Research we have undertaken in conjunction with the Institute of Directors (IoD) reveals the following: The Government has been saying for months to business that it intends to implement the Agency Workers Directive in a balanced way. But the Government’s chosen approach imposes far greater burdens on business than that required by the Directive.
This has now been confirmed in letters that have been received from the European Commission over the last couple of days which demonstrate that the Government is gold-plating.Cost of gold-plating over 10 years: £12 billion – based on data taken from the Government’s impact assessment we and the IoD estimate that businesses are going to be hit with an unnecessary bill of nearly £1.2 billion a year. The big losers are small and medium sized businesses because they could be excluded. Why is the Government doing this? We suspect that in the run up to the election ministers are being pressurised to go well beyond the letter of the Directive. Ministers were no doubt hoping that businesses and recruitment agencies wouldn’t notice and that we would all be satisfied with a few concessions.
What has the European Commission said?
The Government will argue that what it is doing is necessary because of the Directive, but we’ve just obtained an opinion from the European Commission which demonstrates our long held suspicion that the Government’s approach will unnecessarily apply to the vast majority of the UK’s small and medium-sized firms. The European Commission has told us that the Directive requires an agency worker to be given the same “basic working and employment conditions” in relation to pay and holiday as a permanent employee of the hirer taken on to do the same job. However, the Commission defines “basic working and employment conditions” on pay and holiday as only what is set down in a country’s laws, collective agreements and other “binding general provisions.”
What does this mean?
As an example, a “binding general provision” is basically a company level collective agreement or a pay scale. So if you are a firm hiring a temp and you have a pay scale, the temp would have to be given pay and holiday that is in line with how their job relates to an equivalent permanent employee on that pay scale.
Why does this matter?
Pay arrangements in the vast majority of the UK’s private sector are set by individual negotiation. Only the largest employers have binding pay scales or operate under collective agreements. This means that if a firm hires a temp and its pay arrangements are set by individual negotiations the Directive should have no impact. The Commission makes this point crystal clear in its letter: “On the contrary, discretionary individual pay arrangements used in the user undertaking [i.e. the hirer] would be outside the scope of the principle of equal treatment”.
What are the Government doing then?
Presumably hoping that no one would notice, Ministers intend to give all agency workers equal treatment after 12 weeks in an assignment, irrespective of whether they are on assignment with a hirer that has a collective agreement, etc. This could hardly be further from what the Directive requires.
Costs
The Government has said in its impact assessment that its proposal for all agency workers to get equal treatment after 12 weeks in an assignment will cost employers £1.935 billion a year. Given that 30 per cent of temps work in the public sector where collective binding pay scales are widespread and we estimate that 10 per cent of temps working for the private sector are covered by collective agreements and binding pay scales, we believe that 60 per cent of the £1.935 billion could be saved if the Government implemented in line with the opinion of the European Commission’s position. This means that £1.16 billion could be saved each year, or nearly £12 billion over 10 years.
Commenting, Alistair Tebbit, head of EU and Employment policy at the IoD, said:
“The Government is planning to gold-plate the Directive on a huge scale. But you don’t have to take our word for it, even the European Commission agrees. The Commission has told us that the vast majority of small and medium-sized firms in the UK could be exempted.”
“Instead of following the advice of the Commission the Government plans to drop a £1.2 billion bill every year on the doorstep of British business, with small firms being particularly hard hit. Anyone with an interest in the future of the UK’s flexible labour market needs to start asking why the Government plans to make such a terrible mistake.”
Commenting, Adrian Marlowe, chair of the recruiter trade body, ARC, said: “This approach will affect the willingness of hirers to use agency workers, and damage the flexibility of the labour market. It is seriously bad news for hirers, recruitment agencies and workers alike, leading to significant job losses across the temporary recruitment sector.”
