A third (33%) of UK employers are planning to avoid increased costs associated with the Agency Workers Regulations (AWR) by terminating agency worker contracts before the 12-week qualifying period for equal pay and benefits takes effect, according to research by law firm Allen and Overy.
From 1 October 2011, under the terms of the Agency Workers Regulations (AWR), agency workers will qualify for equal treatment to permanent employees in respect of pay and benefits after a 12-week qualifying period.
The research found that 54% of respondents currently employ agency workers for more than 12 weeks at a time. It estimated this change could cost UK businesses £1.3 billion a year to provide equal benefits to agency workers, an average cost per worker of between £1,755 and £3,722, or £90,000 per business per year.
The regulations will also require employers to provide a raft of information to agencies to determine what level of pay and benefits workers should be entitled to after completion of the 12 weeks qualifying period.
Additional findings include:
- While 93% of respondents felt they were prepared for the changes on the whole, 28% of employers did not know how much the new rules will cost their businesses
- 20% of bonus-paying organisations will face an increase to the annual bonus pool of between 5% and 15%
- 57% of organisations offer performance-related bonuses, however, 37% have not yet considered how they will appraise temporary workers once the new rules come into force
- 35% of all respondents said that they have not yet considered the issue of auto-enrolment in relation to agency workers, while 59% of respondents have yet to consider the cost impact of auto-enrolment to their businesses
Stefan Martin, employment partner at Allen and Overy, 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.”
Read more articles on the Agency Workers Regulation (AWR)