Luton Borough Council: A fresh approach to contingent recruitment

Luton Borough Council employs 2,554 staff of which 12 per cent are contingent workers. The highest volume of contingent roles that Luton fills are qualified social worker, neighbourhood services, and care worker.

When the contract to supply temporary staff came up for renewal, Luton reviewed the existing approach against three priorities – ability to: generate additional savings, reinvest savings in council services, and to strengthen the permanent workforce.

After scoping a range of options, the council chose a new direction, creating an in-house recruitment service. Three years on, this approach has delivered a stronger permanent workforce and generates greater savings. Critically, Luton has control over those savings to reinvest in community wealth building projects.

Luton is a unitary authority in the East of England, that serves some 225,300 residents. In the face of a national workforce crisis in local government, Luton was struggling to retain permanent staff and fill vacancies. As a result, in 2019, spending on Luton’s contingent workforce risked spiraling out of control.

Demand for workers across all role categories was increasing, particularly for hard to fill roles such as social work. At the same time, Luton, in common with most councils, was struggling to retain and attract permanent staff. This exacerbated the need for contingent staff and put additional pressure on the permanent workforce to deliver increased demand for services with less staff.

In 2003, Luton appointed a Managed Service Provider (MSP) to reduce contingent workforce spend. While this approach generated savings, Luton realised there were limited opportunities to drive additional savings from this low margin, high markup model. Not least because privately funded MSPs are required to deliver a profit to shareholders.

Helen Davey, Head of Recruitment at Luton Borough Council explains:

"With council budgets under increasing pressure to deliver more with less, we had to find ways to create additional savings to fund our vision that by 2040, no resident should be in poverty. An ambitious project that combines multiple workstreams to decrease unemployment by increasing employability, reduce financial hardship by securing higher wages for residents and break the cycle of poverty by ensuring the next generation of school leavers are equipped with the skills that local businesses need. 

"Added to which, we could see that strengthening our permanent workforce would decrease our reliance on contingent workers, making further savings possible. To achieve this goal, we would need to convert temporary roles to permanent, requiring us to create an attractive employer value proposition to successfully compete with neighbouring councils that offer higher wages. And to build talent pools in anticipation of future workforce requirements reducing our need to make expensive, distress purchases.

"Frustratingly, under the MSP model, the money we saved on our contingent workforce was returned to private sector shareholders rather than being reinvested in public services.

"Together these challenges gave us three clear priorities to manage our contingent workforce: generate greater savings, reinvest those savings to deliver our 2040 agenda, and to strengthen our permanent workforce."

We could see that strengthening our permanent workforce would decrease our reliance on contingent workers, making further savings possible. To achieve this goal, we would need to convert temporary roles to permanent, requiring us to create an attractive employer value proposition to successfully compete with neighbouring councils that offer higher wages. And to build talent pools in anticipation of future workforce requirements reducing our need to make expensive, distress purchases.

When the council assessed the ability of the two dominant contingent workforce supply models on the market, it concluded that neither could deliver the three key priorities. As a result, the council concluded it needed to find a route to move recruitment in-house.

While agreeing with this conclusion, a wide range of stakeholders raised concerns, including councillors, officers and human resource directors of social care. Did Luton have the commercial experience, IT infrastructure, resource or money to set up and run an in-house recruitment service? One that could compete with a private sector provider. 

Helen Davey says:

“We needed an option to share costs and manage risk while improving return on investment. Other councils achieved this by entering a joint venture partnership. We discounted private sector partners because any profit would be returned to investors. And explored public to public sector partners against our strategic priorities.

"Having assessed the risk and opportunity, we partnered with Commercial Services Group (GSG). Wholly owned by Kent County Council, CSG is one of the largest, local authority owned, trading organisations in the UK. It offers a joint venture model to move contingent workforce recruitment in-house, with a with a proven track record of success. Their in-house model can deliver up to 46 per cent savings on fees compared to an outsourced model. Critically, Luton would own those savings to reinvest in community wealth building projects.

"Over a six-month period, CSG supported us to create our own contingent recruitment service, Connect2Luton. We drew on their expertise to set up business processes, policies and practice. We established a robust governance structure, evaluation method and reporting. We used their IT infrastructure to deliver back office support including, billing and payment and compliance vetting and checks. In turn, CSG drew on our local knowledge to help build a supply chain of local recruitment agencies and to manage communication and relationships with internal stakeholders.”

Three years on, the award-winning, Connect2Luton delivers on all three key priorities.

Savings

C2L smashed savings targets generating:

The strong performance achieved enabled Luton to pay back the set-up loan to CSG in half the time – 18 months rather than the allowed three years.

Reinvested savings 

Luton has been able to reinvest its profit share in projects that:

• increase employability of long-term unemployed residents and care leavers 
• boost local employment - 54 per cent of Connect2Luton staff are resident
• work with schools, academies and adult learning providers to fill skill gaps identified by local businesses 
• attend career and recruitment fairs to promote and recruit for local government jobs. 

Connect2Luton has established a successful and respected recruitment brand. This has enabled Luton to create a strong business plan to generate further income to support the long-term sustainability of an in-house recruitment service. It is currently in discussion with the government to supply recruitment services to support the expansion of Luton Airport. 

The business case for moving to an in-house recruitment model is clear, enabling councils to generate additional savings, at a time when new savings are hard to find. And to take ownership of those savings for reinvestment in public services.

Create a clear set of priorities for workforce supply and use these to review your existing model against moving recruitment in-house. 

Don’t dismiss the idea of a joint venture over cost, resource, or capability concerns. A partner with a successful record of moving recruitment services in-house de-risks the project.

In a tough recruitment market, moving recruitment in-house enables a council to create a more stable workforce and fill roles where these is a national shortage.

• Helen Davey, Recruitment Lead, Luton Borough Council, [email protected]
• Steve Wilson, Commercial Director, Commercial Services Group, [email protected]