One of the largest employment agencies in the West Midlands has warned of “chaos in the courts” when regulations to improve the pay and working conditions of temporary workers kick in after Christmas.
First Personnel managing director Matthew Reddy said a new law designed to put agency staff on the same pay rates as permanent employees would result in a huge pay day for lawyers as firms and unions queued up to challenge the way the new system is being implemented.
Introduced just before the 2010 General Election as the result of a deal between the Labour government and trade unions, the Agency Worker Regulations came into force in October.
All agency workers have to receive the same salary, holidays and other benefits as permanent staff after 12 weeks of employment – something that is likely to increase the wage bills of major companies and many councils by millions of pounds.
Mr Reddy said: “One problem is that there is no case law because this is entirely new in the UK.
“Every time we ask a lawyer for an opinion we get a different answer. No one really knows what is going to happen until cases come to court. It is complete chaos and a lot of people have their heads in the sand over this one.”
First Personnel, which has a £42 million annual turnover and finds work for about 25,000 people a year, says it has briefed all of its clients on the Agency Worker Regulations.
The difference between rates traditionally paid to temporary and permanent staff has in the past been anything up to £5 an hour, meaning a potential £200 a week increase in the wage bill for each agency worker.
Mr Reddy added: “Wage bills will rise for many firms, there’s no getting away from that. We have spent a lot of time and energy talking to companies, but until the first 12-week qualifying period is up at Christmas no one can be sure of the actual effect these changes will have.”
The opportunities for legal challenges are believed to be extensive. Not only must employers provide agency staff with wage rates and holiday entitlements enjoyed by full-timers, they must also make sure that workers on temporary contracts have access to car parking, child care and even the use of lockers – if these benefits are enjoyed by permanent staff.
Employment agencies are divided over the likely impact of the Agency Working Regulations on their bottom line.
Mr Reddy admitted that the new system, seen as fairer by Labour, could backfire with some firms saving money by replacing all permanent employees with lower paid staff on temporary short-term contracts.
The Conservative-Liberal Democrat coalition Government has promised a review of the regulations by the end of next year, with many Tory MPs openly opposing the new system.
Demand for agency workers in the run-up to Christmas remains strong, according to the Recruitment and Employment Confederation.
A survey of 600 employers found that 28 per cent planned to increase their temporary workforce over the next three months, while almost two-thirds were confident of expanding their workforce over the coming year.
Roger Tweedy, the REC’s director of research, said: “Despite latest forecasts pointing to slower economic growth, there are a few positive signs for the job market. Permanent employment opportunities will remain constrained in the short term but longer term hiring intentions provide glimmers of hope.
“Employers recognise the benefits that temporary staff can add in supporting seasonal demand and workforce flexibility during these uncertain times.
“Hiring intentions for temps are up on this time last year despite the Agency Worker Regulations coming into force in October.
"Although the full impact of these regulations will not be apparent until the first tranche of workers end their 12-week qualifying period, the early signs are that temporary and contract work will continue to provide a key outlet for employers and workers.”