With the credit crunch still affecting the UK’s recruitment market, pay and charge rates are at an all-time low. But how much of a threat is this to the future of the recruitment industry?

We are experiencing unprecedented cost cutting in the market and in the long run, this has to be to the detriment of quality. You simply can’t operate a quality, consistent service on a shoestring and that’s what a lot of businesses are asking you to do. Lowering costs opens the door to unscrupulous operators and rogue gangmasters willing to undercut to secure contracts. From the client’s perspective, time will tell if the right balance between cost and service has been achieved but it might be too late if the decision has a lasting impact on their own business and relationships with their clients.

One recent negotiation springs to mind, with a client insisting upon receiving an additional 10p per hour reduction, blaming pressure from their customer who needed to make further savings. However, by controlling the volume of temporary workers requested, limiting this to the actual numbers needed rather than simply re-booking and by ensuring the workforce operated efficiently, far greater savings were made. Just a 1% reduction in the workforce (one worker) provided them with a similar saving to the 10p per hour discount requested. The impact of quality over quantity on smaller workforces can be even more dramatic: if nine workers are supplied instead of 10 and the quality of those workers means that production remains unaffected, based on a 40-hour week, at a charge rate of £8 per hour, a saving of £320 will be made which equates to 80p per hour.

We should stand firm against the trend to lower costs to unsustainable levels, and instead promote the quality of our service and the skills level of our workforce

For obvious reasons the driving market has been hit particularly hard by the current economic climate. This has had a devastating effect on the driving community. One major third-party intermediary company has reduced pay rates/overtime premiums to drivers without consultation with either the drivers or the employment businesses. The longer term effect of lower pay rates, redundancies/lack of work, for example, on drivers’ morale will inevitably result in drivers leaving the industry - a recent survey showed that five times more professional drivers have registered for Jobseeker’s Allowance than for the same period in 2008. This trend has worrying implications on our ability to identify and retain the necessary numbers of drivers required to help us out of the recession as business improves.

There has been a significant movement towards PAYE and National Insurance (NI) tax saving systems, both through company dispensations
and umbrella solutions. While many of these schemes are legitimate, some are being used as a vehicle for both tax avoidance and as a method of reducing or avoiding employers’ NI contributions. These savings are then used to artificially lower profit margins in order to provide unsustainably low charge rates. This practice emphasises what little value these organisations place on the service delivered. Thankfully, we are finally seeing HMRC adopting a positive stance against such schemes by stating that they will take action against the illegal use of these practices with a particular emphasis on the exploitation of workers on, or close to, minimum wage.

We should stand firm against the trend to lower costs to unrealistic and unsustainable levels, and instead promote the quality of our service and the skills level of our workforce. This isn’t always easy or achievable in every case, but in the long run, it has to be the best policy for our clients and their customers.

With the emphasis on quality, costs can be reduced and rogue suppliers eliminated, thus resulting in returning us to the credible industry we once were.

Mike Cooper is director of The Best Connection Group, supplier of temporary drivers to the industrial sector