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Nearly one third of businesses might terminate contracts early to avoid Agency Workers Regulations, recruiters claim

Nearly one third of businesses which take on temporary staff and contractors are expected to end contracts early to avoid new laws giving those workers the same employment and working conditions as permanent staff, according to a poll of recruitment companies.10 Jan 2012

The survey, carried out by the Association of Professional Staffing Companies (APSCo) said that 29% of its member recruiters were expecting companies hiring professional level contractors to terminate contracts before the Agency Workers Regulations (AWR) could take effect. Ann Swain, the body's chief executive, said that this showed the new regulations were having an impact "even at the professional end of the market".

The AWR, which came into force on 1 October 2011, gives temporary agency workers the same rights as directly employed staff doing the same work to "basic working and employment conditions", such as pay and holidays. However, to be eligible for those rights agency workers must successfully complete a 12-week qualifying period.

The first 12-week period since the legislation came into force expired at the end of December, and some recruiters have speculated that this will lead to a number of temporary workers looking for new contracts in January. One recruiter, Phil Hutchinson of g2 Recruitment, told APSCo that some of his clients had terminated assignments as the 12-week qualifying period approached, while others were looking to 'buy people out' of contracts or transfer them to fixed-term or permanent positions.

Simon Horsfield, an employment law expert with Pinsent Masons, the law firm behind Out-Law.com, said that, whilst unsurprising, the results of the APSCo survey suggest that many hirers are adopting a high risk strategy.

"Terminating temporary contracts to avoid the impact of the regulations is quite a drastic solution, as that is going to have a major impact on businesses in terms of interruption to the supply of labour," he said. "Employers should only terminate contracts if they are confident that they will not be hiring the same people in the future - operating a 'squad rotation' system to avoid the new laws kicking in is a clear breach, which will lead to a fine as well as employers having to pay compensation to workers."

Only 19% of the recruiters surveyed by APSCo thought that the AWR was contributing towards reduced demand for contractors and temporary staff, although some said the impact was likely to be greater after the first qualifying period had passed.

Lewina Farrell, a solicitor with recruitment agency body the Recruitment and Employment Confederation (REC) said that the world had "not suddenly come to an end" at the end of the year.

"Relatively few calls came into our emergency helpline over the Christmas period, which is a good sign. However, the feedback from members confirms that some clients remain reluctant to share relevant information for equal treatment purposes with their recruitment partners. An immediate priority is to continue reinforcing the message that AWR is an issue for both agencies and clients," she said.

In May last year the Department for Business, Innovation and Skills (BIS) issued guidance (50-page / 335KB PDF) on how businesses can identify what rights individual agency workers are entitled to. It recommended that employers compare agency workers to permanent staff in order to assess what they should be paid. It advised businesses to consult their existing documents such as pay scales, contracts or company handbooks to make sure that agency workers get what they are entitled to.

"A comparator needs to be engaged in broadly similar work, but account can be taken of their skills and qualifications as this may justify a higher level of pay for the comparator. They must work at the same or, if there is no comparable employee in the same workplace, in another of the hirer's workplaces. They will not be a comparable employee if they are no longer employed by the hirer," the guidance said.

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