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Thousands of temps are set to be moved onto permanent contracts with their recruitment agency in the coming weeks, making them exempt from the new law as they would no longer be classed as agency staff, according to a number of recruiters.
Under the rules, coming into effect on October 1, temps will be entitled to the same pay and benefits as permanent employees after just 12 weeks in a job. The law is expected to cost businesses some £1.8bn a year.
But the regulations state that any recruiter employing the temp as a permanent worker can legitimately avoid the rules and continue paying a reduced wage.
A number of recruitment agencies are planning to adopt the so-called “Swedish derogation” model – casting doubt over the usefulness of the new rules.
Staffline, a Nottingham-based recruiter which supplies DHL workers at the Jaguar Land Rover plant in Halewood, is preparing to move hundreds of temps onto permanent contracts.
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The move has attracted intense union opposition but would save the agency an extra £240 per week per worker – or £11m a year – rather than match permanent pay. It would also ultimately save jobs, rather than make temps too costly to supply.
DHL said it would comply with the new rules, adding the derogation model was “entirely voluntary”.
However, the company could not rule out ditching the recruiter altogether and employing the temps directly as fixed-term contractors - which would also make them exempt from the new rules. Workers are expected to hear of their fate in the coming days.
Elsewhere, Staffline is planning to move some 8,000 of its current 25,000 temporary staff base onto permanent contracts, benefiting manufacturers, logistics companies and retailers.
Under the Swedish model, agencies would still have to pay temps during periods when they were not working. But Staffline is understood to be paying the equivalent of one shift’s worth a week; far less than matching permanent pay.
Andy Hogarth, chief executive of Staffline, said the new rules had come at the worst time for business. He said: “The expense and bureaucracy associated with the agency workers regulations is immense and is completely counterintuitive given the fragile state of the UK economy.”
Recent research, revealed in The Sunday Telegraph, showed one in three employers were planning on cutting temps in the eleventh week of their assignment, meaning almost 500,000 agency workers could lose their jobs just before Christmas.
An analysis by Reed, the high-street recruiter, warned businesses could see their costs rise by as much as 30pc under the new rules, or £2.5m a year.
Linda Marshall, head of Reed’s HR services, said temps in the manufacturing, retail and logistics sectors would be the worst affected by company efforts to avoid the new law.
She said: “These employers have hundreds of temps on site and they manage their workforce in that way. They are more likely to be using the derogation model. The very temps this is designed to protect aren’t going to realise the benefits of it. It might be a damp squib.”
The British Retail Consortium said retailers relied on temps to cover peak and trough periods. A spokesman said recruiters were looking at using the legitimate Swedish model.
However, he said: “If you have someone who is the employee of the agency and is on different terms and conditions from existing employees [at the retailer], clearly the objectives of this reform would not be achieved.”
The concerns come after the Department for Business claimed there would be no eleventh-hour review of the regulations, despite David Cameron commissioning legal advice on the matter.
