Logistics companies, large hauliers, UK retailers and manufacturers using a high number (up to 30%) of agency workers in their warehouses are facing a potential 10% labour cost rise, following the implementation of the Agency Workers Directive which is expected in Spring 2010. This was the stark message from Driving Edge's Group Operations Director, John Robb, speaking at the Logistics Leaders Network People Strategy Group meeting in Warwick recently.
Addressing an audience of 25 leading HR Directors of logistics companies, manufacturers and retailers about the need to re-think strategic resourcing policies in the warehousing sector, John painted a potentially gloomy picture. “Even with the economic downturn there is still going to be a labour shortage in some areas of the country for warehouse owners and operators in 2009 and beyond due to immigrant workers going home, lack of UK trained operatives and general competition for labour in other sectors of the economy. All these factors will, in addition to the new legislation, push up warehouse labour costs.”
John added: “Where labour costs represent 50% of total operational costs, big users of agency workers are looking at 3.5-4.5% increase in total overall costs. In sectors where companies are finding it difficult to pass cost rises on to their customers, this could mean the difference between making a profit or moving into a loss. Warehouse operators are often faced with poor utilisation of labour when volumes are low with no guaranteed overtime when required. Current warehouse labour contracts,” he concluded, “were often a compromise and not an optimal solution and using an 'ad hoc agency solution' in the future would be very costly and inefficient with the implementation of the new legislation.”
Driving Edge has already started working with its customers to mitigate the negative effects of the Agency Workers Directive Legislation. Commercial Director at Driving Edge, Matt Wiggetts believes the way forward is to build a strong partnership with a 'business solutions provider' as opposed to an employment agency. “This access to the mix of consultancy, analytical skills operational and legal experience in a solutions driven outsourcing company, is the key to finding the best long-term, cost effective strategic solution to this and other legislation,” Matt concluded.
The new Agency Workers Directive will give agency workers the same terms and conditions as permanent staff once they have completed 12 weeks within the organisation.
Driving Edge is the leader in initiating innovative solutions for resourcing logistics operations throughout the UK