The bill for agency staff this year is likely to exceed £24.8m because of the pandemic, Islington Council has warned.
The authority is preparing to agree a long-term contract of £100m over four years but it also wants to “drive down costs”.
It hopes to make savings by cutting the fee it pays if temporary workers become permanent after 13 weeks.
The executive of senior councillors is likely to agree its procurement strategy this week.
In 2020/21, the council saw agency costs soar to £25.7m – including a £460k bill for agency staff doing lateral flow tests for Covid.
The previous year the authority spent £23.8m on agency staff.
The council hopes that many roles will be filled via its Islington Working website, which aims to help local job hunters, especially women, Black, Asian and minority ethnic residents and people with disabilities.
It will insist that all jobs recruited through whichever employment agency wins the contract must be advertised on Islington Working.
It means there will be no finders’ fee paid to sub-contractors as the council is performing that role.
The deal will see workers paid a minimum of the London Living Wage, and the agency has to agree not to use a blacklist.
This comes after a 2013 council decision that all companies tendering for contracts have to complete an anti-blacklisting declaration.
The council ruled out running its own service as it would cost £300,000 a year to staff, plus £70,000 for IT annually.
It also rejected “cost-prohibitive and inefficient” contracts with several agencies.
Islington Council’s cabinet is likely to agree to use local authority-owned Yorkshire Purchasing Organisation (YPO) to find pre-assessed providers “with a choice to carry out a further mini-competition”.
According to a report prepared for Thursday’s executive meeting, the council will get a share of the profits from the YPO each year as it is an associate member.