Dilemmas in the management of temporary work agency staff

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 11 NO 4, 2001 3

Dilemmas in the management oft e m p o r a ry work agency staff

Kevin Ward, University of Manchester and UMIST School of Management

Damian Grimshaw and Jill Rubery, UMIST School of Management

Huw Beynon, Cardiff University

Human Resource Management Journal, Vol 11 No 4, 2001, pages 3-21

Temporary jobs account for an increasing proportion of new engagements in the UK labour

market, with temporary work agencies or `labour market intermediaries’occupying a

central role in the regulation of entry into some organisations. Such evolving arrangements

have been found to have their contradictions, even for the host organisation. This article

e x p l o res the internal and external pre s s u res to use a temporary work agency as a means of

recruiting labour at host organisations. It considers some of the HRM issues that stem fro m

the use of such workers, including the tendency to devolve HRM to the managers of such

agencies operating within the host organisation. Central to this article is a consideration of

the potential sustainability of org a n i s a t i o n s ’ use of temporary agency workers, engaging

with this concern from the perspective of organisational cost-effectiveness.

Contact: Kevin Wa rd, School of Geography, Mansfield Cooper Building,

University of Manchester, Oxford Road, Manchester M13 9PL. Email:

k _ g _ w a rd @ h o t m a i l . c o m

Recent evidence suggests that a third of new engagements are accounted for by

temporary jobs, a large proportion of which take the form of placements thro u g h

temporary work agencies (Sly and Stillwell, 1997; Forde and Slater, 2001).1

Writing on the US situation, Peck and Theodore (1998: 656-666; see also Houseman,

1998) arg u e :

Fundamentally [temporary employment] is an economy of flows, not

stocks: in cross-sectional counts, little more than 1 per cent of the US

w o r k f o rce at any one time are t̀emps’ but temporary job slots re p resent a

l a rger proportion of the ¯ ow of vacancies.

In the US placements through temporary work agencies have been increasing in the

upswings as well as the downswings of the economic cycle (Autor et al, 1999, Autor 2000a,

2000b; General Accounting Of® ce, 2000; Peck and Theodore, forthcoming). Whether this

pattern is found in the UK is not clear. However, the data that are available on temporary

work agencies in the UK suggest that this kind of employment has been on the incre a s e

over the last decade and that its expansion has been only marginally affected by the

performance of the economy (Forde, 2000; Hotopp, 2000). Indeed, as the evidence to be

p resented in this article suggests, temporary agency work appears to constitute an

important new port of entry into organisations across a number of industries. At the lower

end of the internal labour market there is evidence of organisations abandoning pre v i o u s

methods of re c ruitment and replacing them with a single port of entry through a

temporary work agency ± or what Mangum et al (1985: 602) refer to as a l̀abour- m a r k e t

intermediary’. In some workplaces workers re c ruited through temporary work agencies

may even have become the c̀ore’ (Axel, 1995; Gannon and Nollen, 1997; Walsh, 1990), not

Dilemmas in the management of temporary work agency staff

just in the sense that they are quantitatively larger than the permanent workforce, but also

in that their presence at the workplace changes its culture and dynamics.

This growth in temporary agency work is clearly important and constitutes, accord i n g

to some commentators, the emergence of a `regime of precarious employment’ (Allen and

H e n r y, 1996, 1997; Beck, 1992, 2000; Perrons, 1999; Reimer, 1998, 1999; Wa rd et al, 2000).

Under this arrangement the risks associated with the employment contract become

displaced from the employer on to the worker. Temporary agency work has also been

i n t e r p reted as part of a wider transition to `market-mediated’ ± or s̀pot-market’ ± models

of employment (Abraham, 1990; but see Cappelli et al, 1997; Marsden, 1999: 233-237).

Studies that apply a transaction-cost approach to the employment relationship (after

Williamson, 1975, 1985) attempt to match market- or hierarchy-based forms of governance

s t ru c t u res with certain dimensions of labour market transactions. A c c o rding to this

a p p roach, an organisation adopts the spot-market model of organising work ± for

example, through the use of a temporary work agency ± in a situation where opportunities

to develop ® r m - s p e c i ® c skills are low and individual worker productivity can easily be

m e a s u red. It is assumed that the transparent and transferable nature of this kind of work

enables workers to move between organisations without loss of pro d u c t i v i t y, and

employers avoid the costs typically associated with new re c ruits. As such, the pre f e re n c e s

of both employer and worker are satis® ed (Williamson, 1985: 242-248).

T h e re are a number of potential problems with the transaction-cost approach. At a

general level, there may be dif® culties of always assuming an ef® cient match between the

type of governance stru c t u re and the attributes of transactions, and the rather narro w

consideration of employer and worker bargaining power (Hodgson, 1988; Marg i n s o n ,

1993; for a re v i e w, see Grimshaw and Rubery, 1998). In addition, empirical accounts of the

use of temporary agency workers do not appear to support the rather stylised spot-market

model. First, it seems unlikely that employers’ use of temporary agency workers is pure l y

a rational response to the type of skills or form of work organisation, since these

t̀ransactional attributes’ are either not fully known or are misunderstood (Feldman et al,

1994; Geary, 1992; Grimshaw et al, 2001). Secondly, the use of a temporary work agency

may not be a component of a planned HR strategy; instead, it may emerge as an ad hoc

response to a range of pre s s u res for change (Cooper, 1995; Gannon and Nollen, 1997).

F i n a l l y, there is little evidence of a coherent employment model in operation (Peck and

T h e o d o re, forthcoming). Use of temporary agency workers often brings with it new

s o u rces of contradictions, both within the host organisation and between it and the agency.

It is possible that these contradictions are re p resentative of more wide-ranging sources of

tension between the potential for adaptation and co-operation off e red by the traditional

open-ended employment contract, and the potential for labour discipline and market

responsiveness of the spot-market contract (Marsden, 1999; Streeck, 1987; Wi l l i a m s o n ,

1985). The problem, of course, is that it may be dif® cult to achieve all these objectives

simultaneously (Rubery et al, 2000), and the combination of diff e rent employment forms

within and across organisations may complicate matters further.

This article re p resents a further contribution to the exploration of the potential

contradictions and uncertain outcomes associated with the use of temporary agency

workers, focusing speci® cally on some of the management issues that arise from this use.

The analysis starts with an overview of the size of UK placements through temporary

work agencies. The article then introduces the two case study organisations, `Bankco’ and

` Telecomco’, and provides a context for the use by each of temporary agency workers,

drawing on re s e a rch at each organisation’s customer service centres. The remainder of the

article is split into two sections. The ® rst outlines the labour demand pre s s u res to use

4 HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 11 NO 4, 2001

temporary agency workers at each host organisation and the second sets out the

contradictions and unintended consequences for the management of this group of

workers, including some of the labour supply dif® culties.

UK regulations

While at the end of the 1990s the stock of temporary jobs in the UK stabilised at just under

two million, placements through temporary work agencies continue to grow (Forde and

S l a t e r, 2001). Recent data suggest that over half a million placements are made each year

by such agencies in host organisations (Hotopp, 2000), and that these are incre a s i n g

(Department of Trade and Industry, 2000a; Recruitment and Employment Confederation,

2000a). At the end of the 1990s temporary agency work had become the most common

form of temporary working in all occupational groups. A c ross each of the groups, the

s h a re of such workers as a proportion of all temporary jobs increased from 7 per cent to 16

per cent between 1992 and 1999 (Forde and Slater, 2001: 20).

The importance for the UK labour market and economy of this growth, and for the

re c ruitment industry more widely, has been recognised in the last two years by the

government, which has proposed a series of re - regulatory reforms of the industry (for the

latest proposals see Department of Trade and Industry, 2001). In particular, various legal

changes have been made, widening the de® nition of who is to be covered by employment

p rotection. The use of the term `worker’ in, for example, the Employment Rights A c t

(1996), the EU Working Time Directive (1998) and the National Minimum Wage Act (1998)

has been aimed almost explicitly at bringing temporary agency workers within these

employment regulations, following the adoption of wider de® nitions under Euro p e a n

legislation. As a consequence of these changes, temporary agency workers with 13 weeks’

continuous service are now entitled to paid holidays2

and to receive the National

Minimum Wage. On the other hand, they still do not have the same rights as permanent

workers. For example, they are not entitled to: a written statement of particulars and a

statutory period of notice (one month), statutory sick pay, access to extended maternity

leave, redundancy pay and rights to claim unfair dismissal. The government has also

p roposed regulation of the t̀emp-to-perm’ transition; the initial proposal was to re q u i re

temporary work agencies to waive the temp-to-perm fee, which is currently an established

means of preventing `poaching’ of temporary staff by the host organisation. However, the

government has responded to the concerns expressed by the Recruitment and

Employment Confederation (REC, 2000b); it intends to allow temporary work agencies to

still charge a temp-to-perm fee, but with the re q u i rement that host organisations are

allowed to extend the assignment until after the point that the fee would be waived

(Department of Trade and Industry, 2000a, 2000b). Despite the breakdown in March 2001

of social partner discussions over temporary agency work, the EU and UK policy context

is likely to be subject to further change before a new framework is finally agre e d

(Department of Trade and Industry, 2001; Fagan and Wa rd, 2001).

CASE STUDY ORGANISATIONS

This section sets out our methods used in the re s e a rching of this article and gives a

brief overview of the characteristics of the two case study org a n i s a t i o n s .

The article draws on 25 interviews with management and more than 100 worker

int erviews at two organisations, re f e r red to as Bankco and Telecomco. These

o rganisations are part of a larger re s e a rch project on the management of employment,

carried out across seven sectors over a three-year period until 2000 (see Beynon et al,

forthcoming). The material generated through the semi-stru c t u red interviews was

Kevin Ward, Damian Grimshaw, Jill Rubery and Huw Beynon

5HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 11 NO 4, 2001

augmented by corporate and HR data. This allowed us to understand better how each

o rganisation and its managers attempted to manage employment in response to internal

and external pre s s u res. The interviews with both permanent and temporary agency

workers allowed us to understand further how the use of temporary work agencies

a ffected the experiences of work of both groups (see Table 1).

The precise role and function of temporary agency workers in the org a n i s a t i o n a l

h i e r a rchy differs from one organisation to another, although traditionally the gro u p

tends to have been located at the lower end of the internal job ladder. Their position

re ̄ ects the nature of the particular organisation’ s work, its internal stru c t u re and the

demand-side pre s s u res that have led the organisation to turn to temporary work

agencies for their staffing re q u i rements. The case studies illustrate the close

relationship between the use of temporary agency workers and wider changes in

corporate stru c t u re and the organisation of work.

Bankco

At the time of re s e a rch (1998), Bankco employed 3,674 workers, with a female-to-male

ratio of 6:4 and a full-/part-time ratio of 4:1. The vast majority of these workers ± 87 per

cent ± were employed in the corporate, commercial and personal banking divisions,

and an even higher share of temporary agency workers were found in these areas of

the organisation (see Table 2).

The 315 temporary agency workers placed at Bankco constituted 8.5 per cent of its

w o r k f o rce, with 93 per cent of the temporary agency workforce located at grades 3 and 4.



The two organisations selected as part of this study are drawn from the following

sectors of economic activity:

l B a n k i n g

l Te l e c o m m u n i c a t i o n s

Each organisation was selected on the basis of meeting the following criteria. It was

a relatively large employer and it was in a sector of the economy that appeared to be

characterised by widespread technological, corporate and workforce change. In

labelling the organisations, we have adopted the method of referring to the

o rganisation as ̀ sector+co’.

The following is a brief description of the selected org a n i s a t i o n s :

l `Bankco’ is a major clearing bank in the UK, although not one of the `big four’. It

employs around 3,700 staff. While constrained by a relatively high ratio of

i n f r a s t ru c t u re costs to income, it has a reputation for introducing new ® n a n c i a l

p roducts in the sector and has been quick to exploit the new technology in

information and telecommunications systems.

l ` Telecomco’ is a large provider of telecommunications services in the UK,

p roviding a number of business and customer services in addition to maintenance

of the telephone network. It has a large total workforce and annual turnover was

£15 billion in 1997. Development of mobile telephone services and the internet has

contributed to high pro ® t marg i n s .

N o t e: all employment and budget data refer to 1998

TABLE 1 I n t roducing the case study org a n i s a t i o n s

This is at the bottom end of the job ladder, and here agency workers constituted almost

half of those working at the ® rst `point of entry’ to Bankco’s internal labour market.

Women made up 74 per cent of the temporary agency workers at Bankco, compared to 64

per cent of the total workforce. Temporary agency work thus worsened the gender

imbalance that existed at the lower level grades of Bankco’s permanent staff ± and in the

banking sector in general (O’Reilly, 1992). Sixty-three per cent of the temporary agency

workers supplied to Bankco worked in its personal banking division. It is there that the

most profound change in its organisation of work had taken place, around the

geographical re s t ructuring of workplaces, the centralisation of account functions and the

o u t s o u rcing of certain tasks (for an overview see Leyshon and Thrift, 1993). It is also in this

division that the organisation’s processing functions were relocated into its gro w i n g

number of call centres, as part of its move away from a branch network model of re t a i l

banking (Marshall and Richardson, 1996). In this case study the increase in Bankco’s use of

temporary agency workers has taken place alongside other signi® cant changes in its

o rganisation of work, namely a quadrupling in the number of call centre workers in the

® ve-year period up to 1998. It is thus in practice in the area of the bank that tends most to

shape its external image ± and where workers deal on a day-to-day basis with customers ±

w h e re temporary agency workers have been on the increase.

This ® nding might appear somewhat surprising, given the emphasis incre a s i n g l y

placed on customer care by service sector organisations (Frenkel et al, 1999). However,

as Gordon (1996) and others have observed, there is a high presence of temporary

agency workers in front-line positions within organisations, although this growth has

been accompanied by a tightening of surveillance and other regulatory methods

(Beynon et al, forthcoming). At Bankco, too, new technology has been introduced to

monitor the performance of all staff and to ensure the quality of service is homogenous

a c ross workforce groups. This has accompanied new methods of worker surveillance,

such as the monitoring of incoming and outgoing telephone calls.

Telecomco

Although still a large employer, in 1998 Telecomco employed only half the number it

did in 1980. The most substantive reductions were made during the late 1980s and early

1990s when the organisation underwent a period of rapid change, dispensing with

existing systems of management and redrawing its occupational pro ® le. The consumer

division expanded to challenge the traditional dominance of the networks division.

New re c ruits tended to enter into the rapidly expanding division in newly cre a t e d

positions, instead of requiring formal engineering quali® cations; the emphasis was on

less technical, less formal and more `customer-facing’ skills. Accompanying the



Female F e m a l e M a l e M a l e

D i v i s i o n full time part time full time part time To t a l

Corporate and commerc i a l 4 9 3 0 2 8 3 11 0

Personal banking 1 0 0 4 9 4 2 6 1 9 7

G roup ® n a n c e 1 1 4 1 7

G roup re s o u rc e s 0 1 0 0 1

C e n t r a l 0 0 0 0 0

Operating re s o u rc e s 0 0 0 0 0

To t a l 1 5 0 8 1 7 4 1 0 3 1 5

TABLE 2 Temporary agency workers at Bankco, by sex, division and full/part time (Jan 1998)

reduction in the number of workers directly employed by Telecomco was an increase in

the use of temporary agency workers. Between 1991 and 1997 the number placed at

Telecomco increased from 3,250 to 7,583 ± a rise of 133 per cent over the four-year period.

At our three Telecomco workplaces, temporary agency workers constituted 63 per cent

( Telecomco1), 45 per cent (Telecomco2) and 65 per cent (Telecomco3) of the re s p e c t i v e

w o r k f o rces (Table 3). This high use reflected the growth in clerical workers at each

workplace, an industrial sector where temporary agency work is relatively high (Ford e

and Slater, 2001; Recruitment and Employment Confederation, 2000a). Agency workers at

each workplace were clustered at the lower end of the internal labour market. Job tasks

included call handling and account management re s p o n s i b i l i t i e s .

Contexts and pressures

I n c re a s i n g l y, the traditional patterns of entry into organisations for lower level workers

a re being challenged; the uneven and partial demise of organisations’ internal labour

markets has seen to that (Cappelli et al, 1997; Gallie et al, 1998; Grimshaw et al, 2001).

New re c ruitment practices appear to have emerged to re ̄ ect the broader changes in the

employment system (Cully et al, 1999; Millward et al, 2000). An important element of

this transition has been the growth in the use of temporary agency workers across the

o rganisational ladder, but particularly at its lower end, often justi® ed by managers in

terms of allowing greater `numerical ¯ exibility’ around workforce levels (Atkinson,

1984). While in the past such workers might have been used to staff s̀pecial pro j e c t s ’

(Davis-Blake and Uzzi, 1993: 198), their use now appears to constitute a stru c t u r a l

o rganisational response to changing conditions. Risk associated with the beginning of

any employment relationship is shifted onto the temporary agency workers (Allen and

H e n r y, 1997), with the emphasis resting with these workers to meet an often

u n s p e c i ® ed criterion in order to be eligible for permanent re c ruitment. More o v e r, it is

not just risk that is being shifted as, despite recent reforms, the financial and non-

® nancial bene® ts attached to permanent employment remain denied to them.

One problem with the categorisation of temporary agency workers as peripheral

workers is that, in practice, they often constitute a core workforce (Walsh, 1990), de® ned by



Agency ( To t a l )

Wo r k p l a c e P o s i t i o n / g r a d e w o r k e r s w o r k e r s )

Te l e c o m c o 1 M a n a g e r s 0 ( 8 )

Operational support of® cers 0 ( 7 )

O p e r a t o r s 134 ( 1 9 7 )

Total agency workforce 134 ( 2 1 2 )

Te l e c o m c o 2 Permanent managers 0 ( 1 0 )

Long-term substitute managers 0 ( 3 )

Team coaches 5 ( 2 0 )

Full-time advisers 0 ( 3 2 )

Part-time advisers 88 ( 1 4 3 )

Total agency workforce 93 ( 2 0 8 )

Te l e c o m c o 3 M a n a g e r s 0 ( 1 0 )

Non managers 95 ( 11 6 )

O p e r a t o r s 1,256 ( 1 , 9 5 4 )

Total agency workforce 1,351 ( 2 , 0 8 0 )

TABLE 3 Temporary agency workers at Telecomco (May 1998)

re f e rence to the quantity of labour employed. In such circumstances their use is fast

becoming a means of doing business and not just a way of handling unforeseen events.3

I t

is also the case that the distribution of tasks to temporary agency workers does not always

respect the boundaries between the primary and secondary internal labour markets

implicit in the linkages in the ¯ exibility literature between skill and core/periphery status

(Legge, 1995: 146-147). Instead of a focus on dualism, it is more helpful to consider how

the HR policies for each workforce group combine in often complex and unforeseen ways.

For example, in hiring temporary agency workers to protect the employment status of its

c o re staff, managers may increase the latter group’s fears of job insecurity. There is thus a

need to move beyond the rather stylised core and periphery dichotomy, and to re c o g n i s e

not only that each group is itself highly diff e rentiated but also that the policies for one

g roup affect the other (Hunter et al, 1993; Walsh and Deery, 1999).

In the context of these wider trends, each organisation still faces an individual set of

external and internal pre s s u res and constraints on its employment policies. In both of

our case study organisations ± and their respective workplaces ± the use of temporary

agency workers marked a response to a combination of factors. Generally, and to

d i ff e rent degrees, a combination of six, often contradictory, factors in¯ uence a host

o rganisation’s decision to re c ruit temporary agency workers through one or more

agencies. These are :

1. the desire for greater numerical ¯ exibility due to increased uncertainty associated

with technological change and new forms of competition;

2. the need to respond to changes in external labour market conditions;

3. the coupling of corporate performance targets to employment levels, leading to a

need to mask true staf® ng statistics;

4. corporate level pre s s u re to reduce labour costs;

5. the generation of internal ¯ exibility in order to meet job security and re d e p l o y m e n t

t a rgets for core staff; and

6. the provision of a cheap screening process to assist re c ruitment and selection

p ro c e d u res.

The ® rst pre s s u re towards the use of temporary work agencies arises out of the

i n c reasing uncertainty stemming from technological change and new forms of

competition. For both case study organisations it is not yet clear how innovations such

as voice-activated technology or the internet will shape future employment

re q u i rements, both in terms of the numbers re q u i red or the precise skills mix. The

i n t roduction of new technology is proceeding hand in hand with change in the terms of

competition on which organisations compete (see Leyshon and Thrift, 1999, for a

discussion of technological change in UK retail banking).

At both Bankco and Telecomco new technology has allowed the spatial

re s t ructuring of operations and the closure of a number of workplaces. While Bankco

closed its branches, Telecomco closed its exchanges. In both cases, telephone-based

selling and customer account management ± made possible through the introduction of

new technology ± has allowed each organisation to reduce the size of its permanent

w o r k f o rce. Within the newly created workplaces they rapidly increased their staf® n g

levels through the use of replacement temporary agency workers. This appro a c h

allowed the organisations to cope with continued uncertainty concerning customer

reactions to this new mode of service delivery, the reliability of the new technology and

the extent to which it would displace human labour.

The second factor stems from conditions in the external labour market. The internal

and external labour markets can be considered mutually constituted and interre l a t e d



(Grimshaw and Rubery, 1998); the clearest example of how this relationship works out

in practice is found at one of our three Telecomco workplaces. Here, a buoyant local

economy led to competition for workers at the lower skilled end of the labour market.

Workplace managers, limited by corporate pay and re c ruitment guidelines, were

unable to increase hourly rates. Instead, they increased their use of temporary agency

workers, thereby attempting to pass the problem of adjustment back to the labour

market intermediaries. This, however, was only partially successful. Still unable or

unwilling to match competitors’ pay rates, the temporary work agency could not meet

the call centre’ s staf® ng targets.

The third pre s s u re to externalise employment arises out of the new ways in which

the performances of service sector organisations are evaluated. Telecomco has

continued to suppress its employment levels in order to satisfy the City. Almost by

definition, this involves decisions being made on a shorter-term basis, even if the

implications of these obviously stretch into the longer term. Profit per worker has

become a common indicator of corporate performance in the telecommunications

sector (McGovern et al, 1997). With the reduction in permanent workers, this ® g u re has

been artificially increased, with high output/staffing levels maintained despite the

retaining of a large temporary agency workforce.

A fourth factor in the decision to externalise involves the budget and labour cost

parameters within which organisations have to make decisions. In the context of wider

industrial relation changes and labour market deregulation, organisations have looked

at the reduction of labour costs as a relatively easy means of reducing total budgets.

Each case study organisation operated within a sector- s p e c i ® c framework that shaped

the decisions it could make about costs. At Telecomco workplace managers had to turn

to temporary agency workers due to corporate guidelines on cost targets. Wo r k p l a c e

managers argued that, despite having to pay an agency fee on top of the agency

w o r k e r’s hourly rate, the organisation saved money through avoiding having to pay

sickness cover, pension contributions and holiday entitlement (at the time of interview).

The need to meet corporate cost targets accompanied a directive from above to use

temporary agency workers in order to meet these targets.

A ® fth pre s s u re encouraging the use of temporary agency workers resides in the

o rganisation’s need to provide protection for existin g staff ± mirror ing the

segmentation associated with the f̀lexible firm’ model (Atkinson, 1984). Bankco’s

commitment to no compulsory redundancies was a critical element in its partnership

arrangem ent with the trade union, limiting its ability to reduce its permanent

w o r k f o rce. In return for its co-operation in the organisation’ s dramatic re s t ru c t u r i n g

p rogramme, the trade union received assurances from Bankco that it would re d e p l o y

s t a ff whose jobs were lost. The trade union agreement then allowed the organisation to

i n t roduce more ¯ exible policies around working time and career pro g ression. As a

consequence, Bankco reduced the re c ruitment of permanent workers and increased the

use of temporary agency workers. This allowed the organisation to increase its internal

¯ exibility and staf® ng levels.

F i n a l l y, a sixth pre s s u re or incentive relates to the opportunity to use temporary

work agencies to replace internal management functions, in particular those of

re c ruiting staff (see also Casey, 1988; Davis-Blake and Uzzi, 1993; Katz, 1997). Selection

functions are devolved to an agency and workers are screened before they enter the host

o rganisation. Once in the workplace the host can evaluate the performance of staff while

under no obligation to offer them permanent contracts. Both Bankco and Telecomco used

the policy of re c ruiting through temporary work agencies as a way of reshaping their

wider selection processes. Recruitment at the bottom end of the job ladder onto permanent



contracts stopped, as each organisation used its relationship with an agency to judge

potential temp-to-perm switches.

The cumulative effect of these six pre s s u res ± ® l t e red of course through the diff e re n t

actions of organisations and managers (see below) ± was a gradual increase in the use of

temporary agency workers across both organisations. At each organisation’s workplaces,

managers had to deal with the consequences of the corporate policy of using such

workers. This raised not only employment and staff development issues but also the

question of how to manage a relationship with the external organisation charged with

supplying a section of their workforce. Internally, managers had to handle the demands

of diff e rent groups of workers, all on diff e rent contracts and with varying degrees of

security attached to each.

MANAGEMENT ISSUES

This section explores the problems faced by workplace managers who act as

i n t e r p reters of corporate policy and who also have day-to-day responsibility for

managing an occupationally and contractually divided workforce. The analysis

e x p l o res how local managers respond to corporate decisions over the use of temporary

agency workers and it assesses the scope for local managerial autonomy in addre s s i n g

some of the contradictions bound up with the effects of corporate decision making.

Systems of accountability in organisations have been re c o n ® g u red over recent years. A t

both case study organisations there was a tendency to devolve a level of responsibility and

accountability to `business units’ ± the workplace, department or directorate. At the same

time, however, this devolution was often accompanied by a centralisation of overall

budget control and a strict monitoring of performance (see also Marginson et al, 1988).

This corporate-orchestrated local autonomy raises the issue of how corporate targets set

a round staf® ng levels may generate con¯ ict and uncertainty at the local workplace level.

At Bankco, individual workplace managers were constrained by corporate guidance to

limit the re c ruitment of permanent staff due to ongoing uncertainty over workplace

re s t ructuring and technological innovations, particularly in its call centres. At Te l e c o m c o ’ s

call centres, workplace managers were frustrated at having to manage the diff i c u l t

relationship with its temporary work agency and the poor staff morale that resulted fro m

high turnover. Nevertheless, there was some consensus among Telecomco’s thre e

workplace managers about the need to have a mix of staff on permanent and temporary

agency contracts in order to retain a f̀reshness’ at the workplace. Their reasoning was that

a degree of turnover stopped workers becoming too comfortable in their positions. The

d i f® c u l t y, according to managers, was in getting the balance right between maintaining

morale and encouraging a degree of turnover, particularly given that the capacity to make

these often delicate decisions did not always reside at their level. Workplace managers,

then, across both organisations faced difficulties in operating within corporate

frameworks that advocated the use of temporary agency workers. Yet, at Telecomco, these

same managers argued that there were bene® ts from having a sizeable proportion of their

s t a ff on temporary contracts.

Relationships with a temporary work agency can clearly be complex. In practice the

relationship is not determined solely by contract, but rather is negotiated and managed

between agency and organisation managers on a daily, weekly and monthly basis. How

functions in the labour supply process are separated out between the agency and the host

o rganisation is often negotiated at the individual workplace level. For example, at one

Telecomco workplace, a manager began to renegotiate the division of responsibilities due

to dissatisfaction with the performance of the agency. Unhappy with the quantity and



quality of labour supplied, he claimed to have attempted to `drag the agency into the re a l

world’ (Resources manager, Telecomco3). When he demanded a re c ruitment plan from the

a g e n c y, he said that he was off e red an `excuse list’. The Telecomco manager worked with

the agency to increase both the volume and quality of workers they could supply.

A c c o rding to this manager, the agency was also supplying individuals who, in their own

w o rds, were `unready for commitment’. One example of the collective approach to solving

the quantity and quality problems pioneered by the manager was the development of a

`job shop’ arrangement with a local university. This was supposed to provide a re a d y

supply of what Telecomco managers re f e r red to as h̀igh quality and articulate’ students in

their ® rst year at university to the temporary work agency. Telecomco then had a chance to

hold on to them for at least two years before they graduated.

Although the failure to meet their contract meant that the agency was penalised

® n a n c i a l l y, this did not solve the workforce problems faced by local managers. Indeed,

the manager found it more beneficial to work with the agency to overcome the

d i s c repancy between the number of staff it was contracted to deliver and the number it

regularly supplied. Two other Telecomco workplace managers complained that they

w e re constrained by corporate guidelines over which agency to use, and were left with

no fallback if it did not deliver workers when and where re q u i red. The performances of

these workplaces were directly affected by the performance of the agency. Other studies

have found dissatis® ed host organisations to be willing to cancel the contract with a

temporary work agency or to increase the number of agencies involved in supplying

s t a ff (Peck and Theodore, forthcoming). Yet local Telecomco management continued to

use one particular temporary work agency. In part, this reflected the lack of f̀it’

between the level of the organisation at which contracts between Telecomco and the

agency were negotiated and signed and the level at which management issues aro s e .

Evidence from the US suggests that organisations using a temporary work agency feel

obliged to introduce ever more sophisticated forms of quality control and monitoring

( G o rdon, 1996), but these measures may not be suf® cient in a context where the head

o f® ce fails to take action against the contractor.

Shifting responsibility for HRM

Both Bankco and Telecomco involved a temporary work agency in the management of

the workforce and in taking over traditional HR functions. In particular this involved

shifting to the agency the responsibility both for screening new staff and for managing

s t a ff and re c ruitment. However, this redistribution of functions was not all one way;

while the workplaces of the host organisation lost some of their re c ruitment function,

managers found that they had to work closely with temporary work agency managers

in an ongoing partnership.

Screen tests

Bankco and Telecomco both used a temporary work agency to screen workers before

they entered the workplace. This allowed each organisation to externalise elements of

the costs of re c ruitment and granted them some recourse if the agency workers failed to

perform `satisfactorily’. Initial screening carried out by the agency ranged from a short

30 to 60-minute interv iew to three-hour assessments. Bankco first turned to a

temporary work agency during the mid-1990s. The emphasis at this time was on

q u a n t i t y, with quality checks suppressed. The main cause of this pre s s u re was Bankco’s

decision to shift work away from its branches and into its newly opened and rapidly

expanding call centres. Such was its demand for temporary agency workers during this



period that it failed to impose any stringent re c ruitment criteria on the temporary work

a g e n c y. As one former agency and now permanent worker outlined:

I got taken on through the agency, so really I was quite lucky, plus

Bankco was quite lucky because at the start...it was quite lackadaisical. It

wasn’t organised with the agencies at all. There were some very odd

people coming through, so to speak... I really do think they just wanted

bums on seats. No. 4, Bankco2

The inability to regulate the quality of temporary agency workers, particularly if, for

example, the labour market tightens, was also evident at Te l e c o m c o :

My feeling was that the people being re c ruited through the agency were

not of the same calibre as Telecomco people. The interview process was not

as stringent. On numerous occasions I have seen certain things they

shouldn’t have said or done. But [the agency worker] may not have known

that. The selection process needed to be addressed. No. 7, Te l e c o m c o 2

When Bankco opened its second call centre (Bankco5), it again utilised a single

temporary work agency in the initial re c ruitment process but adopted a diff e re n t

s t r a t e g y. During the re c ruitment process there was a clear functional divide. The

agency placed adverts in local newspapers, advertising the vacancies at the host

o rganisation and conducting the initial interviews. These centred on demonstrating

technical skills. Bankco managers then interviewed on site those who made it thro u g h

this first stage. Unlike at other workplaces in the organisation, and at Te l e c o m c o ,

successful interviewees in this case were re c ruited on to permanent contracts. In this

example, the `screening’ period was shorter, and was followed by an interview for a

permanent post.

H o w e v e r, externalising the screening of re c ruits to a temporary work agency is not a

panacea for the problems of re c ruitment at organisations. For example, at Te l e c o m c o

t h e re was some evidence of recent changes in the screening process, triggered by the

company’s unhappiness with the service provided by the agency:

Selection is not as customer-focused as the organisation would wish.

Workplace manager, Te l e c o m c o 2

While working within a corporate-established contractual framework, local managers

w e re keen for the temporary work agency to introduce more stringent scre e n i n g

p ro c e d u res. As the host organisation, Telecomco managers could instruct the agency on the

needs of the workplace. However, at the margins there was still an element of negotiation

between them and agency managers. This points to some form of functional integration

between the management of the agency and that of the host organisations (Peck and

T h e o d o re, 1998). An example of this integration is found in the way that Te l e c o m c o ’ s

manager attempted to externalise elements of training provision. Under the new

arrangements, the agency had to equip the workers it placed with some c̀ustomer- f o c u s e d ’

training before they took up posts at Telecomco. Prospective workers then attended a short

on-site interview. Telecomco’s managers at this workplace were keen to use this as a

q̀uality checking device’, where a temporary agency worker’s appearance and ability to

communicate could be tested. This pattern of management was not, however, universal

even within the organisation. A c c o rding to a manager at another Telecomco site, the

o rganisation demanded only two skills from prospective agency re c ru i t s :

A nice customer manner [and that] they be able to use a mouse on the

c o m p u t e r. Workplace manager, Te l e c o m c o 1



Managing the temps

A c ross the three Telecomco workplaces there was some evidence of a division of

responsibility in the on-site management of temporary agency workers. The on-site

agency managers dealt with personnel issues. These managers, who were responsible for

monitoring sickness and absence levels and for hiring and ® ring, were also the ® rst to

a d d ress any problems encountered by their workers. In turn, Telecomco’s managers

performed routine employment tasks such as the monitoring of the individual

performances of agency workers and the assessment of the collective performance of the

a g e n c y. As one agency worker outlined when asked to whom they were answerable:

Usually the team manager within [Telecomco]. But if we’re late or sick we

usually have to speak to the [agency manager]. No. 6, Te l e c o m c o 1

Other issues dealt with by the managers of the host organisation included the

`moulding’ of temporary agency workers. This took the form of overseeing the two-

week-long Telecomco induction course and then monitoring the pro g ress of agency

workers once the course had been completed. One team manager outlined:

You get them in from the street, basically. You have them from scratch, so

you develop that person. You see them change. You get people who are

very negative and [then] ones who are new, fresh, full of enthusiasm.

No. 6, Te l e c o m c o 2

In practice there were clear diff e rences from one organisation to another in the extent to

which the host organisation was involved in the screening process. At Bankco local

managers were initially relatively indiscriminate in terms of whom they were pre p a red to

accept through each temporary work agency. In the longer term, this policy, coupled with

the introduction of the partnership deal with the union, led to a subsequent move back

t o w a rds the hiring of directly employed Bankco workers. At the other extreme Te l e c o m c o

has remained committed to the use of a temporary work agency but at least some

managers were clearly becoming more involved in the screening process, although this

was by no means universal within the organisation.

Managing division at the workplace

Having two workforce groups performing the same tasks at a single workplace led to a

number of problems for management at both organisations. One of the most obvious

issues related to pay diff e rentials. At both Bankco and Telecomco, temporary agency

workers did not receive the same bene® ts as the host organisations’ permanent staff. For

example, they did not receive sickness pay, holiday entitlements or pension contributions

(at the time of interviews). At Bankco temporary agency workers faced dif® culties in

obtaining payment for any extra hours they worked. As one agency worker explained:

We had to send our wage sheets to the agency each week, and at certain

times if we were busy and the bank was busy and we put in to get a few

extra hours...they weren’t too good at paying us pro p e r l y.

No. 8, Bankco5

Friction and a sense of injustice are often accentuated where the same jobs are linked

to diff e rent hourly rates and with diff e rent social bene® ts. A Telecomco worker who

e n t e red the organisation through a temporary work agency and who then secured a

permanent contract noted this:

I think [Telecomco] staff get a lot more bene® ts than agency staff ... I’ve

talked to people and, if they come from an agency and they’re working with



people who aren’t from an agency, there’s sometimes a bit of friction.

No. 6, Te l e c o m c o 1

T h e re was also some evidence of temporary agency workers being re c ruited as part

of a functional separation of job tasks ± in line with the models of ¯ exibility in which

the periphery workforce increases with upturns in demand or in response to new

p re s s u res (Davis-Blake and Uzzi, 1993). At one Telecomco workplace (Telecomco2) a

new team was formed using only temporary agency workers. In this case, the sense of

division between the group and permanent staff deepened:

When I came in as an agency worker it was called `Fast response’ . We

w e re suppose to go in, sign in, log on and take calls ... They called us `Fast

action response’...[which became] FA RTs, and so there was a bit of a them-

and-us situation. No. 4, Te l e c o m c o 2

At Bankco, as well as using temporary agency workers on a longer-term basis, the

o rganisation also continued to re c ruit them on three-month contracts around one-off

p rojects or in response to heavy workloads in particular areas of the organisation. This

often led to more work for management as they had to manage new staff unsure of

how the workplace was organised. As one team manager outlined:

It is quite hectic at the moment ... I am supporting another team as well as

managing my own and also we have got a group of [agency] staff in, so I

have got more numbers than I would normally have ... [They are in] to

help with some paper processing. No. 1, Bankco5

Permanent workers at the Telecomco workplace viewed the introduction of temporary

agency workers in this context as a means of introducing new ways of organising work

that they might have resisted. As Christopherson (1989) noted, organisations seek to

c i rcumvent norms and customs that have evolved around how work is org a n i s e d .

T h rough Telecomco’s separation of jobs into discrete tasks and the creation of a new, all-

temporary agency worker team at the workplace, permanent workers viewed themselves

as quite separate from their temporary agency worker c̀olleagues’:

No disrespect to them, I could not do that job! It’s so boring ... They are

agency workers probably because it is so mind-numbingly boring ...

Telecomco probably know they wouldn’t be able to employ anybody on a

permanent contract to do it. No. 4, Telecomco2

In contrast, the division between permanent and temporary agency workers at

Bankco was less pronounced, and there was even a corporate drive to erode the

distinction. Functional separation was avoided for the most part and instead the policy

was to broaden the work experiences of all lower level workers.

Management of attrition

High use of temporary agency workers has tended to go hand in hand with high

worker turnover. But at workplaces where, by their very existence, there is a high

d e g ree of l̀abour churning’, the management of attrition appears to have become part

of the accepted lot of workplace managers. A c ross the three Telecomco workplaces,

local managers attempted to keep temporary agency workers at the workplace for at

least six months. They re g a rded this as a vital period, for if agency workers re m a i n e d

beyond three to six months they were likely to remain on-site for 18 to 24 months.

G e n e r a l l y, however, these managers lacked the autonomy to make substantive changes

to the employment conditions of temporary agency workers. At one Te l e c o m c o

workplace (Telecomco3) a number of possible `solutions’ to the retention issue were



p roposed. None involved decreasing the proportion of agency workers ± or upping the

number of permanent workers.

T h ree temporary agency workers left Telecomco3 each day, citing `no loyalty to

Telecomco’, l̀ack of development/expectations’, `lack of agency contact’ and lack of

`motivation of advisors and managers’ as reasons for leaving (Table 4).

At the same Telecomco workplace, the site manager argued that 18 months was the

optimum period for a placement before temporary agency workers became overly

familiar with their job. In this context it is dif® cult to see what commitment was being

given to agency workers by the host organisation. Potential solutions all centred on the

o rganisation more effectively matching workers’ skills with job re q u i rements. This was

linked to developing more sophisticated means of assessing the impact of working

conditions on the decision to leave. A c c o rding to the European Labour Force Survey

( E u rostat, 1998),4

a round two-fifths of temporary agency workers take temporary

placements as they cannot ® nd permanent jobs. It is thus not surprising that the most

important factor behind the decision of agency workers to leave the host org a n i s a t i o n

was the absence of permanent contracts on off e r.

At Bankco there was also evidence of managers struggling to retain agency workers.

As a result the organisation lost staff who, according to one t̀eam manager’, were good

at their job:

What happened in the early days [around 1991] was that we lost a lot of

good staff because the staff who were good on the telephones and could

handle the customers wanted the security and we lost them to other ® rms.

No. 3, Bankco4

The high degree of turnover highlights the ¯ ip side for local workplace managers of

the decision by corporations to cut labour costs through the use of temporary agency

workers. At both Bankco and Telecomco workplace managers were almost powerless to

do anything about the labour churning that characterised their work sites.



Number (% of

Reason for quitting of quits total quits) E x a m p l e s

Seeking or secured 62 ( 2 1 ) `Permanent job with Manweb

permanent employment Customer Services’

`Left to work full time as a sales

adviser for health and safety company’

Contracts terminated due to 57 (19) `Dismissed due to two AWOLs and

consecutive misconduct other disciplinary issues’

or going AW O L `Dismissed in training’

`Resigned after a period of suspension

for alleged fraud’

Unhappiness at work, either 37 ( 1 2 ) `Left due to lack of development and

related to team re o rganisation bonus plan’

or due to a lack of career `Left due to changes in Centre Five’

o p p o r t u n i t i e s

P e r s o n a l 1 0 1 ( 3 3 ) `Leaving due to partner going abro a d ’

M i s c e l l a n e o u s 4 5 ( 1 5 ) `Left Te l e c o m c o ’

To t a l 302 ( 1 0 0 )

TABLE 4 Job quits at Telecomco3

CONCLUSION

In this article we have drawn on evidence from a number of workplaces within two

l a rge organisations in the UK to examine a series of management and worker issues

a round the use of temporary agency workers. Our ev idence is particularly

pertinent right now. Despite the recent breakdown in discussions, Euro p e a n

regulation on fixed-term contracts is likely to be followed by new regulations over

the use of temporary agency workers (Fagan and Wa rd, 2001; Michon, 2000).

Following on from the labour law changes introduced in the Working Time and

Part Time Directives, and those forthcoming in the Fixed-Term Directive, the

context in which organisations use temporary agency workers is set to change

again in the next few years.

In our judgement, corporate decisions to use such workers based on the belief that

this will lead to a reduction in labour costs and allow a greater degree of numerical

¯ e x i b i l i t y, reveals an understanding of this development which is, at best, partial. A t

both of our case study organisations, issues concerning the employment re l a t i o n s h i p

w e re regularly seen to be in conflict with other corporate goals. At Telecomco ±

despite all the organisation’s rhetorical claims around `customer care’ ± share value

and corporate performance took precedence over the maintenance of its image as a

good employer and policy was rooted in its desire to keep up with technological

change and to maintain a certain level of f̀reshness’ at its workplaces. At Bankco,

temporary agency workers were used as a short-term response to `uncertainty’

(Gannon and Nollen, 1997: 11 9 ) .

The evidence presented in this article makes it possible to make two general points.

First, the contradictions imbued in the use of temporary agency workers are made clear

in the difficulties faced by local managers in overseeing a workforce where such

workers constituted a sizeable share. Our evidence suggests that the performance of

the `business unit’ ± the workplace, department or directorate ± is unlikely to be

enhanced by the use of large numbers of temporary agency workers. Despite

technology that allows ever more sophisticated workforce planning, at both Bankco

and Telecomco’ s workplaces the substitution of temporary agency workers for

permanent workers has been shown to raise a host of management problems. Such

arrangements involved managers at the host organisation overseeing temporary

agency workers and drew the management into a relationship with the agency that

supplied them.

S e c o n d l y, it is not clear that the extensive use of temporary agency workers is

sustainable. Some of the internal contradictions bound up in their use are likely to

continue to unravel in unpredictable ways. Managers at Bankco acknowledged this

and attempted to balance corporate objectives with the better management of

employment issues through the introduction of a review of its call centre workforc e .

The outcome of this was a reduction in its temporary agency workforce by just over

t w o - t h i rds, from 10 per cent to 3 per cent of its total workers. This marked an

acknowledgement by Bankco that what had been designed as a short-term policy

response was in danger of becoming institutionalised into corporate and local

managers’ employment practices. Furthermore, the policy was having an effect acro s s

a range of employment issues, from high turnover rates to an absence of opportunities

for internal pro g ression. As part of its re v i e w, Bankco off e red all temporary agency

workers at their workplaces pay and benefit conditions equivalent to those of its

permanent staff and introduced a set of internal systems that it hoped would allow its



lower level entrants to make pro g ress. In this way Bankco believed that, by converting

temporary agency workers on to permanent contracts, it might be offering individuals

the ® rst step in a possible career path. Given the growing use of temporary agency

work and the rapidly changing European and UK regulatory frameworks, we may

expect other large organisations to follow its example in the future .

Acknowledgements

The authors acknowledge the ® nancial support of the Leverhulme Trust and would

like to thank the managers and workers interviewed as part of this project. The article

has bene® ted from the comments of Nik Theodore, H R M J’s editor and two anonymous

re f e rees. The usual disclaimers apply.

Notes

1. H o w e v e r, use of the term `new engagements’ may overstate the existence of

temporary employment. There is no distinction made between engagement for one

day and for six months. So, an individual who re-engages for short periods of time

on a regular basis may arti® cially swell the `new engagements’ ® g u re. This pro b l e m

is exempli® ed in a recent consultation document, which argued that the number of

temporary agency workers invoiced per week lay somewhere between 250,000 and

879,000 (Department of Trade and Industry, 1999: 109-110; see also Hotopp, 2000).

2. This re s e a rch was carried out for the most part before the provisions of either the

Working Time Directive or the National Minimum Wage applied.

3. Temporary work agencies have themselves actively encouraged this growth in the

last two decades. The temporary work agency sector is become incre a s i n g l y

dominated by a small number of global organisations, offering a widening range of

services beyond the supply of temporary workers.

4. In the European Labour Force Survey (Eurostat, 1998: Table 42) it is reported that 40

per cent of temporary agency workers were temping because they `could not ® nd a

permanent job’.

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Dilemmas in the management of temporary work agency staff

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