Agency Workers Directive threatens UK economic growth

As the consultation on the UK implementation of the Agency Workers Directive closes, the British Chambers of Commerce (BCC) has written to the Business Secretary, Lord Mandelson, expressing major concerns about the legislation’s impact on the UK economy and flexible labour market.

When the Directive is implemented, it will be one of the most costly regulations to British business in the last 10 years, with an annual burden on the private sector of at least £1.5 billion.

In the letter, David Frost, Director General of the BCC argues:

“With the economic downturn, it is even more important that implementation of this Directive is done in a way that does not discourage the use of the flexible workers that are so important to economic growth returning to the UK.

“1 in 4 businesses in the UK use agency workers, rising to 1 in 2 for the largest companies so implementation of the Directive will clearly have a big financial impact. It is imperative that implementation is delayed until the last possible common commencement date, October 2011. Implementing earlier risks crippling the agency sector, hampering job creation, and stifling economic growth.”

Ends

Media Contact:

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people.

Full copy of the letter:

Dear Lord Mandelson,

The British Chambers of Commerce has always been concerned about the effect that the Agency Workers Directive would have on the UK economy and on our flexible labour market. Implementation must not discourage the hiring of flexible workers by Britain’s businesses; otherwise, the economic recovery is under threat.

1 in 4 businesses in the UK use agency workers, rising to 1 in 2 for the largest companies so implementation of the Directive will clearly have a big financial impact. The Impact Assessment itself recognises that the cost to the private sector will be upwards of £1.5bn per year. We believe it is imperative that implementation is delayed until the last possible common commencement date, October 2011. Implementing earlier risks crippling the agency sector, hampering job creation, and stifling economic growth.

The BIS consultation document on implementation contains several aspects which are of grave concern to business. The use of the hypothetical comparator will allow disgruntled agency staff to compare themselves to an ‘imaginary permanent employee.’ Allowing the hypothetical comparator will lead to uncertainty, confusion and a huge increase in vexatious claims. The hypothetical comparator is not suitable for equal treatment legislation, as illustrated by the Equal Pay Act 1970 which does not allow their use.

The Directive expressly states that comparison should be made between people in the ‘same job’ yet the BIS document says that comparisons can be made between people in ‘similar jobs.’ To allow people to compare themselves to those in similar, but not the same, jobs is outside the scope of the Directive and will again lead to uncertainty and dissuade employers from hiring agency workers. UK implementation should follow the words and spirit of the Directive and only apply to those doing the same job.

The Directive leaves the question of what pay is for member states to interpret. We were dismayed to see that BIS has gone for the widest definition of pay, to include all contractual entitlements. This will be incredibly burdensome to administer and may encourage ‘levelling down’ of benefits to permanent employees. Many employers do offer other benefits, such as bonuses, to their agency workers but they should not be compelled to do so. Incidentally, many agency workers receive a higher basic salary than permanent employees in recognition that they do not receive all the same perks.

I have also enclosed our full consultation response which highlights these issues amongst many others. Given that this Directive has the potential to dampen the prospects of a quick economic recovery, I hope that the Department will take adequate time to consider these responses and draft the regulations, even if this means legislating next Parliamentary session.

Yours sincerely

David Frost
Director General