How can business ignite the red-tape bonfire?

The Agency Workers Regulations (AWR), which came into force on 1 October 2011, granted agency workers the same rights as permanent employees. Nick Woodward, managing director at Etz Timesheet Solutions, believes that the AWR are a welcome wake-up call for business in exposing underlying regulatory compliance issues.

The Regulations state that, after a 12-week qualifying period, agency workers are entitled to the same terms and conditions that they would have been entitled to were they recruited directly by the hirer. These include pay, duration of working time, night work, rest periods, rest breaks and annual leave.

The 12-week qualifying period meant that, following the introduction of the AWR, Christmas Eve 2011 was the date on which all agency workers became entitled to the new rights.

The panic triggered by the extension of rights across the agency workforce illustrates a dangerous dilemma for British business.

Companies labouring under the shadow of an uncertain economic future are missing business opportunities and are spending far too much time and money incorporating new Regulations; yet, conversely, the failure of many cash-strapped businesses to adequately prepare for new laws is storing up even greater financial costs for the future.

In a startling illustration of this “catch-22” facing business, a recent report found that complying with those Regulations predicted over the next four years alone will cost an estimated £27 billion; on the other hand, the trebling of tribunals over the past three years, as newly empowered employees flexed their legal muscle, illustrates the equally devastating cost of non-compliance.

The regulatory situation

We know that the rapidly shifting legislative landscape is diverting time and resources away from business growth, stunting enterprise while bloating the administration budget. It is deterring many businesses from making new hires due to the unpredictability of labour costs and the risk of tribunals from any regulatory oversights. The problem is even worse for small firms, which lack the resources to hire external specialists and pay the penalties for non-compliance.

The Forum of Private Business (FPB) estimates that the need to wade through approximately 60 Regulations, updated weekly, is sapping at least £16.8 billion from the corporate purse each year, while the Institute of Directors puts the combined cost of implementing new legislation at £80 billion per year. The risk is so severe that the National Audit Office says many businesses are now afraid to hire. At least eight out of 10 UK companies have been forced to splash out towards an astonishing combined £5.8 billion on external consultants to assist in navigating the legal minefield.

Perhaps the greatest concern of all, at a time of slow growth, is the amount of time that administration teams must spend on compliance. The FPB estimates that around £29.8 billion worth of business opportunities fall by the wayside every year as employers devote more and more time to incorporating new legislation into their payroll systems.

Britain’s membership of the European Union means the adoption of further Regulations. There is already an array of EC Directives on the horizon, from the Parental Leave Directive to the Capital Workers’ and Pregnant Workers’ Directives, which will only increase the administration bill.

Agency Workers Regulations

The AWR remove the last remaining safety net for employers by extending to agency workers the full range of present and future rights.

This is significant for recruitment agencies, which face not only the possibility of businesses reducing their use of temporary staff, but also the added burden of calculating the cost of all future regulatory changes, with their legal obligation to pass on that information to hiring firms. Both businesses and agencies will be compelled to revisit old contracts in light of a stream of new obligations, from maternity rights to office facilities, holidays and bonuses, all of which must be merged with existing payrolls.

Failure to check the small print could put agencies and businesses at risk. New figures show that more than one-third of businesses have not incorporated pension liabilities into their calculations for agency workers.

The problem is further amplified for multinationals, which must calculate the projected costs of various impending rights for thousands of globally dispersed staff, across vastly different legal jurisdictions and currencies, at the same time incorporating differing tiers of employees within many company divisions and subsidiaries into their payroll systems.

Automating compliance

So, how can businesses simultaneously avert the looming legal hazards and cut the exorbitant cost of compliance?

Innovations in cloud-based technology are reducing the burden of red tape and the legal risks associated with the modern “rights era”. Software can be immediately updated to include any legislative changes, enabling companies to instantly and accurately predict the cost of new laws across all employee tiers and company divisions. There is no longer any reason to offload the number crunching and small-print scanning to costly external specialists and in-house managers or to fail to anticipate new laws, legal risks and extra costs buried beneath mountains of paperwork.

The latest software automatically faxes and indexes timesheets, calculates when wages, bonuses and leave are due across multiple currencies and jurisdictions, and can turn a timesheet into a client invoice in 60 seconds. Crucially, it can merge seamlessly with any existing payroll system.

It is no surprise that many businesses are moving towards automating their payroll management. Software-as-a-service systems, such as those offered by our organisation, speed up and streamline everything from financial analytics and credit control to invoicing and timesheet processing. Documents can be electronically “signed” and data can be merged into a single online repository. In the era of worker empowerment, it may be cloud technology that delivers a long overdue “bonfire of red tape” to lift the shackles on business growth.

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