We have seen a slow but steady number of call centres being repatriated over recent years from offshore. This has predominantly been due to quality and brand issues but a key reason is that The UK has been more price competitive. Costs have remained fairly constant in The UK but prices have been rising offshore. However, a landmark court ruling could put costs up in The UK.
In The UK, all employees are entitled to holiday pay but the amount of this pay is based on a basic weekly salary and does not include things such as overtime and bonuses/commission. The ruling at The Employment Appeals Tribunal means that the holiday is now based on a full weekly salary. This is potentially a big deal for call centres where overtime is common place and bonuses are used heavily particularly in outbound.
Of course, it sounds like a big deal but let's do some maths to see how much this adds to the total costs.
If we consider a call centre agent earning '1500 per month as a basic salary. If they work 25% above their scheduled hours on average in the form of overtime and add '300 per month of bonuses to their salary, then their average salary is '2175 per month. In a given year, approximately 11% of the working year is holiday entitlement. This means that for this 11% of the year, the cost of paying the holiday pay is approximately 45% higher. Therefore, in an average year, the cost for employing each employee per year is roughly 5% higher per year (11% of 45%). If we calculate this back to how much extra it will cost the employer including national insurance approximately '0.44 per hour. This might not seem huge and this is based on an employee whose total weekly remuneration is 45% above their standard pay. If the total weekly remuneration is only 10% above the standard pay, then the new ruling is only equivalent to a 10 pence per hour increase and so for many companies, this is not an issue. However, if you are a company which relies heavily on bonuses and commission, then it could even be a bigger deal. When companies are calculating the bonuses they pay, it is normally based on a fairly tight formula. It may well be that in future, commissions are lowered slightly in order to accommodate this.
Industry had feared that this would be backdated but it appears that it can only be done so for a maximum of 3 months. However, in an industry which has been forced to be competitive due to the threat of offshoring, there is little room for movement. The challenge for outsourcing agreements is that costs are normally agreed over the course of a contract duration. It is therefore unlikely that these additional costs had been considered when calculating the cost of this agreement and these extra costs will eat into already tight margins.