The introduction of the Agency Workers Regulations next month could threaten up to 500,000 temporary employment contracts, a report has found.
One-third of medium-to-large businesses admitted that they may attempt to avoid increased costs caused by the Regulations by terminating agency workers' contracts before the 12-week qualifying period is reached, according to a report by international law firm Allen & Overy.
The report estimates that the cost to business of providing equal benefits for temporary workers will be £1.3 billion per year, an average cost per worker of £1,755.
From 1 October 2011, agency workers will have the right to the same basic employment conditions - such as pay, holidays and performance-related bonuses - as direct recruits after 12 weeks working for the same hirer in "the same role".
However, the report, which surveyed 200 HR practitioners, found that many employers are yet to look at how the changes will affect certain benefits, with 37% saying that they are yet to consider how they will appraise temporary workers for performance-related bonuses and 35% are yet to evaluate how the Regulations will affect them after pension auto-enrolment rules are introduced next year.
Stefan Martin, employment partner at Allen & Overy, commented: "The advantages of using a flexible workforce during the current economic climate will be compromised as employers feel the burden of additional rules and regulations.
"While businesses will undoubtedly continue to use agency workers, this will result in increased costs. Rather than strengthening their rights, this may actually make the position of agency workers much more uncertain, exposing them to early termination of contracts."
He added that employers that use agency workers need to assess how they are going to manage their temporary workforce, and should review their agency contracts to make sure that they minimise the scope for the agencies to pass on the increased costs.
Employers can find a full guide to what is covered by the Agency Workers Regulations on XpertHR.