Power to the temps

The proposed directive for temporary workers is trumpeted by
the European Commission as urgently required regulation for a sector in need of
protection. This sounds far-reaching, but what does it really mean for temp
agencies and employers, asks Juliet Darell-Brown

The European Commission published its proposed directive on temporary
workers in March to a hail of criticism from the UK Government and business.

The fundamental principle of the proposed Directive on Working Conditions
for Temporary Workers is to introduce the idea of non-discrimination on the
grounds of being a temporary worker. While the UK’s one million temporary
workers are protected by the national minimum wage and have a right to some
paid annual leave under the Working Time Regulations 1998, they do not have the
right to parity with their permanent equivalents.

The principle of non-discrimination

Article 5(1) of the directive provides that "temporary workers"
shall, during their postings with employers, receive at least as favourable
treatment, in terms of basic working and employment conditions, as a comparable
worker in the same enterprise, unless the difference in treatment is justified
by objective reasons.

Working and employment conditions are defined as: pay, seniority, working
time, rest periods, night work, paid holidays, public holidays and provision
for pregnant women, nursing mothers, children and young people. Although not
explicitly stated in the directive, in European terms ‘pay’ means remuneration
and therefore the non-discrimination principle is likely to include pensions,
health insurance and other benefits.

Exemptions

Exemptions from the principle of non-discrimination are possible for
objective reasons or on the basis of collective agreements. The principle may
also not apply when a temporary worker is a permanent employee of an agency and
continues to be paid between postings. However such situations are likely to be
rare.

There is a further exemption, the "six-week rule", which provides
that non-discrimination may not apply where a temporary worker is on an
assignment (or a series of assignments) with the same business for a period of
six weeks or less. The Confederation of British Industry has called for the
exemption to be extended to 18 months before temporary staff are eligible for
full rights, but it is thought unlikely that such a substantial amendment will
be made.

Other provisions

Other key provisions of the Directive include an obligation on employers to
provide temporary workers with access to permanent employment. Temporary
workers must be informed of vacant posts within the business during postings.
Clauses preventing the temporary worker from taking up a permanent position
with the business they are temping for will be void (or may be declared so) and
equally it will not be possible for agencies to charge temp-to-perm fees. In
addition, temporary workers must be provided with access to the social services
of the business, for example, canteens, crèches or transportation. While on a
posting, or in between postings, workers should be provided with access to
training. Agencies will no longer be able to charge temporary workers a fee for
finding them work.

The theory behind the directive

The genesis of the directive was a consultation launched by the Commission
in 1995 to develop ways and means of improving flexibility in working time
while enhancing security for employees. Expressed very simply, the idea behind
it is that by guaranteeing minimum rights for temporary workers, more workers
will be attracted to the temp sector, which will have a knock-on effect in
terms of the quality, and also the quantity, of the temp pool. Employers will
be attracted by the option of employing temp workers at all levels within an
enterprise, thus solving workforce shortages and the problems created by staff
absences while creating more flexible and progressive working practices.

The legislators hope it will lead to further expansion of the agency sector
across Europe and induce investments. The Commission is downplaying the effect
it will have on agencies’ and employers’ wage bills. However, UK business is
not impressed.

The impact on the UK

The UK together with France, the Netherlands and Germany, employs more than
80 per cent of the agency workers in the European Union. In the UK, temporary
workers account for about 2.5 per cent of workers in the industry, services and
construction sectors and 5.3 per cent of those in the public sector. The
directive could become law in the summer of 2004.

The CIPD stated: "Agency workers allow employers to rapidly meet
changes in business demands and staffing crises. Also, temping is a useful
route into work for the unemployed and young people and provides versatile
employment for people who do not want to tie themselves to a permanent job. The
EU proposals are wholly inappropriate for the UK. They will restrict
flexibility without significant benefit to anybody. The UK Government must
stand firm and resist proposals in Europe for the directive to have a wide
scope. It must insist on a practical approach that protects flexibility for
workers and employers."

The UK’s reaction to the directive is perhaps predictable. The Government
indicated its unease with the draft legislation in February this year, when the
Prime Minister’s official spokesman said: "I think we have our doubts that
other member states would want to rush into pan-European legislation which
might conflict with national regulation. We don’t believe that agency workers
are in exactly the same position as part-time and fixed workers, in as much as
they don’t share a common employer."

We can safely read between the lines that the Government is flexing its
muscles for a fight, although it has been keen to downplay the possibility of a
clash with the Commission.

So, what is the effect going to be?

Temporary worker agencies

Temp agencies are steeling themselves for the deluge of legislation coming
into force in the next few years. The Conduct of Employment Agencies and
Employment Businesses Regulations 2001 are already set to introduce changes to
the way agencies do business. The regulations are still in the consultation
period and although first expected to come into force last summer, a date
remains to be set. The regulations will start to prepare agencies for the
directive by prohibiting temp-to-perm fees (subject to some exceptions) and
ending the practice of charging fees to temporary workers.

The impact of these provisions on agencies will inevitably lead to increased
costs. With less power to hold on to their temporary workers, agencies will be
forced to spend more on recruitment and training and will also want to recover
these costs from the end user, the employer.

There is little doubt that the wage costs to agencies will increase. The
Commission has provided the following statistic: in the UK, the average weekly
income of full-time agency workers was 32 per cent less than the average weekly
income for permanent employees.

It is worth bearing in mind that in some sectors in which workers have
sought-after skills, temporary workers earn more per hour than permanent
employees. However, notwithstanding the existence in some sectors of a wage
disparity in favour of temporary workers, a significant proportion of temporary
workers will be looking for higher wages. As a result, agencies will have to
increase their prices.

Employers

With agency costs increasing, employers will ultimately pay the price, as
hiring temps becomes more expensive.

The legislators found that employers’ decisions to recruit temporary workers
were hardly ever based on cost. A survey showed that only 1 per cent of workers
were recruited because the cost of doing so was lower than that of hiring a
permanent worker. The motivation was almost entirely based on increases in
workload.

This may be the case for larger enterprises, but what about SMEs and
start-ups? The increase in the costs of taking on temporary workers may make
engaging them prohibitively expensive for some businesses.

Certainly for smaller young businesses, a largely temporary workforce can
relieve some of the pressures at the initial stages of a business in terms of
administration and cost. The option will now no longer be available when hiring
a temporary worker could be as administratively complicated and more expensive
than hiring a permanent employee. In addition, employers will have to invest in
the administrative burden of changing policies and practices to make temporary
workers a more integral part of their business.

The introduction of paid holiday is going to increase the cost to the
employer, too. The result of the Directive is that instead of employers having
to comply with the Working Time Regulations provision for 20 days holiday
(including bank holidays) pro rated to all temporary workers, these workers
will be entitled to the same paid holiday as permanent employees pro rated for
the length of the posting. All temporary workers who remain in a posting for
more than the six-week eligibility period will benefit.

The directive provides that temporary workers should be afforded access to
training on a level with their permanent peers. This is going to prove a
difficult pill to swallow for employers who consider training to be an
investment in their permanent employees and their business.

The focus will also now have to shift towards an investment in workers that
includes providing temporary workers with access to the social services
provided to permanent employees. Such social services would include childcare
arrangements (for example crèches), transport to and from work (which would
range from complimentary buses to the provision of season ticket loans),
canteens or, for those few employers who still use them, luncheon vouchers and,
conceivably, gym membership.

The removal of the temp to perm fees and the prohibition of contractual
terms between agencies and employers preventing employers from hiring temporary
workers supplied by the agencies, will encourage employers to fill internal
vacancies from their pool of temporary workers. This knock-on effect will be
complemented by the provision in the directive obliging employers to provide
temporary workers with information about internal vacancies.

Conclusion

It is difficult to predict exactly what the effect of the directive on the
temporary worker sector will be. It is likely that more workers will be
attracted by the idea of temporary work, but how many more workers would be
prepared to give up the security of being a full-time employee just for the
promise of a few more benefits? Employers’ costs will inevitably rise, as will
agencies’ costs, but will employers’ recruitment costs fall? Will they find
that the quality of temporary workers will rise such that the benefits to their
business, in times of increased workload or holiday periods, will be worth the
extra cost and administrative burden? It is not inconceivable.

What is clear is that employers looking to avoid the ambit of the directive
will ensure that they switch temporary workers every six weeks. Such avoidance
tactics can only hurt both business and the temporary worker.

However, before employers and agencies start planning their implementation
measures, let us wait and see how the battle between the Government and the
Commission will play out.

The final directive may look rather different.

Juliet Darell-Brown is an employment solicitor at Mishcon de Reya

Find out more…

on directive at

www.europa.eu.int/eur-lex/en/com/reg/en_
register_052020.html

on agency regulations at

www.dti.gov.uk/er/agency/newregs.htm

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