WFBSC Policy Position: Employment, outsourcing and the cleaning sector

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1 Introduction WFBSC Policy Position: Employment, outsourcing and the cleaning sector Until recently cleaning employers have been under represented in the global institutions that legislate and/or set the policy context within which the cleaning industry operates. The WFBSC believes this lack of representation has led to a policy context and research base that encourages anti outsourcing groups to attack cleaning employers and to attack the very concept of outsourced service provision. Since becoming a participant in the International Organisation of Employers meetings of sector partners, the WFBSC has sought to do two things: 1. Become the representative of cleaning employers in meetings of the IOE and elsewhere, removing focus from global employers and take the role of defender of the outsourced cleaning sector 2. Rebut negative propaganda about outsourcing and cleaning employment and promote both as methods of economic and employment growth The following document outlines some of the advantages and positive aspects of outsourcing and the contribution of the cleaning sector to economic growth and prosperity. The changing nature of employment The world of work is undergoing significant changes. Whether these changes are being triggered by globalisation, shift towards a greener economy or technological advancements, new realities of work are emerging as a result. These realities present new challenges in the employment landscape and of the increasing diversity of needs of both workers and businesses. Elements of a traditional work model standardised practices, assembly lines, mass production, decreased man power for optimum efficiency increasingly has to exist alongside other models of work such as lean production, learning organisations and outsourcing, as many industrialised countries are gradually transitioning from production based to services based economies. This trend fosters growth in innovative services and solutions and favours the development of such new forms of work organisation. Factors that are contributing to this shift are as follows: Rising number of people being self employed A growth in outsourcing Greater need for working time flexibility (addressing the work life balance)

2 Demise of clear cut patterns of life (students working whilst studying, people remaining employed after retirement age) Blurring of employment forms (franchisee, multi activity) Increasingly dispersed workforces (tele working, nomadism, network companies) Economies are more and more characterised by accelerating change, increased volatility, and complexity. In this dynamic context, businesses need to remain competitive on a global scale while successfully navigating complexity in the global (labour) markets. Against this background, it is important to look more in depth to the role that business services play in helping organisations around the world to remain competitive by facilitating adaptation to change and enabling them to focus on their core business and leaving the non core functions to the specialists. The case for outsourcing Research by global facilities provider ISS shows that in the UK alone, outsourcing is worth 120 Billion to the economy, and 10.5% of all UK jobs are those of an outsourced nature. Key industry players in facilities management are increasing their share of voice around the issues that drive the UK economy, including Corporate Responsibility, carbon reduction, the living wage, sustainability and more, driving up standards and living conditions and helping the economy and businesses become greener and more environmentally sustainable. There are a significant number of associated benefits to outsourcing services. The following is a brief summary of some of those benefits identified by a variety of sources: 1. Reducing risks clients can share risks with the outsourced service provider I. Commercial risk: a large service provider can pool contingency required for corrective or reactive asset maintenance and therefore can provide comprehensive service quality. This in turn guarantees savings though maximum or fixed price terms in contracts not possible with in house solutions. A large provider can also manage transition and transformation costs within any overall agreed savings targets and can guarantee an implementation time line for them. II. Pricing risk by engaging in long term outsourcing contracts organisations can be guaranteed fixed price/quality ratio even if the market changes. III. Continuity risk large service providers can offer workforce retention and career development, continuous education and succession planning. The service provider also takes charge of recruitment and dismissals as well as covering holidays and absence. The service provider can also support cultural change supporting harmonisation, transparency and flexibility. IV. Health, safety and environmental risks respecting rules on these risks are a shared responsibility between the client and the service provider. The service providers

3 standards and local regulations can be aligned in all working environments to ensure personal safety of employees and environmental safety of the workplace 2. Increased professionalism outsourcing service provisions to dedicated companies makes the operation of these services more professional in appearance, work practices and products used, resulting in an increase in other areas such as service excellence and sustainability. 3. Service Excellence outsourcing a service to a contractor whose core function is the provision of that service drives up the standard of the service and the efficiency of its performance, as their business is focussed on providing the best service possible in order to keep a particular contract and/or procure more contracts. 4. Increasing education and training outsourced service providers can invest more time and money into improving the skills and qualifications of staff to perform the core function of the service, as this is improves the core business of the provider, which in turn helps raise the image of the industry from one with low status jobs to one with chances of a professional career. 5. Cost efficiency research by ISS estimates that upon primary outsourcing clients can reduce their cost base by 10 12%, followed by further reductions of around 2 4% every subsequent year they use the outsourced service provider. By outsourcing some or all internal service functions it is possible to free up resources, enhance competitiveness and promote sharper strategic focus on the service provider, improving quality of service. Furthermore, outsourced staff can be integrated with non outsourced staff through multi skilled training, so cleaning staff can supplement their daily routines and be called upon by the client to work in additional capacities when their schedule allows. 6. As well as the initial cost savings/cost efficiencies generated through outsourcing a service, there are a number of indirect cost savings to be made. These are sometimes hard to predict and evaluate but research shows they can be found across a number of departments for clients: I. Finance departments when a service provider takes over, they may purchase machines and tools from the client, which saves the client depreciation charges on these assets. There are also reduced costs for processing of payroll; budget management and cost control resources; lower invoicing costs (as there are fewer contracts to manage and employees to pay and less invoices as those relating to outsourced employees will be taken over by the service provider). II. HR departments resources are freed up that were previously used to manage personnel issues, typically in staff recruitment, development and retention, as well as various administrative tasks. Furthermore costs will be reduced during the recruitment stage: drawing up job descriptions, advertising jobs, application screenings and carrying out some initial interviews will all be done by the service provider.

4 III. Procurement for large organisations offering integrated outsourced facility services, the number of contracts to be managed is reduced (to one) and a single point of contact and communication for activities related to contract management releases resources. IV. IT department cost savings can be made from three sources: hardware, software and licenses and IT support. The service provider will use its own computers, laptops; PDA s and pays for the software uploaded on these devices. Service providers will also operate with their own IT support service, saving the clients IT department resources that were previously used to support those systems. V. Corporate real estate ISS research identifies that outsourcing services reduces the number of onsite employees (by having central management and support functions moved to the service providers offices) and therefore space consumption VI. VII. VIII. Management time and focus Outsourcing the services to a specialist organisation frees up senior management of the client organisation to focus on the core of their business as the service provider will have its own senior management solely devoted to focusing on developing the strategies of their service provision. Business continuity often these activities spread among a number of different departments, so savings will be mostly activity based. Costs associated with facilities management service projects can be saved post outsourcing, freeing up time for the people previously involved as they will no longer be part of the core continuity programme. Dedicated service providers perform their service with better quality and care, leading to fewer accidents, fires, and service degradations to the customer and the associated costs with each. 7. Industry of opportunity according to the WFBSC Worldwide Cleaning Report, the USA is one of the few countries that regard the cleaning industry as one of opportunity rather than low skilled labour. Individuals keen to start their own business in industries with low barriers of entry are drawn to the cleaning sector to do so. Outsourced cleaning contracts allow such business entrepreneurs to be successful. 8. Cleaning businesses themselves can benefit from providing outsourced services through increased turnover and staff numbers. This has particularly been highlighted as happening in France, where the industry is the sixth largest employer and has the second highest turnover in the industry, after Germany. 9. Other benefits of outsourcing include: diversified workforce with access to new skills sets; greater capacity to be innovative; better speed to market for new and better products and services (as well as best quality services).

5 Sources Facility Management: The ISS Way, ISS Whitepaper e_iss_way/ Indirect Cost Savings when Outsourcing, ISS Whitepaper, 2010, Morten Kamp Andersen; Palle Fransen Queck; Peter Ankerstjerne when_outsourcing/ Multi skilling and Job Satisfaction in Outsourcing, ISS Whitepaper, 2010, Morten Kamp Andersen; Peter Ankerstjerne atisfaction_in_outsourcing/ Worldwide Cleaning Report, WFBSC, Contact Details For further information please contact: Andrew Large, Executive Vice President, Salisbury House, London Wall, London, EC2M 5QQ, England