The latest on the ongoing RPOs issue and bank funding options

The Recruitment Finance Division of Lloyds TSB Commercial Finance has been working closely both within the recruitment sector and the invoice finance community to highlight the ongoing issue of RPOs potentially affecting bank funding options for staffing companies.

This has taken a number of forms. A working party group of invoice finance providers has been seeking to educate intermediaries and end users buyers on behalf of both recruitment businesses and invoice finance providers, on the issue of the controversial ‘Pay when Paid’ clause primarily, plus other restrictive clauses such as the non assignment of debt.

A Recruitment Supply Chain Business Forum was recently jointly organised by APSCo and the ABFA at which all parties, including end user decision makers, RPOs and recruiters, were represented to discuss the issue. Attendees were also polled on topical questions, producing the following interesting results:

- 68% believe that the current supply chain model does not create a level playing field for all participants in the market
- 80% view the existing restrictions on the ability of suppliers to raise finance make the current supply chain practice unsustainable
- 57% supported regulation of the contract chain to assist the supply chain

At the end of the forum a vote was taken on potentially drawing up a code of conduct governing recruitment sector supply chains, with 77% saying they would like this code to help regulate the industry. Overall, at the event there was a fantastically refreshing desire by everyone to find a workable solution. Indeed, on this we are already starting to see a mindset change.

The challenges now are to see a steady improvement in these contracts. I personally expect the RPO/MSP model to only increase in different sectors and with various buyers, therefore we now need to push towards common process, such as a ‘code of conduct’, with the buy-in of all contractual parties. The benefit to the industry of having this code is that end users will hopefully be further encouraged to contract with an RPO who has signed up to the Code as it promotes fairness across the whole of the supply chain.

A code of conduct though is not the sole solution being proposed, and there are others being discussed such as ring fencing supplier monies or further contractual amends. To that end, a meeting is being organised by APSCo with some of the largest RPO companies in June to discuss next steps and ensure the improvement in contracts continues.

As the Recruitment Finance Division of Lloyds TSB Commercial Finance we will continue to play an extremely active role in leading industry discussion on this issue, and will update Review readers on new developments as they occur.