Agency workers are suffering from a ‘pay penalty’ compared to staff who are employed directly by organisations, according to a new report from the Resolution Foundation.
Issued on 30 November, The Good, the Bad and the Ugly: The Experience of Agency Workers and the Policy Response  updates previous research in the field that the Foundation published in late 2016. “Collectively,” the report says, “we estimate that in 2017 agency workers missed out on around £290 million of pay as a result of this penalty, or an average of £400 per worker.”
It points out: “More than one third of agency workers are in the lowest earnings quartile while close to two thirds are in the bottom half.” Indeed, agency staff have an average pay gap of £2.41 an hour less than their non-agency counterparts.
“At the outset of this project,” the report notes, “we estimated that agency workers across the board experience a pay penalty of 22p an hour compared to other types of workers that cannot be explained by their different personal or job characteristics. With eight more quarters of pay data now available to us than we had in 2016, we can see that the agency-worker pay penalty has endured and remained stable over time. Interestingly, the … penalty is three times as deep for men than women.”
In BBC coverage of the report, agency-employed call-centre worker Connor McCann gives a personal view of the pay penalty, saying: “It didn’t matter how good you are at your job, you’re still being paid less than your colleagues … I was speaking to the exact same customers and selling the exact same products, so it felt really unfair.” McCann also explains that he has struggled to pay his bills. 
In the report, the Foundation argues that more should be done to improve agency workers’ knowledge of their pay entitlements, which would give them greater clout in negotiations. However, shouldn’t agency bosses do more to recognise the performance of the contractors on their books?
If agency workers are disadvantaged by not having the same relationship with the leaders at their client firms as their directly employed colleagues, is it not up to the agencies themselves to fulfil that role? Should agency heads take a greater interest in how their contractors are faring, rather than – as seems to be the case – keep them at an arm’s length?
The Institute of Leadership & Management head of research, policy and standards Kate Cooper says: “Organisations that currently make prolific and regular use of agency workers must ask themselves whether that reliance is truly warranted. What kind of impact is it having upon the motivation and morale of contractors if they are routinely working alongside people who are non-agency, and are therefore greeted with evidence of discrepancies on a daily basis? If an agency worker is showing dedication and going the extra mile, yet happens to sit next to someone doing a similar job who receives benefits inaccessible to contractors, that will undoubtedly deliver dissatisfaction.
“If you get dissatisfaction – and the inevitable disengagement that stems from it – you will not get the high level of performance you were no doubt banking on getting when you went down the agency route in the first place. Neither will you help to foster the cachet of being a great employer, because of the atmosphere that will build up in the workplace.
Cooper explains: “The urge to outsource is very much a legacy of Peters and Waterman’s 1982 treatise In Search of Excellence,  which encouraged firms to focus only on what they’re good at, and bring in external sources of expertise to manage more specialist matters. There is a sense in that – but only up to a point. When that sort of thinking is applied in an inconsistent fashion, it gives rise to more problems. You should want people in your organisation to talk, and to develop social cohesion. But as a consequence, it’s highly unlikely that discrepancies will stay under the radar.”
She notes: “To resolve this, businesses could either bring tasks fully in house, or contract them fully out. But there is also the question of what agencies themselves could do to improve the situation for their workers. How your agency is perceived in the business community should act as a powerful incentive: if you want to be seen as an ethical agency that attracts great people – talents with the capability to fit in and deliver, no matter where you send them – then the arrangement you have with your contractors must be of mutual benefit.”
Cooper adds: “As such, it is absolutely in an agency’s interest to ensure that it does a good job of looking after the people on its books. And yes – that means agency leaders must acknowledge that those people are their employees. It’s not simply a matter of setting up a shop window for leaders of other organisations to peruse, and then leave the management of your people up to them. You must show leadership, too.”
For further thoughts on recognition and reward, check out this learning module from the Institute