Employers see rise in costs since Agency Workers Regulations took effect

Employers have faced a rise in costs since the Agency Workers Regulations took effect, with the majority citing increases of more than 10%, according to research by law firm Eversheds.

The research found that some respondents have seen a rise of between 25% and 50%. Nearly two-thirds are relying on at least one or more exclusions to avoid the worst of the impact of the regulations.

The legislation, which came into effect on 1 October 2011, means that, after 12 weeks of employment, temporary agency workers have the right to the same basic working and employment conditions as if they had been recruited directly by the hiring organisation. This applies to pay, working hours, overtime, holidays, rest periods, access to vacancies, and other benefits.

The research also found that more than 17% of respondents use Swedish derogation contracts, an arrangement whereby agency workers are engaged on permanent contracts of employment, which guarantee them minimum levels of pay between agency assignments.

Richard Sheldon, associate at Eversheds, said: “Four years ago, 80% of respondents to one of our studies told us that they feared a hike in costs once the regulations took effect.

“More recent feedback suggests considerably fewer organisations have encountered a rise in their overall UK labour costs although, clearly, some of the impact will have been absorbed, or avoided, in other ways in the run-up to the regulations.

“Last year, just 12% of employers told us they would be adopting Swedish derogation contracts. Our latest survey results suggest take-up of this option is in excess of 17%. They also indicate that those that adopt this approach tend to use it extensively, in our experience exclusively in certain roles or locations.

“The regulations are not drafted as clearly as they might have been in this regard but, once established and adhered to, this mechanism may in fact offer a degree of certainty lacking elsewhere in the regulations. It remains to be seen how practice will evolve in this area in the coming years and months.”

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