As early as 2010 temporary workers could be enjoying the same pay, perks and general bonhomie as their permanent colleagues; Annie Hayes quizzed the business community to find out what the impact will be.
The Directive
The Agency Workers Directive is mostly a done deal. A further rubber stamping exercise involving a second reading in Europe with a further six months to allow for amendments (in reality no one expects further changes) and the law will be implemented in the UK in a little over two years.
So what does it involve? After 12 weeks on assignment an agency temp will be catapulted into the realms of ‘equal treatment’. The acid test will compare ‘like for like’ with permanent employees on almost every footing – from basic pay, notice of termination, vocational training and the right to be notified about vacancies etc. It will not as yet include access to occupational pension schemes, share option schemes and benefits such as an employer’s sick pay arrangements.
It’s a massive change in the way this fluid and incredibly important section of the labour pool is treated.
The temporary labour market
Statistics vary on just how many temporary workers there are. The Recruitment and Employment Confederation (REC) estimate there to be 1.3m temps placed every week, the Chartered Institute of Personnel and Development (CIPD) say this figure might be slightly top-heavy pointing at the possibility of ‘double counting’, whilst according to National Statistics the numbers are even larger, rising by 71,000 to more than 1.5m at the end of 2007. Whatever the truth, it’s a slice of the total labour pool that accounts for roughly 2% of all employees making up a significant proportion of spend in the UK of a total £23.16bn and it looks set to increase.
Findings from the REC show that 85% of HR directors intend to increase their use of temp workers.
The CIPD’s Labour Market Outlook (LMO) 2008 report gives us some useful insight into the breakdown of the temp market, noting that the incidence of agency workers is particularly high in manufacturing and the public services. Take up in England is highest, reporting proportions well over 70% and several over 80% and relatively low in organisations employing fewer than 50 staff in total (54%).
What employers think of agency workers
A lot of the arguments over ‘fair treatment’ boil down to pay. According to de Poel, an independent consultancy that works with companies to reduce the costs associated with temporary and permanent staff recruitment, there are two camps. They say that users and suppliers of higher paid agency workers (such as in engineering, IT and professional roles) are unlikely to be adversely affected by the new laws because their agency workers are probably already better paid than comparable permanent employees. This is not the case for lower paid temps in blue collar roles.
And according to the CIPD’s LMO survey, agency workers typically earn around two-thirds of the earnings of permanent employees. The figures mask those that are well paid such as the IT consultants.
According to Mike Emmott, employee relations adviser for the CIPD 80% of those who didn’t agree that agency workers should be given the same pay and conditions as permanent employees in their LMO report, just don’t buy the moral and ethical argument for ‘fair pay’. “When people say ‘it is only fair’ they do it on an ethical stance – most employers don’t see it in such a simplistic way. They give different rewards to their temporary staff.” Many employers, says Emmott, simply don’t think their temps should be paid at the same rate as their permanent staff because they haven’t proved their loyalty and may not be as experienced.
Mike Emmott, CIPD
Negative reaction
Overall attitudes to the Directive, according to the findings of the LMO survey are pretty negative. The majority of respondents didn’t think it was necessary or sensible to have further laws in this area.
A major bone of contention and the main economic argument against the Agency Workers Directive is that it will raise the cost of employing agency temps. This, it is claimed, will reduce the use of agency workers – thereby reducing the flexibility such workers provide and thus harming workplace productivity – and possibly result in lower employment. It is also argued that jobless people would find it harder to enter work through the ‘temp-to-perm’ route, says the LMO. Yet it’s not an argument that everyone buys. Alison Harter, sales and marketing director, de Poel, formerly of Monster.co.uk doesn’t believe it will impact on temp numbers saying that as long as the reasons for hiring remain, including seasonal fluctuations, extra work and to cover staff, the demand will continue.
It cannot be ignored, however, that of all respondents to the LMO survey, 39% think that the introduction of the Directive would have an impact on their recruitment strategy. Of this figure more than two-thirds (68%) think that they would recruit fewer agency workers – with around a third stating that they would in turn hire additional permanent staff.
The LMO survey also asked employers which of the two items of EU legislation under consideration would likely have the greater impact – the Agency Works Directive won hands down.
The CIPD are not alone in their stance against the Directive. The Federation of Small Businesses (FSB) has gone as far as to label the agreement a disaster. Tina Sommer, FSB EU and international affairs chairman, said: “Part of the reason for the UK’s relative economic success in the past decade has been the flexibility of its workforce. This deal could put all that at risk at the worst possible time”.
Tina Sommer, FSB EU
Concern also centres on how the Directive will be managed in practice. Anne Fairweather, head of public policy at the REC envisages several ‘complexities’. “Lots of positions are difficult to compare – consider locum doctors for example. It could become quite bureaucratic and assignments may get shorter.”
Fairweather also believes there will be concerns over how much information would be appropriate to give about rates of pay to an external agency. A further sadness she says is that in repeated monthly surveys by the REC around 84% of temps report they are satisfied with their assignments.
Indicating that they don’t hanker after the terms and conditions that will fall into their lap when the legislation goes through. Although Harter says this doesn’t mean, however, that they will continue to be happy.
The brighter side
Emmott says that the CIPD have longed ‘stopped crying into their beer’ and instead are now working at getting the implementation right.
Harter says there are also areas which the legislation doesn’t appear to capture, pointing to ‘ways around’ the law. Companies can look at increasing the number of limited company contractors they use (as opposed to traditional ‘agency temps’). Bosses can also engage agency workers for 12 weeks at a time, and then dispose of them or engage agency workers on a ‘project basis’ and treat all temps as ‘trainees’ for the purposes of establishing the pay level they should receive. This, says Harter, is a common approach in countries like France where measures similar to those covered by the deal are already in place.
Unsurprisingly the unions are also backing the deal. TUC general secretary Brendan Barber called the agreement a victory for union campaigning. Attitudes aside, Harter says that employers can’t afford to bury their heads in the sand advising them to take steps now.
Making preparations
“The first thing companies should do is to start to understand how they are using their temporary workforce,” advises Harter.
The ability to compare rates of pay with grades will also put employers in pole position, deciding whether temps should be taken on as part of a project basis.
Employers could also do worse than gear themselves up for a rocky ‘teething period’ and looking at the example of other countries where similar legislation is in place could be useful. The clock is ticking and the time for upset and anger it seems is long gone.
3 Responses
Freelancers should not panic about agency directive
“A worry for PCG’s members, who are highly skilled contractors and freelancers, is whether their way of working will fall within the scope of the directive. The definition of an agency worker in the text of the directive is unsophisticated and its scope will not be finalised in detail until it comes to the UK for implementation, which will be next year at the earliest. We are hopeful that freelance professionals will be excluded. Many of PCG’s members are highly skilled professional freelancers who run their own businesses as limited companies – they do not need or indeed want the same protection as some of the more vulnerable workers out there who do need the protection. However, UK contractors and freelancers should not panic – the new rules won’t come into force until 2010 or even later. On the whole, the government has been quite supportive of labour market flexibility: they blocked this measure for six years and when that was no longer possible negotiated the least worst outcome.”
Agency Workers Directive
This is a good example of one size fits all legislation. If you look at the assumptions behind the EU approach, it considers all ‘temps’ as people who have been deprived of a real job (with a large concern) in some way. It assumes that everyone’s desired state is to be employed in the traditional manner andthe background work done had real difficulty in perceiving anything else was possible.
In the beginning, the UK government wished to protect poorly paid (and perhaps vulnerable) people from being taken advantage of. This is a laudable aim.
However, it is a very big jump from this to assuming what the EC has.
The original documentation was poorly drafted and confused the concept of worker and employment – which by the way doesn’t help with things like ir35.
The UK legislation had to have an ‘opt out’ introduced, so that people who clearly did not require any form of employment protection, because they definitely did not wish to be treated in any way as an employee (temporary or otherwise)could be excluded from the legislation. Hopefully, the EU inspired regulation will do the same.
Cost of flexibility
The FSB fears for the loss of economic benefit from the loss of flexibility. Unfortunately while the economy has benefitted, the cost of the flexibility has in many cases been borne by indiviual workers, who cannot get mortgages, save for pensions or even plan for holidays. For an inclusive society it is important that the economic benefits be shared and this is what the EU regulations are trying to ensure.