A body that represents nursing recruitment agencies has hit out at health secretary Jeremy Hunt for using the sector as a “convenient scapegoat” for the NHS’s staffing woes.
Mr Hunt recently introduced new rules designed to clamp down on what he calls agencies “ripping off the NHS”.
“It could appear to the uninitiated that the flexible staffing cost crisis in the NHS is solely and completely the responsibility of the UK healthcare recruitment sector”
But the Association of Professional Staffing Companies (APSCo) claimed his criticism of the sector was “simply not supported by the facts”.
In an open letter to Mr Hunt, APSCo chief executive Ann Swain accused Mr Hunt of “vilifying the sector”, complaining recruitment agencies were being unfairly blamed for spiralling staffing costs.
Instead, she said staffing issues and rising costs were down to a range of factors including poor workforce planning and the fact the government had cut nursing training places.
“Listening to your rhetoric and the media coverage at the time, it could appear to the uninitiated that the flexible staffing cost crisis in the NHS is solely and completely the responsibility of the UK healthcare recruitment sector,” she wrote.
“The rising costs of temporary staff used by the NHS is caused by a much more complex set of circumstances and is, I believe, a symptom of ineffective workforce planning and a wider issue regarding clinical skills and staffing shortages,” she added.
In her letter Ms Swain defended the sector saying recruitment companies’ margins were often a small percentage of the cost of hiring an agency nurse and “unreasonably large margins” flagged up by Mr Hunt were “the exception and not the rule”.
However, she acknowledged there were “a minority of rogue companies that charge unreasonably high margins and take advantage of the critical need of their NHS clients”.
She also flagged up complexities and “inefficiencies” in the purchasing and supply of temporary staff and the “rigorous compliance burden” on staffing agencies.
“It should be noted that the NHS requires recruitment firms to undergo more rigorous compliance checks than it undertakes for its own staff,” she wrote.
She warned that “without decisive action” staffing and skill shortages would only get worse, but said the recruitment sector could actually help the Department of Health.
She urged Mr Hunt take advantage of the expertise and experience within her body and the sector as a whole to adopt a “collaborative and consultative approach”.
“It’s outrageous that taxpayers are being taken for a ride by companies charging up to £2,000 per shift”
Department of Health
However, the Department of Health said some staffing agencies were “ripping off hospitals” and tackling this was part of a range of measures to help cut costs and improve frontline care in the NHS with agency staff bills costing £3.3bn last year.
“Some staffing agencies are quite simply ripping off hospitals, which is why we’re going to use the vast bargaining power of the NHS to drive down rates and beat them at their own game,” said a Department of Health spokesman.
“It’s outrageous that taxpayers are being taken for a ride by companies charging up to £2,000 per shift for a nurse and skimming off as much as half in fees,” he said.
The strict new rules will set a minimum hourly rate for agency nurses and doctors, ban the use of agencies that are not approved and put a cap on the total agency staff spend for trusts in financial difficulty.
The DH spokesman added trusts were also expected to take steps to address staffing shortages and workforce planning issues.
“A recent review into hospital productivity identified that trusts can also achieve savings through better rostering and workforce planning and we expect trusts to also look at the learning from this,” he said.
The full text of the letter:
18th June 2015
Dear Mr Hunt,
Temporary staffing costs in the NHS
Further to my letter, of 5th June, I am disappointed with your denigration of the recruitment sector, which plays such a critical role in the effective delivery of healthcare in the UK, and that you were unable to spare the time to talk to APSCo about this issue. As the only trade body dedicated to representing the professional recruitment sector, I believe that we are able to provide both a different viewpoint, and some practical advice on how the Department of Health might help NHS procurement bodies and trusts organise their staffing supply chain.
Listening to your rhetoric and the media coverage at the time it could appear to the uninitiated that the flexible staffing cost crisis in the NHS is solely and completely the responsibility of the UK healthcare recruitment sector, which is, in its entirety, unscrupulous and profiteering. However, we believe that this analysis is simply not supported up by the facts. The rising costs of temporary staff used by the NHS is caused by a more complex set of circumstances, and is I believe a symptom of ineffective workforce planning in the NHS and a wider issue regarding clinical skills and staffing shortages in the UK.
A symptom of a much wide problem
APSCo believes that without decisive action to address the root cause, the staff and skills shortages currently faced by the NHS are only going to get worse.
The lack of internal training within the NHS and the ageing demographic within the UK healthcare industry have resulted in a current shortage of allied health professional staff and approximately 20,000 nurses to fulfil existing vacancies across the NHS. Subsequently, over the last 3 years, the demand for temporary staff to work within the NHS has increased dramatically, and is forecast to further increase over the coming years.
In the end of 2015 the Royal College of Nursing forecasts that the NHS will spend at least £980 million on “agency” nurses alone. Their figures show that this has increased significantly year on year from £327 million in 2012-13, £485 million in 2013-14, and £714 million in 2014-15. 
There is a clear correlation between the continued rise in the use of temporary nursing staff and the decrease (of 16% since 2010) in nursing training places within the NHS. There is now an approximate training capacity for only 21,529 nurses in 2015, which represents less than 6% of the total nursing staff within the NHS, and the situation is further complicated by the fact that 45% of the current nurses working in the NHS have the right to retire within the next five years.
A similar skills/staffing crisis exists for doctors and allied healthcare professionals, which given the growing shortfall in home grown healthcare professionals, and the heightened pressures on frontline services, will cause a continued increase in the reliance on temporary staff within the NHS.
Current supply chain inefficiencies
The UK healthcare recruitment market is, as discussed above very large, but very fragmented. The NHS is the UK’s largest user of temporary staff, which is unsurprising when one considers that the NHS employs over 1.7 million people, and needs temporary resource to cover employee leave and vacancies.
There are a number of purchasing organisations within the NHS, which cover the provision of staff. These include the Crown Commercial Service; HealthTrust Europe; and various regional procurement hubs. Each of these organisations has purchasing framework agreements in place, negotiated by procurement professionals, under which a variety of recruitment company suppliers agree to provide staff, at an agreed margin. Individual health trusts may decide to procure staff via any of these procurement bodies, or none.
Therefore, as a recruitment firm providing healthcare professionals into the NHS, it is necessary to tender for a place on a number of framework agreements covering the same supply (nursing staff for example) with different purchasing bodies, and also have some individual agreements with trusts and hospitals that are not part of a framework, to ensure that the recruitment business receives the majority of vacancies within its specialism or specific geographic area.
This is not an efficient purchasing model. It involves a good deal of duplication of procurement effort, and allows hospitals to recruit outside of any framework, and the protection such agreements afford in pre-agreed terms.
The issue of off-framework expenditure
NHS expenditure on temporary resource supplied via any of the framework agreements in place is protected in terms of the margin that the recruitment firm is able to charge. As I explained previously the 2014 UK Recruitment Index compiled by Deloitte and APSCo put the average gross margin on temporary placements in the healthcare sector at 14%.
At this point it would be sensible to acknowledge that the recruitment company’s margin is a small percentage of the overall cost of each temporary worker. The vast majority of the cost to the NHS (bar the 14% average recruitment firm margin, and employment taxes and national insurance) goes directly to the worker. Interestingly, your comments about “expensive staffing agencies” charging up to “£3,500 a shift for a doctor” did not acknowledge the substantial amount that would be paid to the doctor – I assume this is because doctors are not considered politically correct scapegoats – unlike the recruitment sector.
The unreasonably large margins that you have recently cited (as high as 100%), are, and should be acknowledged by you publicly as the exception not the rule.
The NHS does have a problem with expenditure not covered by negotiated framework agreements. This is partly due to the fragmented nature of the procurement provision within the NHS, and the fact that trusts and hospitals can choose whether or not to be part of group purchasing agreements, and partly fuelled by the skills and staffing shortage highlighted above, and the ever-increasing demand for NHS services.
However, it is my understanding, talking to healthcare recruitment firms, that the majority of major staffing suppliers to the NHS supply resource off-framework at similar margins as their “on framework” business. There are a minority of rogue suppliers that charge unreasonably high margins and take advantage of the critical need of their NHS clients, and APSCo believes that these companies should be brought in line with the majority of professional recruitment organisations providing a valuable service to the NHS.
Compliance costs and staff quality
The compliance burden on recruitment firms in the UK healthcare sector should not be underestimated. Within the recruitment firm’s margin (averaging at 14%) the business must fund the cost of undertaking stringent compliance checks on all healthcare professionals put forward for selection by the NHS, the current estimated cost to the recruitment business to undertake this compliance is approximately £300 per candidate.
It should also be noted that the NHS requires recruitment firms to undergo more rigorous compliance checks than it undertakes for its own staff.
We understand that informally the Department of Health has acknowledged the issue posed by the off framework expenditure, and that future plans include an embargo on this expenditure by NHS trusts other than in exceptional circumstances, which have yet to be defined. We further understand that you have tasked Monitor, and the NHS Trust Development Authority, with working with individual NHS Trusts, to set hourly rates. We are also aware that NHS Employers is planning a review of the procurement of temporary staff to determine which are not being supplied under a framework or local agreement.
APSCo is encouraged that, despite the headline comments made by you vilifying the UK recruitment sector, the Department of Health clearly is aware of, and is taking some action to deal with the temporary resource issues faced by the NHS.
APSCo has a wealth of knowledge in helping industry with the tools it needs to set up and maintain a healthy, competitive, but fair and transparent recruitment supply chain. I take this opportunity to ask you to seriously consider taking advantage of the experience and expertise within APSCo and the recruitment sector as a whole, and adopt a collaborative and consultative approach to change within NHS staffing procurement. I would also ask you to refrain in future from using the recruitment sector as a convenient scapegoat, simplifying what is clearly a much more complex issue.