In the latest edition of Tipoffs – John Thorpe writes an article about headcount freeze:
Just when you thought it couldn’t get any worse, the management team have reacted in a traditional “batten down the hatches” approach and put an immediate freeze on all headcount! You need essential resources to enable delivery of your project and they are not available internally, so what can you do?
As pointed out in the article “Project Managers on Top”, the first step is to review your project and then build a solid case around why you need this resource and the implications of not getting the desired outcome. You then probably need to enlist the help of your HR team or resourcing manager to look at the options around “flexible resourcing”.
The headcount freeze is not about stopping you from delivering your projects – the issue generally revolves around a business not wanting to burden itself with additional fixed costs that impact the balance sheet immediately and also have longer term implications with regards to the total cost of employing people. So flexible resourcing is an ideal answer as it allows you to get the right person in to deliver, at a known cost, with no long term impact.
So who are these people? Traditionally they are Contractors, of course, who will be engaged on a day rate who you can assign to deliver packages of work over an agreed timescale. The contractors will typically have a limited company or an umbrella company and invoice you for the work completed, thus shifting the cost on the balance sheet. In most instances, you pay a level of premium for their services, as they are carrying the risk and administrative overhead associated with their operations.
Other options are temporary workers, those who still have the desired skills but have no desire to set up and operate a limited company or manage their affairs through an umbrella organisation. They are happy to work and operate through companies such as Arras People, who manage their affairs and take care of their PAYE. My own view is that many people still think of “Temps” as being people who deliver administrative roles, cover for sickness, and operate at the lower end of the pay scale. Our experience over the past four years would suggest that this is not the case, and Project Management professionals at all levels can be engaged in this manner.
The biggest challenge we see is when people try and set rates for both contractors and temporary workers. Should they be market driven or linked in some way to current salary bandings so as not to upset the permanent workforce? The answer is probably a mix of the two, and understanding the subtle differences is important when setting expectations.
When considering a contractor, it is important to remember that you will be paying a day rate (including or excluding expenses), plus the agent’s commission. The contractor has to take care of National Insurance, Income Tax, employment benefits, etc., so their rate needs to reflect this. It is important that you consider the “real” cost of employing somebody in a permanent role to undertake a task before working out the size of the pot that you can afford to spend. Simply dividing a salary of £50,000 by 52 weeks and then by 5 does not give an equivalent day rate! You need to find out the “real” cost of employing that person, which include holidays, Pension contributions, company car, bonus and any other benefits that regular employees may be eligible for in that role. Not to be forgotten: Employers National Insurance.
Once you have that number, you need to reflect that you are engaging a company that will be taking on these hidden costs and, most importantly, acting flexibly in terms of potentially short durations and impacting your “risk/opportunity” associated with your project delivery. Once these are all considered, you can see the relative cost and work out a top price that you would be willing to pay.
When considering a temporary worker, it is again important to view the “real costs” associated with that role you are looking to fill, and once these are all considered you can see the relative cost and work out a top price that you would be willing to pay. The key difference here is that you will be paying a fee to the “agency”, which does not directly reflect the rate that the individual is earning through PAYE. The Agency will include at least four elements which make up the rate charged to you! These will include: Gross pay for the temporary worker; Holiday pay for the temporary worker, which must be at a rate equivalent to 24 days per annum at this time; the employer’s National insurance due of the temporary workers wage, and; a margin for running the engagement.
So flexible resourcing can help in these tough times and once again being prepared helps you understand how the costs will fit into your model. Market resources will of course always have some impact especially if you are looking for scarce skills as will the quality of your resourcing partner who should be able to work with you to deliver the appropriate resource at the best price!
John Thorpe is the Managing Director of Arras People
