Employers are terminating agency worker contracts ahead of new equal treatment rules, a City law firm has warned.
As of 1 October 2011, agency workers will qualify for equal treatment to permanent employees in relation to pay and benefits after 12 weeks.
According to a report by Allen & Overy, Changes to Temporary Workers, up to half a million temporary contracts could be under threat as a result.
The firm’s research among 200 medium to large UK businesses found that a third may be planning to avoid increased costs by terminating contracts before the 12-week qualifying period kicks in. It estimates the new rules, which implement the European Temporary Workers Directive, will cost UK business about £1.3bn per year (between £1,755 and £3,722 per worker).
It found that a quarter of employers did not know how much the new rules would cost their business; one in five bonus-paying companies faced an increase to their annual bonus pool of between five and 15%; and a third hadn’t yet considered the issue of auto-enrolment of agency workers into pension schemes.
Allen & Overy employment partner Stefan Martin said: “The advantages of using a flexible workforce during the current economic climate will be compromised as employers feel the burden of additional rules and regulations. While businesses will undoubtedly continue to use agency workers, this will result in increased costs. Rather than strengthening their rights, this may actually make the position of agency workers much more uncertain, exposing them to early termination of contracts.
“Users of agency workers need to assess how they are going to manage their temporary workforce going forward and should review their contracts with agencies to minimise the scope for agencies to simply pass on increased costs to business.”
