A year on from the introduction of the Agency Workers Regulations (AWR), opinions are divided over the precise effects.  

The regulations, which were implemented on 1 October 2011, were introduced to give temporary agency workers equal treatment with comparable permanent workers after a 12-week qualifying period.

In the lead-up to AWR, there were fears that it could seriously reduce the use of agency workers, with major consequences for agencies.

And concerns were also raised by employer and other trade bodies of potential damage to the flexibility of the UK’s labour market.

However, according the Recruitment & Employment Confederation (REC), the regulations have caused only “limited problems” for business, with only 4% of employers reporting they had reduced their use of agency workers in direct response.

This is an improvement on previous REC research that only one in 10 employers had stopped or significantly decreased the use of temporary staff in the eight months to April 2012, while a further 18% marginally reduced their use of agency workers.

Further, the REC says that two out of three employers believe that AWR has had no impact on the costs of their business. Employer satisfaction with staffing agencies remains high at 92%, says the trade body.

REC chief executive Kevin Green says: “One year in it’s clear to us that there have been only limited problems for businesses, some real positives for workers and that it’s recruitment agencies across the UK who have really absorbed the administrative burden and costs associated with the implementation of the new rules.

 “Of the minority of employers who reduced their use of temps most of them made that decision because of the wider financial climate, rather than it being a knee-jerk reaction to the new regulations. So it makes sense that demand for agency staff will pick up as growth returns. In fact, our latest data shows that there’s already been a turnaround and the outlook for temps is starting to improve despite the fact we’re still officially in a recession.”

However, the CBI says the regulations may have cost business more than £1.5bn and “are a drag on job creation in this vital sector”.

And the CBI says its research has shown that 57% of firms that use temps have reduced their use as a result of the regulations, while 8% have stopped using temps all together.

The CBI cites TEAM (The Employment Agents Movement) research showing that 37% of agencies reported a decline in assignments as a result of the regulations.

The REC is predicting a rapid return to the use of temps as growth returns, with its latest data showing the use of temps is already starting to pick up even with the economy still in contraction. 

However, on the downside, the REC says that implementing the regulations has increased administrative burden and costs in the form of staff training, more paperwork, new systems and the associated increase in headcount. “This could be contributing to the 2% reduction in net profits reported by agencies between October 2011 and April 2012,” it says. 

The government plans a review of AWR next year.

The REC’s Green says: “The government should either hold a substantial review, which looks at all the relevant issues including pay, assignment lengths, bonuses, or they should leave it alone. 

“What we don’t want is businesses’ time and energy being wasted on a partial review that upsets the current system, creates uncertainty and could risk interfering with the work of agencies and employers making effective use of temporary staff and keeping the temporary labour market buoyant.”

Neil Carberry, CBI director of employment & skills, urges the government to be bold “in stripping out needless administration that threatens hiring and does nothing to benefit temporary workers”.

And he suggests a number of ways that the government could simplify the regulations, including:

• streamlining the highly complex definition of pay to allow for easier comparison

• simplifying the 12-week qualification period so that those on short-term assignments aren’t needlessly caught up in the regulations

• stopping ‘gold-plating’ of the regulations 

Richard Sheldon, senior associate at international law firm Eversheds, says that AWR has improved the pay and conditions for many agency workers, and allowed them access to better pay and to staff facilities, such as a canteen or childcare facilities.

However, he continues, “what is also emerging is a picture of considerable misunderstanding and/or misinterpretation of the regulations, often due to the way in which the regulations themselves are drafted. 

“For example, whilst our experience is that some hirers were ahead of the game and took steps to prepare for the regulations early on, many organisations have yet to implement them properly or fully - frequently because they are unclear as to what is required. 

“Others, on the same basis, have adopted an approach which exceeds requirements, often resulting from misunderstanding of the law and incurring additional, avoidable expense.”