‘Practising what they preach’? The disconnect between the state as regulator and user of employment agencies

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‘Practising what they preach’? Thedisconnect between the state asregulator and user of employmentagenciesIan Kirkpatrick a , Alex De Ruyter b , Kim Hoque c & Chris Lonsdaled

a Leeds University Business School, University of Leeds , Leeds, UKb Business School, University of the West of Scotland , Paisley, UKc Birkbeck, University of London , UKd University of Birmingham Business School , Birmingham, UKPublished online: 11 Nov 2011.

To cite this article: Ian Kirkpatrick , Alex De Ruyter , Kim Hoque & Chris Lonsdale (2011) ‘Practisingwhat they preach’? The disconnect between the state as regulator and user of employmentagencies, The International Journal of Human Resource Management, 22:18, 3711-3726, DOI:10.1080/09585192.2011.622919

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‘Practising what they preach’? The disconnect between the state asregulator and user of employment agencies

Ian Kirkpatricka*, Alex De Ruyterb, Kim Hoquec and Chris Lonsdaled

aLeeds University Business School, University of Leeds, Leeds, UK; bBusiness School, University ofthe West of Scotland, Paisley, UK; cBirkbeck, University of London, UK; dUniversity of Birmingham

Business School, Birmingham, UK

There has been a considerable expansion of agency working in many countries in

recent years. Based largely on neo-liberal thinking, this has been seen as a welcome

means of promoting labour flexibility and creating jobs. Governments in Anglo-Saxon

countries in particular have been keen to limit agency market regulation. However, in

line with a shift from new public management (NPM) to post-NPM imperatives, the

UK state, as an employer, has adopted an increasingly regulatory stance in its own

dealings with employment agencies. Using data from three related research projects,

we explore this development in the context of the UK’s National Health Service (NHS).

We highlight the problems that overt market liberalisation engendered and point to the

steps the NHS has taken to address these problems through the introduction of

framework agreements and the internalisation of flexibility. While these policies have

generated new unforeseen challenges and tensions, they do point to a growing

disconnect between the government’s approach towards the regulation of agencies in

the wider macroeconomic arena and its own approach as a user of agency services.

Keywords: agency working; flexibility; new public management; NHS employment

relations

The demand for temporary agency workers has expanded rapidly in many countries in recent

years. In theUK,81%ofemployersuse recruitment agencies (CIPD2007),with theproportion

of all temporaryworkers accounted for by agency staff growing from7%of the total in 1992 to

18.6% in 2008 (Forde, Slater andGreen 2008). Such trends have sparked a growing interest by

scholars in the changing relationship between (sometimes global) employment agencies and

nation states (Peck, Theodore and Ward 2005; Biggs, Burchell and Millmore 2006; McCann

2007; Forde 2008). Evident from this literature is that the growth of temporary work

arrangements across countries has resulted in part from attempts by governments to: promote

labour flexibility; generate jobs; and ensure competitiveness (Cappelli 1995; Standing 1997;

McCann 2007). This can be seenmost notably in theOrganisation for EconomicCo-operation

and Development (OECD) Jobs Strategy (OECD 1994) and the European Employment

Strategy (Bailey, De Ruyter and Kavanagh 2007). Formulated largely on the basis of neo-

liberal thinking, these strategies view temporary or contingent work as a welcome means to

provide the unemployedwith a stepping-stone into the labour market (for a critical analysis of

this argument, see Gray 2002) and to enable employers to meet their flexibility needs.

ISSN 0958-5192 print/ISSN 1466-4399 online

q 2011 Taylor & Francis

http://dx.doi.org/10.1080/09585192.2011.622919

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*Corresponding author. Current address: Birkbeck, University of London, UK. Email: [email protected]

The International Journal of Human Resource Management,

Vol. 22, No. 18, November 2011, 3711–3726

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These developments have been particularly pronounced in the UK over the past

25 years (De Ruyter and Burgess 2003) with the New Labour government elected in 1997

following the previous Conservative regime in assigning employment agencies a key role

in delivering greater labour market flexibility. According to the (then) Department of

Trade and Industry, ‘The private recruitment industry is both a product of the flexible

labour market and a key attribute of its success. For employers, the ability to access the

widest range of skills, quickly and reliably, is essential for competitive performance’ (DTI

1999; cited in McCann 2007, p. 156).

This situation has, in part, resulted from the lobbying activities of employment

agencies themselves (Forde 2008), with peak organisations such as the Recruitment and

Employment Confederation (in the UK) and CIETT1 (at EU level) having sought to

combat any regulation or directives that might limit the freedom of their members

(Biggs et al. 2006, p. 196). Employment agencies have also actively promoted their labour

market role to government and companies as providers of integrated HR solutions that can

help the unemployed back into work and satisfy organisations’ flexibility requirements

(Forde 2001; Peck et al. 2005; Purcell, Purcell and Tailby 2005). Given this, it is perhaps

unsurprising that UK governments have been reluctant to regulate the employment agency

market (McCann 2007).

However, while these developments in the wider regulatory arena are well understood,

less is known about the relationship between the state and employment agencies where

the management of its own workforce is concerned. Here, there may be contradictory

imperatives or logics at work. On the one hand, in a context of reforms aimed at bringing

employment practices closer to those of private firms (Kirkpatrick and Hoque 2005; Stuart

and Martinez Lucio 2008), one might expect there to be some enthusiasm among public

sector employers for agency working. Lending support to this view is the fact that between

1984 and 2006 temporary work in public administration, health and education in the

UK grew by 82% (National Statistics Office 2005). On the other hand, as an employer, the

state’s approach may be shaped by the high costs associated with using agency

workers (especially in core services) and other competing notion that emphasise the need

to modernise employment relations and pursue a ‘third way’ between markets and

bureaucracy (Addicott, McGivern and Ferlie 2007; Dibben, Roper, James and Wood

2007). Implied here is a disconnect between the neo-liberal approach that governments

have adhered to in their broader policy-making role and a more regulatory stance as direct

employers and clients of employment agencies.

In this article, our aim is to explore this issue, focusing specifically on developments in

the National Health Service (NHS) – currently the UK’s largest public sector employer.

Over the past decade, the NHS has been a prime user of employment agencies (Grimshaw

and Carroll 2007). However, as discussed below, concerted efforts have been made

recently both to regulate and ‘manage the market’ for agency staff and also to develop

alternative forms of flexibility.

The remainder of this article contains four sections. First, we provide a discussion

of the approach to agency use that one might expect public employers to have adopted

in the context of competing new public management (NPM) and so-called post-NPM

imperatives. This is followed by a discussion of the data used and a description of our

NHS case study. The analysis reveals a marked shift in way the state has acted, as a

user of agency services, with attempts having been made to manage the market and

develop alternative approaches to meeting employers’ flexibility needs. The final

concluding section discusses the wider implications of these findings for theory and

future policy.

I. Kirkpatrick et al.3712

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The changing role of the state as a user of employment agencies

When seeking to explore the changing relationships between nation states and

employment agencies, our starting point is an inclusive view of the state as a broad-

based regime that consists of institutions that penetrate civil society at a numerous levels

(Crouch 1993). Hence, where employment is concerned, nation states play numerous

roles, including the development of procedural regulation and substantive employment

rights, structuring the labour market through macroeconomic policies, influencing the

‘supply side’ in terms of employee capabilities, defining levels of welfare provision and

constructing notions of industrial citizenship. Of central interest here, the state also plays a

key role as a direct and indirect employer (Hyman 2008).

The approach nation states have taken to these roles has, however, varied considerably

over time. Jessop (1994, p. 263) notes how increasing globalisation has engendered a shift

from welfare to workfare, with states becoming less concerned with full employment and

re-distributive rights and more concerned with a ‘productivist reordering of social policy’.

Where employment regulation is concerned, this implies a weakening of rights and a

promotion of labour market flexibility to promote national competitiveness (ibid). Hence,

in the public sector, there has been a move away from the state as a ‘model employer’ at

the vanguard of ‘progressive’ employment practices, towards a more restricted,

‘regressive’ role (Hebdon and Kirkpatrick 2005; Stuart and Martinez Lucio 2008).

While these tendencies are apparent across the developed world, they are most

pronounced in the so-called liberal market economies (Hall and Soskice 2001) that already

have weak laissez-faire traditions of regulation and where the influence of neo-liberal

ideas has been greatest (Hutton 2003). In these countries, there has also been a stronger

emphasis on the adoption of NPM principles aimed at narrowing the gap between public

and private sector practices (Dunleavy, Margetts, Bastow and Tinkler 2006) and

introducing competition and free market principles into public organisations. From an

employment perspective, this heralded an attack on traditional bureaucratic hierarchies

such as internal labour markets (ibid), which in turn has had implications for attitudes

towards temporary working and employment agencies.

Following the logic of NPM, an early assumption was that agency and other contingent

forms of employment would be beneficial for employers in the private and public sectors

alike. For example, in the flexible firm model (Atkinson 1984), agency workers were seen

as peripheral employees that provided numerical flexibility and hence enabled cost

savings. Such workers could be easily dispensed with as demand for services declined and

readily re-hired if demand subsequently rose. The expectation was that employers would

deliberately choose to restructure their workforce along such lines (Kalleberg 2001,

p. 487). This message found clear expression in a range of government policies aimed at

promoting outsourcing and market testing (Conley 2002; Grimshaw, Earnshaw and

Hebson 2003) and was also reinforced by moves to devolve budgets across the public

sector (Hegewisch 1999). This provided local-level managers with greater freedom to use

temporary staff for what Hunter, McGregor, MacInnes and Sproull (1993) describe as

‘new’ reasons (as a substitute for the permanent labour force) as opposed to ‘traditional’

reasons (as a supplement to the established workforce to cover for short-term absences).

There are, however, indications that as direct employers, nation states face some

competing imperatives thatmay lead them to reduce their dependencyon agencyworkers. For

example, there is a growing awareness of the costs (both direct and indirect) associated with

agency working (Hoque and Kirkpatrick 2008), especially in terms of rising fee levels. A

CIPD employers’ survey (2007, p. 19) reported that in 76% of organisations, using agencies

The International Journal of Human Resource Management 3713

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‘considerably increases the cost of . . . recruitment spend’. This is most notably the case for

highly skilled professional agency workers pursuing so-called portfolio careers, who may be

able to drive up the price of their labour, especially in tight labourmarkets (Kunda, Barley and

Evans 2002; Kirkpatrick and Hoque 2006). There are also no guarantees that agencies will

deliver workers of an appropriate standard, especially when they are under financial pressure

to place staff quickly, regardless of quality or ‘person organisation fit’ (Koene and van

Riemsdijk 2005). Furthermore, agency working might be detrimental in instances where

organisation-specific knowledge is required (Lepak and Snell 1999), as is the case in many

public services, or where there is an expectation that staff will work beyond contract and

engage in good citizenship behaviour (Coyle-Shapiro andKessler 2002).Although such costs

may apply to all forms of agencywork, they are likely to be greatest when agencyworkers are

performing ‘core’ professional roles demanding very specific knowledge and continuity of

care (Hoque and Kirkpatrick 2008).

A declining willingness to use employment agencies might also be linked to the

changing ideas that inform government policy. In recent times, there has arguably been a

partial retreat from NPM principles with the emergence of a so-called post-NPM logic

emphasising the need to tackle the excesses of marketisation through the implementation of

various kinds of regulation. One element of this is the notion that reforms should be

determined less by ideological commitments to free market principles and more by

assessments of ‘what works’ (Boyne, Kirkpatrick and Kitchener 2001). Even when the

focus remains on outsourcing or privatisation (as has often been the case), the message has

been to promote greater partnership and collaboration between purchasers and providers

(Bovaird 2006). In the UK, a partial retreat from NPM principles was also apparent in the

post-1997 New Labour government’s rhetoric of modernising employment relations

(Brown, Charlwood, Forde and Spencer 2007), as demonstrated by the introduction of a

national minimum wage and the acceptance of the EU social chapter (Waring, De Ruyter

and Burgess 2005).While this may not imply a radical break with the past, NewLabour was

nevertheless ‘less dogmatic about the virtues of market solutions and less fetishistic about

the qualities that markets and market competition possess’ (Thompson 2007, p. 25).

These ‘post-NPM’ principles arguably have twomain implications for the approach that

states take to their role as employers and users of employment agencies. The first concerns a

change in the nature of contracts, in particular a shift from open ‘spot’ purchasing of agency

services to more systematic attempts to regulate and ‘manage the market’ (Hoque,

Kirkpatrick, De Ruyter and Lonsdale 2008). This has involved what Druker and Stanworth

(2004, p. 58) describe as ‘preferred, high volume supply relationships’ and also ‘Vendor

Managed Services’ (Hoque, Kirkpatrick, Lonsdale andDeRuyter 2011), which fix prices in

advance and also prescribe standards. Such arrangements, according to the REC/CIPD

(2008), have the potential to help employers avoidmany of the costs associated with agency

working and add value to their resourcing decisions.

The second implication of the emergence of post-NPM principles is that there may be

less commitment to the notion that employment agencies are essential for the achievement

of desired levels of labour flexibility. The possibility here is that public employers may

seek to withdraw from using employment agencies altogether. This could be through the

imposition of budget freezes or through attempts to reduce the demand for agency workers

by improving the recruitment and retention of permanent staff, for example (Hoque and

Kirkpatrick 2008, p. 340). In addition to this (and perhaps less well understood at present)

are other ways in which employers might seek to ‘internalise’ their flexibility

requirements. This might involve restructuring working practices to allow for greater

functional flexibility (Desombre, Kelliher, Macfarlane and Ozbilgin 2006), increasing


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spending on overtime for permanent staff or the development of ‘in-house agencies’,

casual labour pools or ‘banks’ (Stanworth and Druker 2006, p. 183).

Implied therefore is a disconnect between the state’s policies aimed at promoting a

liberalised market for employment agencies in the broader macro economy (McCann 2007)

and its own behaviour as a direct employer and user of agency services. Where the latter is

concerned, there may be an increasing recognition of the disadvantages of agency working

and a desire to find alternative ways for public employers to meet their flexibility needs.

However,while this possibility has beenhintedat in the literature, noattempts havebeenmade

thus far to explore it directly. As such, it is towards addressing this matter that our attention

now turns, focusing on one part of the UK public sector: the NHS. Looking specifically at

nursing, we address the extent to which post-NPM principles have influenced relationships

with agencies as demonstrated by employers’ attempts to regulate the market and ‘internalise

flexibility’. This article also considers the effectiveness and sustainability of these measures.

Background on the NHS

TheNHSwas established in 1948by the thenLabourGovernment, as part of itswider policy of

increased social provision by the state. Directed on a day-to-day basis by its ownmanagement

executives (one each for England, Northern Ireland, Scotland and Wales), the NHS is still by

far the largest primary and secondary health care provider in the UK. In 2008–2009, it spent

most of theDepartment ofHealth’s budget of£98.7billionand,with a totalworkforce in excess

of 1.3 million, continues to be the countries’ largest employer. Most recently there have been

attempts to devolve powers to manage this workforce to semi-independent foundation trusts

(Greener and Powell 2008). However, where most clinical professions (including nursing) are

concerned, employment terms and conditions continue to be shaped by joint regulation and

centralised pay review bodies (Cox, Grimshaw, Carroll and McBride 2008).

As of 2005, 404,161 qualified nursing, midwifery and health visiting staff were

employed in the service – a figure that has grown significantly since 1997 (RCN 2005, p. 4).

The complexities of managing this workforce, in terms of dealing with absenteeism,

maternity leave and changing activity rates, have fuelled a considerable demand for agency

services, as indicated by overall spending figures. While agency workers have been used in

the NHS for some time in a variety of professional clinical, non-professional and ancillary

roles, expenditure on temporary nursing staff (including agency) rose in England from £216

million in 1997–1998 to a peak of £589.7 in 2002–2003 (NAO 2006). Statistics relating to

the total agency workforce are hard to obtain given the incompleteness of data (Buchan and

Seccombe 2006, p. 53). However, an Audit Commission (2001) estimate suggested a figure

of approximately 43,000 nurses working through agencies in some capacity – this being the

most significant area of agency activity in the NHS (NHSP 2008b).

Notwithstanding these trends, more recent figures show that expenditure on agency

nurses has now fallen to £370 million in 2004–2005 (NAO 2006). This same pattern is

also indicated by Table 1, which charts the rise and fall of agency nurse expenditure as a

proportion of total nursing staff expenditure. At face value, this suggests that there has

been a shift in the way in which the NHS manages its flexibility requirements. However,

the exact nature of this change and its consequences remain unclear. It is therefore towards

addressing this matter that our attention now turns.

Methods and data sources

The analysis that follows draws upon a range of primary and secondary sources. Secondary

sources include annual reports and research material from NHS Professionals (NHSP), the


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National Audit Office and Royal College of Nursing (RCN). To complement this, the article

also uses primary sources drawn from three related research projects conducted between 2006

and 2008. The first project, conducted in 2006–2007, focused on changing employment

practices in EnglishNHS trusts. This comprised 26 semi-structured interviewswithmanagers

(including procurement managers and clinical managers) in 21 NHS organisations (18 NHS

Trusts and three procurement consortia representing groups of (other) Trusts), of which eight

were in the South/South-East, five in London, five in the Midlands and three in the North. In

addition, one Regional Director of NHSP was interviewed.

The second project, conducted between July and November 2006, comprised semi-

structured interviews with agency managers from 23 agencies operating in the health care

sector. The agency managers were all senior managers/partners with direct responsibility

for delivery to health care client organisations. Of these agencies, six operated nationwide,

while eight operated solely in London, three in the South/South-East, four in the Midlands

and two in the North. All bar one of the agencies supplied nurses, health care assistants and

allied health professionals to the NHS or had done so at some point in the recent past.

The third project, conducted between May 2007 and December 2008, consisted of case

studies of three trusts in the Greater London area. In all, 30 semi-structured interviews

were conducted across the trusts (10 in each case) with senior managers (including HR

managers), line managers (i.e. ward sisters or matrons), procurement and nurse bank

managers, and agency workers themselves.

In all three projects, the interviews were transcribed with the full consent of

respondents. The data were then content analysed in order to explore common themes and

variation both within and across the three projects. To improve validity, attention was

given to triangulating the data by systematically comparing interview accounts in each

project with available documentary sources.

Managing the market and internalising flexibility in the English NHS

The data from all three projects suggest that the NHS has undergone some significant shifts

in the way it uses employment agencies, with a combination of approaches having been

adopted to manage the market and reduce reliance on agency provision. In what follows,

we describe the evolution of these approaches by examining first the difficulties the NHS

experienced in the agency worker market from the late 1990s to approximately 2004.

We then examine the way in which employers have collectively and individually

responded to these difficulties (e.g. by attempting to regulate the market and ‘internalise’

flexibility) and consider the extent to which these responses represent a retreat from NPM

principles. The final section then explores some of the emerging consequences and

challenges of these new policies and practices.

Table 1. Expenditure on agency nursing staff by NHS trusts in England 2000–2005.

Year Percentage of total nursing expenditure

2000–2001 5.92001–2002 6.82002–2003 6.52003–2004 5.02004–2005 3.3

Source: Bosanquet et al. (2006, p. 11).


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Past dependency on agency workers supplied through open and unregulated markets

Agency nurses have been a feature of the NHS since the 1970s. Initially, agency working

provided a route into the service for newly qualified nurses that were unable to find a

permanent position. However, this changed after 1997 following the investment in the

NHS by the Blair government which led to a sharp increase in the demand for nurses.

A considerable proportion of this demand, as noted above, was met by private employment

agencies.

This growing use of agencies can also be attributed to the decentralisation of budgets

in the NHS. In many trusts, decision making was highly fragmented – each ward

purchasing staff directly from local agencies with which they had developed trust

relationships. Respondents in all three projects highlighted the previous lack of trust-level

control over agency worker procurement, which had typically been delegated to line

managers. Given this, trusts often were simply not aware of how much was being spent at

ward level on temporary staff. As one senior nursing manager in London explained:

. . . there was a concern four or five years ago about the rising escalating costs of temporarystaff within the NHS. There was little control over how much agencies were charging, qualitycontrol, quality assurance frameworks and audits . . . and agency ordering also within theTrust wasn’t very well controlled, in terms of having policies and procedures in place, peopleweren’t necessarily sticking to what they were meant to do.

Arguably, allowing wardmanagers to engage with the agencymarket directly was congruent

with NPM principles of allowingmarket forces to determine the price of agency workers and

to guarantee the quality of agency nurses supplied. It also allowed line managers the

discretion tomanage their workforce as they saw fit to match headcount to demand as closely

as possible. The problem, however, was that the coordination failure resulting from the lack

of systematic and centralised control over procurement provided opportunities for agencies

to engage in exploitative and opportunistic behaviour. As one agency manager explained,

‘there were far too many agencies out there who were allowed to dictate to the hospitals how

much they would charge them and how much they would pay them’.

By 2001, this situation had started to change. At about this time, the sheer scale of the

problem – expenditure having exceeded £450 million (Bosanquet, Haldenby, de Zoete

and Fox 2006) – meant the direct costs of agency working started to receive media

attention. Stories appearing in national newspapers put ministers within the Department of

Health under increasing pressure to restore order within the marketplace (Lonsdale,

Hoque, Kirkpatrick and De Ruyter 2010). Added to this have been more specific concerns

about the risks associated with using agency workers to fill ‘core’ professional roles, which

had traditionally relied on stable teams of nurses employed on permanent contracts (Tailby

2005). These concerns led to two separate initiatives. The first comprised attempts to

regulate and manage the market through the development of regional framework

agreements and preferred supplier lists. The second was an effort to reduce dependency on

private employment agencies through the internalisation of flexibility. In both cases, the

main drivers of change were central government policy makers and the executive

management teams of trust hospitals. The following sections explore these two initiatives

in depth.

Managing the market

In 2001, the Department of Health instructed the NHS Purchasing and Supply Agency

(PASA) to help trusts secure better value for money in the agency market (NAO 2006,

p. 30). PASA responded primarily by developing a series of ‘framework agreements’


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including the first ‘London Agency Project’ and a series of regional agreements covering

the rest of the NHS. These framework agreements formally established both the prices for

different grades of nurses and also the minimum compliance standards that the agencies

selected onto the agreements were expected to adhere to. PASA negotiated rates and

commissions with the agencies using ‘e-procurement’ technology. This allowed for an

online ‘reverse’ auction in which the lower an agencies’ bid, the greater were its chances

of getting onto the framework agreement. A third ‘London Agency Project’ was signed in

2005 and a non-London agreement followed in 2006. Importantly, trust adherence to the

framework agreements has been high. In 2004–2005, 77% of agencies used by hospital

Trusts were on framework agreements for general nursing (O’Reilly, Trueman, Ganderton

and Wright 2006). All the trusts in our research had signed up to one or more framework

agreements.

In addition, a majority of trusts entered into more specific ‘preferred supplier’

arrangements with a small number of framework-approved agencies. These contracts

varied, although normally one agency acted as primary supplier or ‘master vendor’ while

others acted as secondary suppliers, filling the roles the primary agency could not fill.

These arrangements allowed volume discounts to be negotiated with the primary supplier.

Individual service-level agreements also specified quality standards with regard to agency

nurse training and qualifications, for example.

Linked to these new contractual forms, changes occurred to the way trusts managed

requests for agency workers. In most cases, authority was removed from clinical managers

and centralised in the hands of procurement or nurse bank managers. Strict rules were also

introduced requiring ward managers to present a clinical case for agency cover. Questions

were increasingly asked about the tendency to exaggerate the need to fill shifts and to

‘overbook’. In such situations, ward managers were often told by their superiors

to consider alternatives such as re-deploying permanent staff from other wards, or to just

‘make do’. As one trust procurement manager explained:

. . . [w]e now assess every request for an agency nurse and we’ll look at the shift, we look atthe mix of patients; and someone at a senior level will decide ‘well actually you know, thepatients aren’t at risk, you’ve got two members of staff, you can actually manage’. Whereas,in the past, they always had the extra staff. We’re saying to the nursing staff, now you’ve gotto go that extra mile. The other person didn’t turn up, they’re off sick, tough – you manage itlike any other department.

In some instances, rules governing such decisions had become highly formalised, with one

London trust introducing an ‘algorithm’ to determine when a request for cover would be

accepted.

Internalising flexibility

A further attempt to address the rising costs associated with agency use in the NHS has

been to seek alternative ways of meeting flexibility needs. The creation of the NHS’s own

internal agency – NHSP – has been central to this (Heery 2004; Tailby 2005; De Ruyter

2007). Steps have also been taken by individual trusts to re-build their own internal nurse

banks.

NHS Professionals

Formed in 2004, and becoming operational in 2005, NHSP has twomain roles. The first is to

act as a provider of temporary nurses to trusts, thereby bringing it into direct competition


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with private employment agencies. Individual trusts were given the option of transferring

the management of their internal banks over to NHSP, which then acted as a preferred

supplier, only using agency staff if it is unable to fill posts directly. By operating nationally,

the aim is for NHSP to achieve economies of scale, thereby driving down fees and, in effect,

determining the market rate for temporary staff. NHSP has also been able to reduce rates

given that it is ‘non-profit and only has to cover costs’ (trust manager). A second, related

function of NHSP is more developmental, assisting trusts with longer-term human resource

planning and the training of temporary workers (see also Grimshaw and Carroll 2007).

Currently, NHSP supplies over 45,000 temporary workers to the NHS – the majority

of whom are nurses. In March 2008, approximately 200,000 requests for nursing shifts

were made by trusts to NHSP (NHSP 2008a). NHSP acts as a primary supplier of

temporary labour to 27% of acute Trusts in England (NAO 2006, p. 31).

For employers, there are clear advantages to be gained by using NHSP. Most important

is the ability to achieve economies of scale through centralised organisation and national

coverage, allowing NHSP to charge lower rates that private agencies cannot match.

Beyond this, NHSP has an innate appeal to would-be agency workers in that

‘[NHSP] staff can pay into the NHS pension scheme and have all the benefits of working forthe NHS. NHSP staff members have first choice on available shifts and they can still choosehow much or little they will work’. (NHSP manager)

Internal nurse banks

The second way in which flexibility has been internalised is through the more extensive

use of internal banks, in cases where NHSP was not used. Nurse banks can be defined as ‘a

group of flexible employees, contracted to work on an as-and-when-required basis, often at

short notice, to cover for planned and unplanned shortfalls in staffing’ (Scottish Executive

2005). Most typically consist of a mix of bank-only staff (on zero-hours contracts) and a

larger group of ‘dual contract’ staff who have permanent posts but take bank shifts on a

supplementary basis.

Of course, banks are not new in the NHS and have for many years helped hospitals to

adjust to changing labour requirements. The past decade, however, saw a decline in the

ability of many Trusts to manage these services effectively (Audit Commission 2001;

Tailby 2005). As the demand for temporary workers grew from 1997 onwards, most nurse

banks were unable to respond.

In an attempt to reverse this decline, some trusts (including more than half of those in

our own sample) have sought to increase the size of their internal banks, especially the

non-substantive or pure bank element, in three main ways. First, recruitment campaigns

have been implemented specifically targeted towards potential bank nurses. Second, steps

have been taken to improve the terms and conditions of ‘pure’ or ‘full-time’ bank nurses

by offering training and support for clinical development, for example, similar to that

received by permanent staff. By treating them as ‘temporary insiders’ (Wolfenden 2007),

such policies aimed to enhance bank nurses’ citizenship behaviour and commitment to the

organisation. Third, changes have been made to the entry threshold for bank nursing. In a

departure from the past, two London trusts are recruiting newly qualified nurses directly

onto their banks. At another, a team of Practice Development Nurses had been established

specifically to provide mentoring and support for these less experienced nurses.

Beyond this, strict policies have been introduced requiring ward managers to prioritise

the use of bank nurses instead of using agency nurses or overtime payments when seeking

to cover shifts. The rationale given for this ‘bank first’ rule is twofold. First, bank nurses


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are widely believed to be cheaper than agency workers. Second, they are assumed to be

less risky and easier to manage. Although bank nurses may not always possess equivalent

levels of skill or experience, they are more likely to possess organisation-specific

knowledge and therefore require less induction and support.

Of course, the ability of hospitals to lower costs through the use of internal banks is

contingent upon a number of factors – the most important being the availability of supply

of nurses in the external labour market. Generically skilled nurses, for example, are in

more abundant supply and hence are more likely to work at the going bank rate. Location

is also important. If there is only one hospital in the travel-to-work area (as is often the case

in the south-west and north), nurses seeking flexible working arrangements are less likely

or able to seek alternatives to the local bank by signing up to employment agencies. This,

however, is not necessarily the case for more specialist nurses, or in other regions (in

particular London), where the scope for nurses to work through employment agencies is

much greater.

Emerging tensions and challenges

As noted earlier, overall figures on spending on agency nurses (Table 1) over the past

decade suggest that attempts by the NHS to manage the agency market and to internalise

flexibility have had some impact. Framework agreements in particular have reduced the

margins that agencies charge to trusts, helping to achieve much tighter control over

finances. At one London trust, it was noted that typical agency commission rates had fallen

from 20–25% to 15% over the previous 4 years. Framework agreements have also been

useful in terms of specifying the minimum competencies and quality thresholds that

agencies must satisfy.

In addition, efforts to internalise flexibility, both nationally and locally, have

contributed to the lower use of agency workers by trusts. While spending on agency nurses

has fallen in recent years, spending on bank nurses (including NHSP) has grown from

£957 million (2003–2004) to £1,339 million (2007–2008) (NHSP 2008b). In most trusts,

it was reported that the ratio of agency to bank nurses had shifted decisively in favour of

the latter: in one case (a London trust), from 70% agency to 30% bank in 2004 to the exact

opposite in late 2007.

However, these new policies have not been entirely problem-free. In what follows, we

explore the challenges that have emerged both for attempts to manage the market and

internalise flexibility.

Managing the market

Notwithstanding the benefits of framework agreements for NHS employers, concerns were

raised regarding their sustainability. By mid-2008, demand for more specialist nurses had

started to grow with all three London trusts included in our third study increasingly

purchasing ‘off contract’ to secure this labour supply. This meant paying higher prices

with fewer guarantees of quality. There was also growing pressure from agencies, unhappy

with declining margins, to renegotiate the volume discounts that had been negotiated

through the framework agreements.

Added to this were concerns that framework agreements were undermining the quality of

nursing staff being supplied to the NHS (see also Hoque et al. 2008). Here, three main

problems were identified. First, as a result of declining profit margins some agencies had

become increasingly unwilling to supply hospital trusts, preferring instead to place their best


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staff with private health organisations. Second, questions were raised about the extent to

which new compliance standards were being adhered to and the patchiness of audit coverage.

Third, itwas felt thatwhile the framework agreementswere helping to lower agency fees, they

also encouraged what Druker and Stanworth (2001, p. 87) describe as a ‘high volume

“Fordist”-style service delivery’ model. Respondents, both from agencies and trusts,

described how new e-procurement systems had removed some of the ‘human element’ from

placement decisionmaking with agencies concentrating on boosting fill rates over and above

‘person–organisation fit’. In this way, getting the right person for the job was increasingly a

matter of ‘pot luck’, a ‘lottery’ or ‘a bit of a wing and a prayer’ (Ward manager, London).

Problems associated with the internalisation of flexibility

Different problems were associated with efforts to internalise flexibility. First, significant

doubts were expressed by some trust managers and (perhaps unsurprisingly) by agency

managers about the effectiveness and future viability of NHSP. While reducing fee

margins, NHSP frequently achieved very poor fill rates particularly in more highly

specialist areas of nursing. This was attributed to ‘poor administration and management’

and a failure to provide bespoke services to individual trusts. As one trust clinical manager

in the Midlands explained:

. . . the drawback with NHSP was because you literally went into their call centre, if we rangthem and said we needed a nurse and Bristol rang them and Worcester rang them, who got thefirst pick of that? The benefit for us of having an SLA [Service-Level Agreement] with ourown primary supplier [agency] was that they were committed to actually having to supply acertain volume of nurses to meet to their contractual arrangements to us, so we always got firstpick.

Although it was acknowledged by trust respondents that NHSP were attempting to address

these concerns, questions were also raised over NHSP’s record of training temporary staff,

with a number of managers commenting on a ‘surprising lack of investment’ in this area.

In addition, it was suggested by agency managers that trusts were far less stringent in

the quality checks applied to NHSP staff. Some described this as ‘unequal treatment’ or

even ‘anti-competitive’. According to one respondent: ‘ . . . If you’re an agency providing a

nurse into a hospital, then we feel that you have to satisfy more training requirements than

someone going through NHSP . . . ’. It was also suggested by agency managers that NHSP

being in the role of both a provider of flexible staff and overseer of private agency staff

could potentially raise conflicts of interest.

Difficulties were also identified with individual trusts’ attempts to substitute agency

nurses with nurses from their own banks. The first related to constraints imposed by the

external labour market, especially in London, where internal banks were competing for a

finite pool of qualified nurses. It was felt that bank pay rates were ‘not competitive’, with

agencies offering higher financial rewards (if not the same levels of training and support).

These pressures in part explained why a majority of trusts running their own banks were

finding it increasingly difficult to fill all requests for shifts.

A second factor undermining efforts to internalise flexibility through banks was the

limited number of shifts many bank nurses were able to work. The majority had permanent

posts, but were registered with the bank with a view to working occasional supplementary

shifts. As such, they were only able to work a few additional bank shifts before falling foul

of the European Union working time rules (although these were not always enforced).

Hence, absolute numbers of bank nurses did not always equate with the ability to respond

to changing staffing needs.


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Linked to this were the work–life balance and job role preferences of many bank

nurses. In all three London trusts, the banks tended to be less effective at filling shifts on

certain days e.g. at weekends and at certain times with most bank nurses favouring less

demanding night shifts as opposed to day shifts. Of particular concern to managers, many

bank nurses were unwilling to multi-skill and cover shifts across different clinical areas.

This was notably the case with nurses who also held permanent contracts, but were often

only willing to work extra shifts in their own wards.

Finally, efforts to replace agency nurses with bank nurses were hindered by ward

managers’ informal practices with regard to placement decision making. In theory, all

requests for bank nurses had to be communicated to the central bank, which would then

take responsibility for filling the shift. Frequently, however, this system did not work in

practice. In many instances, ward sisters, in collusion with their line managers, tended to

fill bank shifts using their own substantive staff or other nurses who they knew personally.

This had the benefit of limiting risk, given that shifts were being filled by nurses who were

familiar with the ward. At the same time, however, it made it harder for the bank itself to

gain a strategic overview of labour usage across the trust. Informal practices of this nature

also militated against the goal of recruiting and retaining a larger number of pure or non-

substantive bank nurses. As bank shifts were often filled in advance by existing permanent

staff, this meant fewer opportunities for those on ‘pure bank’ contracts, thus making such

contracts less attractive.

Given these challenges, the capacity of internal banks to respond to changing labour

requirements has remained somewhat limited. This in turn explains why a majority of

trusts found themselves having to adopt a ‘dual strategy’, whereby agencies continued to

be used in instances where internal banks were unable to supply.

Discussion and conclusion

The findings presented in this article demonstrate a considerable shift in the way NHS

employers use employment agency services. The market has become increasingly regulated

via the introduction of framework agreements, and considerable attempts have been made to

reduce agency use via the use of NHSP and internal nurse banks. One might argue that these

moves are in keeping with a post-NPM stance as they implicitly acknowledge the dangers of

overt market liberalisation. The introduction of framework agreements suggests a tacit

acknowledgement that unregulated agencymarkets are not sufficient to deliver service quality

at lowest cost, while the use of NHSP and restructuring of internal banks implies that

numerical flexibility can be achieved without recourse to the open market whatsoever.

Taking a wider view, these changes in the NHS illustrate emerging tensions in

government policy. As we noted earlier, the UK state has been at the forefront in applying

neo-liberal principles to the regulation of the broader employment agency market

(McCann 2007). Most recently, this has been demonstrated by widespread anticipation

that the EU agency worker directive, ratified in June 2008, will be incorporated into UK

law in the most minimalist fashion possible (Bowcott and Hencke 2009). However, the

commitment to promote the use of agencies in the wider economy is not – at least where

the NHS is concerned – replicated in the management of public services. As such, there

would appear to be a growing disconnect between the state’s approach as user of agency

services and its broader regulation of the employment agency market, where it largely

continues to preach the mantra of neo-liberalism.

Such conclusions raise broader questions about our understanding of public service

reforms and the role of the state. In the literature, it is often implied that attempts by nation


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states to influence supply side labour market policies and substantive employment rights

will be consistent with their own practices as direct employers (Hyman 2008). By contrast,

the case of the UK NHS suggests that these policies and practices may increasingly be

misaligned. Partly, this can be explained by the tensions inherent within the previous New

Labour government’s project of modernising employment relations and engagement with

notions of post-NPM (Brown et al. 2007; Thompson 2007). However, also important has

been the more practical need for governments to deal with problems of market failure – an

unintended consequence of the previous NPM reforms.

Notwithstanding these conclusions, it is apparent that the post-NPM ‘solutions’ that

have been adopted in the NHS are not without problems of their own. Framework

agreements have reduced fee rates, but this has led to concerns that rates are now so low

that many agencies have been discouraged from supplying the NHS, while those that do

supply will be less able (or willing) to improve the quality of services. Where the

internalisation of flexibility via banks and NHSP is concerned, while this has also

delivered cost savings to trusts and some benefits to workers (Cox et al. 2008), this has

been predicated on favourable external labour market conditions and a purchaser-

dominated market. Indeed, whether NHSP and internal banks have the capacity to deliver

sufficient quantity and quality of staff should labour market conditions change remains

very much open to question.

Such findings suggest that the apparent retreat from free market principles within the

NHS is, at best, only a partial solution to the problems that earlier NPM reforms and a

reliance on open markets engendered. This in turn suggests a need for alternative ways of

meeting employer labour supply and flexibility needs. Arguably, one such solution could

be a ‘full circle’ move back to the state as model employer, whereby terms and

conditions, internal labour markets, training and development, HR planning, job design

and employee involvement in decision making are comprehensively and systematically

addressed and improved (Grimshaw, Ward, Rubery and Beynon 2001). It may only be if

this occurs that the recruitment and retention problems that necessitated the use of

agency workers in the first instance will ever be overcome. Over the past 5 years there

have already been some moves in this direction (see, e.g. recent recruitment campaigns

in the NHS and social services). However, it is open to question how far any drive to

strengthen internal labour markets will be sustainable, especially given rising

government debt and cuts to public sector jobs by as much as 500,000 over the next

four years (Groom 2010).

Of course, when drawing these conclusions it is useful to note certain caveats and

directions for further research. While our study indicates a partial retreat from market-

based solutions, this may have much to do with the highly skilled nature of the work

performed by the nursing workforce. Whether similar pressures exist in lower skilled areas

of the public sector remains to be seen. It is also open to question how far moves to

internalise flexibility in the NHS reflect a deeper shift in the emphasis of policy as

suggested above. Answers to these questions will require more longitudinal research and a

greater focus on the experience of other public services. Only then will it be possible to

develop a more complete understanding of the direction government policy is taking and,

more specifically, the evolving relationship between state and employment agencies.

Note

1. CIETT, the International Confederation of Private Employment Agencies, see http://www.ciett.org/, accessed February 15, 2009.


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Documents

‘Practising what they preach’? The disconnect between the state as regulator and user of employment agencies