking refunds/rebates on agreed terms54%37%
An entry fee to be or remain on a supplier list19%10%
Automatic prompt payment discount when paid on or before agreed terms16%8%

Other procurement practices we have not identified (please specify):

  • Margin on lower rate of NI not being able to charge
  • Creative calculation of on-costs
  • On-site services, PPE, transport
  • Over-bearing audits to disguise and bully so that rebates have to be paid

4. During the last 12 months, has a client refused to cover a statutory cost such as SSP, Apprentice Levy or statutory pension contributionsFeb 2020Feb 2022
Yes36%31%
No64%69%

Reasons:
Fixed costs are difficult to defend – told that other agencies don’t charge them
Clients have asked for certain costs to be at actuals rather than the standard charge figure
Refused to include Apprenticeship Levy in costings
A major 3rd party logistics company will only contribute 1.5% towards pension
Client disputed SSP is a real cost…
There are many competitors out there utilising payroll schemes despite being contrary to GLAA regs. They save on these scrutiny charges and ERNI and are therefore able to undercut compliant suppliers.
Refusal to include SSP/SMP is quite common
Refused to include Apprenticeship Levy and SSP
Problem with client refusing to pay holiday pay – still in the process


5. During the last 12 months, has a client requested that you absorb part of the annual increase to statutory costs such as NMW, SSP, ENIC or statutory pensions?Feb 2020Feb 2022
Yes48%33%
No52%67%

Details:

  • Several of our clients stopped using us for a period as they did not wish to pay the increased charge
  • Yes, but we have refused to do so
  • Yes, for pensions
  • This happens quite often
  • We have had requests to absorb part of the upcoming NMW increase and E’er NIC Levy

6. Do you use the ALP/GLAA charge rate guidance in calculating the cost of labour supply?Feb 2020Feb 2022
Yes69%81%
No31%19%

If no, why not?

  • The margin figures are far too low to be sustainable
  • Because it comes out at much more than non-compliant competitors utilising payroll schemes.
  • Our clients won’t pay it – too high. We would love to but not realistic to be competitive.
  • Clients do not accept the final charge rate
  • Not always, the suggested margin is rarely achievable on volume contracts


7. In the last 12 months, have you come across competitors who are agreeing to such low charge rates that you do not believe labour can be provided ethically and compliantly?Feb 2020Feb 2022
Yes82%63%
No18%37%

Respondent Comments:

  • Regularly told that we are the most expensive supplier and some rates are considerably lower than we would expect, margins of 0.50p with no fixed costs
  • Charging extremely low fees on permanent placements 5% or flat fees on skilled workers
  • There are too many to mention, we are all aware this is as a result of the toothless tiger HMRC investigative teams doing nothing to quash/shutdown outlawed schemes, still rife across the industry
  • Field workers being paid cash
  • We are frequently compared to another agency in xxx, and clients will ask us to lower our rates to match and we have refused. 
  • This is a constant situation.
  • Another supplier locally does this all the time!
  • Most of those agencies provide accommodation or are huge volume.

8. In the last 12 months, have you come across competitors where you know:Feb 2020Feb 2022
Workers are sent home with no pay if there is no work available on the day47% 31%
Workers are not paid for trial days or for required training e.g. inductions45%18%
The labour provider is making additional revenue from workers through tax avoidance schemes such as false self-employment; sham structures to allow employment allowance abuse; non-compliant umbrella schemes etc.22%12%
The labour provider does not hold a GLAA licence20%12%
Workers are not paid all their holiday pay entitlement32%9%
Workers are subjected to wage deductions that take their wage below NMW/NLW17%7%
Qualifying workers do not receive parity pay under AWR15%7%
Workers are subject to wage deductions that they have not agreed to15%6%
Workers are not paid other statutory benefits such as SSP or Maternity Pay15%6%
Workers are not being paid the appropriate minimum wage15%4%
The labour provider is making additional revenue from workers such as commission on personal accident insurance, prepaid cards, making profit on uniforms, transport or other service24%4%
A gangmaster who you believe is trafficking or holding workers in debt bondage4%3%

9. Please provide any further details and specific examples of unethical and exploitative competitor practice that you can share with us.  There is no need to use any names.

  • Reported suspected wrong-doing on several occasions to the GLAA
  • Suspending workers when they reach the 12 weeks parity pay
  • Large number of people turn up for a bus and then they choose who they want to take and send the rest home.
Have you reported these issues to the GLAAFeb 2020Feb 2022
Yes32%26%
No68%74%

If not, why not?

  • They do not have manpower to investigate, waste of time
  • Do they act?
  • Waste of time as nothing happens
  • Have reported two competitors to HMRC
  • What’s the point? What have they done about xxxxx? Probably the biggest infringement ever completely swept under the carpet by both HMRC and GLAA
  • It is only third hand suspicion and we have no evidence or facts to support

Any further details and specific examples of unfair procurement practice by clients that you can share with us?

  • The government has introduced IR35, and there appears to be a growing number of agencies willing to not make deductions at source for drivers and therefore being able to gain a competitive advantage in labour attraction, and also price competitiveness with clients. This has been reported to HMRC, but no action appears to be being taken
  • We have found this to be most prominent in relation to IR35 changes affecting drivers – where clients are ignoring with wanton abandonment and complete disregard the legislation.
  • It is not fair, in my opinion, like Agricultural workers below 25 years old to be paid less than one individual who’s over 25 years old, as long as their tasks are same as the others and the Labour provider charges their clients same amounts for each.

© ALP Briefs and Guidance are available free of charge to members from the ALP Help Centre

Back to News & Events