Flexible staffing is central to many firms’ profitability. So will new legislation on short-term contracts make it harder for companies to use temps – and can outsourcing help?

“Flexibility of resourcing is very important, particularly in the current climate,” says Hugh Piper, director at Manpower, the employment group. “Many businesses will be wary of risking permanent contracts when they don’t know what is going to happen in the next six months.”

Under legislation that could be in place by the end of 2009, there may be no financial benefit to employing temps for more than three months. The Agency Workers’ Directive, a European Union proposal that has taken six years to reach a draft, ensures that anyone employed for 12 weeks or more will be entitled to the same pay and conditions as permanent staff.

“This is a bad deal but it’s the least worst outcome for companies,” says Neil Carberry, head of employment policy at the Confederation of British Industry (CBI), the employers’ organisation, pointing out that the original proposal was for a six-week qualifying period. “There is a feeling in the business community that this will be damaging.”

According to the CBI, the directive could lead to up to 252,000 fewer agency assignments. “It’s not a question of direct cost – in most cases, contractors are paid the same or more than employees – it’s a question of the money spent on proving you are doing the right thing,” says Carberry. “It creates a need for a really bureaucratic process in the company to make sure the law isn’t being broken.” Between 10% and 15% of outsourced recruitment is temporary, according to NelsonHall, an outsourcing analyst. Gary Bragar, HR outsourcing research manager at the firm, does not believe the directive will cut temp hires.

“For clients who have short-term staffing needs, temporary workers still provide a better alternative than permanent hires,” he says. “There is still a cost saving. It makes it harder for the provider but that’s all part of the negotiation between the client and the agency.”

Says Gerry Crilly, managing consultant at Alsbridge, an outsourcing consultant: “There is still a lot of uncertainty around the directive, such as what jobs you use to compare {when setting pay rates for contract staff] and that gets into a whole process of job evaluation.”

For Alan Warner, director of people and property at Hertfordshire council, reducing hassle is key to outsourcing recruitment. For the past eight years, the council’s recruitment has been handled by Manpower.

“It is a one-stop shop that makes business sense,” he says. “It’s in the outsourcer’s interest to ensure they are up to date with the legislation because it’s their core business. The penalties of getting it wrong are greater.”

Not that he relies entirely on Manpower’s legal team; the Local Government Association also issues guidance and advice on hiring and firing.

Warner believes the effect of the directive has yet to become clear – the government has up to three years to implement it, which could push it back as far as 2012 – but does not see it changing the outsourcing relationship.

“Most legislative change is not dramatic. Of course, there is a contract underpinning the work we do with Manpower but if you have to keep referring to a contract, there is something wrong. It’s about common sense.”

But outsourcing of recruitment needs that come with complex conditions attached may make it harder for employers to bring them back in house at a later date, warns Andy Cook of HR consultancy Marshall-James. “They won’t have the in-house talent and will always have to buy it in, which will cost more. The provider wants the client to be dependent on them.”

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