A new report carried out by law firm Allen & Overy has revealed that 500,000 temporary employment contracts could be at risk due to the Agency Worker Regulations (AWR) that are due to come into force on the 1st October, 2011.
According to the report 33% of medium to large businesses in the UK could attempt to avoid the increased costs by terminating contracts before the new rules take effect.
The Agency Worker Regulations are a set of rules that call for equal treatment to agency workers so they have the right to the same basic employment and working conditions as permanent staff, as long as they have worked for a period of 12 calendar weeks in the same job. While Limited Company freelancers should be outside the new rules, contractors using Umbrella Companies are directly in the firing line.
The Allen & Overy report has estimated that UK businesses could payout an extra £1.3bn a year in order to provide equal benefits to agency workers. The average cost per worker is between £1,755 and £3,722, or £90,000 per business per year.
Stefan Martin, employment partner at Allen & Overy commented: “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.”
Despite these concerns, another recent study carried out by Citation, employment law experts, has suggested that small and medium sized UK businesses are more concerned about absence due to staff sickness rather than the much publicised AWR reforms. Meanwhile other industry figures aren’t sure the AWR will have any impact at all. With October just around the corner, we’re bound to find out soon!
