Regulations to hike cost of temp workers

NEW AGENCY Workers Regulations coming into force on 1 October might not seem a great concern for many FDs. However, as FDs are frequently responsible for the HR function of their organisations, they may find that they affect them more than previously imagined.

For some businesses that rely on agency temps to supplement their existing workforce, the new regulations may increase the costs of doing so to the extent that it might not be cost-effective any longer. And, with penalties of £5,000 for each agency worker against businesses that deliberately attempt to avoid the regulations, the potential impact of falling foul of the new rules is not to be sniffed at.

The regulations will give agency workers unprecedented new rights. They will now be entitled to the same facilities and amenities as permanent staff from day one. These include things like canteen and childcare facilities as well as transport services (for example car parking), prayer rooms and shower facilities.

After working for 12 continuous weeks in the same role for the same hirer, temps will have a right to the same basic working and employment conditions as comparable permanent staff. They will be entitled to the same overtime, shift allowances, holiday pay, and bonuses or commissions if they are attributable to the worker's own work.

The cost of hiring a temp will therefore be similar to the cost of a direct employee, undermining the reason that many FDs choose to hire temps in the first place. Although temps won't be entitled to sick pay, occupational pensions, redundancy or maternity pay, businesses may find hiring temps significantly less economical than they did before.

A break between or during assignments will not trigger a new 12 week qualifying period unless the temp stops working at the business for more than six weeks. However, sick leave of up to 28 weeks, annual leave, a temporary cessation of work for a pre-determined time (such as school holidays or seasonal factory shutdown), jury service of up to 28 weeks, and any industrial action will only cause the qualifying clock to pause if the agency worker returns to the same role. In circumstances where the absence is for reasons relating to pregnancy, childbirth, or maternity, paternity or adoption leave, the qualifying clock will continue to run even during absence.

Claims for failure to provide the same basic conditions could prove costly. They can be brought to the employment tribunal and there is no ceiling to the compensation payable. In most cases, employment agencies will be liable to pay the compensation ordered. However, the hirer will become liable for any tribunal compensation if the agency took reasonable steps to obtain information about the hirer's basic working and employment conditions, and the hirer failed to supply accurate details.

Risking such high costs, FDs will need to take proactive measures in order to minimise the impact of the regulations. Businesses should review how long agency workers are needed for an assignment and engage with agencies in order to ensure that their temps receive equal treatment to comparable permanent employees.

Employers using large numbers of temps can ask agencies to consider a derogation contract: a permanent contract between the temp and the agency. The obligation is then on the agency to find work for the temp and pay them between assignments. Provided that specific conditions are met, temps will not be entitled to the same pay as the hirer's permanent staff.

The financial cost as well as the organisational impact of these regulations could make the widespread use of agency temps a thing of the past. Agencies and hirers will have to share even more information than they do at present, and and they must closely monitor when a worker is entitled to equal treatment. FDs should therefore not disregard the regulations; instead they should assess their impact both on the organisation and on the bottom line.

James Wilders is a partner at Dickinson Dees