Invisible Employeesí Recruited Against Corporate Policy

European procurement teams are unable to control maverick spending on temporary labour, according to a recent survey from Spend Management company Ariba. The survey of 52 procurement directors from Europeís biggest spending companies across a variety of industries found that internal compliance is the biggest issue for procurement to deal with when managing temporary labour spend.

The survey, conducted in January and February 2005, also found:

ëInvisibleí Employees ñ 21 percent of European procurement directors have no visibility of their companyís temporary labour spend

Spending in the Wild ñ 46 percent of European procurement directors feel that temporary labour is arranged irrespective of corporate agreements and contracted suppliers

Contacts vs. Contracts ñ 38 percent of European procurement directors claim that those buying temporary labour off contract do so because they prefer to use personal contacts regardless of corporate policy

Agency Experts ñ 73 percent of European companies use temporary recruitment agencies citing recruiter expertise and the reduction of internal administration as the top reasons for outsourcing.

Temporary labour spend is one of the most difficult services to manage with 36 percent of procurement directors claiming ëinternal complianceí as the hardest issue to tackle when managing temporary labour spend. In fact, 50 percent of European procurement directors say that each department manages its specific temporary labour needs and nearly a quarter of procurement directors claim that between 21-30 percent of temporary labour spend is arranged irrespective of corporate agreements and contracted suppliers.

ìWith company savings targets set at an all time high, purchasing directors must look at how they can work within each department to make budgets go further î said Steve Muddiman, Vice President for EMEA Marketing, Ariba. ìWith temporary labour spend making up between 5-10 percent of a companyís overall spend, buying ëinvisible employeesí off contract is simply not an option.î

However, if company-wide compliance is expected, procurement processes must be scrutinised. Over a quarter procurement directors (26 percent) say departments feel it is easier to pick up the phone to a local recruitment agency than engage in the procurement process. In fact, 50 percent say their ERP system does not include a specific HR solution.

Recruitment agencies donít help the situation with 17 percent of European companies claming a there is a lack of defined service level agreements offered by recruitment companies, and over 30 percent of organisations that have used agencies have found they deliver a poor standard of candidates.

As savings are sought across all areas of spend throughout the company, HR departments remain doubtful of working with procurement. Over a quarter of procurement directors say that HR are wary to let the procurement department get involved in the sourcing of temporary labour.

ìHR needs to start recognising that procurement can add real business value when managing complex spend,î continued Muddiman. ìThe procurement team can work closely with suppliers and the HR team to develop meaningful supplier strategies such as service level agreements, performance management targets, even opening up new supplier routes. Spend management should not be just about securing the lowest price. Itís about establishing a working relationship between HR and procurement to create a definable set of best practice processes.î