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The CBI has set out its analysis of the impact of the Agency Workers Regulations (AWRs) a year after they came into force, and its priorities for the upcoming Government review of the regulations.

Neil Carberry, CBI Director of Employment & Skills, said: “Agency jobs are a crucial way into employment both for people looking for flexible work, and for those seeking experience and a way into the workforce.

“But one year on from the introduction of the regulations, the business verdict is that they are a drag on job creation in this vital sector.

“The regulations are thought to have cost businesses more than &pound1.5bn in their first year, but temps have not reaped the rewards – instead, the vast majority of this cost has paid for paper-pushing to ensure compliance. This has in turn led to a reduction in temps hired in eight out of nine months in 2012, despite a rise in permanent staff being hired.

“We cannot afford to be complacent, given that we would expect increased demand for agency temps in uncertain economic times, not a drop. The Government must not shy away from a review of all aspects of the regulations that are left to the UK to decide. Given the very significant costs of complying with the EU directive, we should be bold in stripping out needless administration that threatens hiring and does nothing to benefit temporary workers.”

The CBI has identified several key areas where the government should focus its efforts to simplify the regulation, 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

Removing gold-plating where the regulations specifically go beyond that required by the directive and UK implementation agreement

Stripping out the perverse incentive in the regulations to lodge opportunistic tribunal claims

Key stats about the agency sector in the UK:

CBI research has shown that 57% of firms that use temps have reduced their use as a result of the regulations. 3% have increased their use, while 8% have stopped using temps all together

TEAM research found that 38% of agencies reported a decline in assignments as a result of the regulations. 18% reported an increase

The same survey found that 62% of agencies reported a negative experience of the regulations

BIS research prior to the implementation of the regulations showed that agency workers received, on average, 96% of the pay of comparable employees.

Falling labour productivity and rising costs will test resilience of the labour market

Responding to official UK second quarter labour productivity figures published this morning (28th September) by the Office for National Statistics (ONS), the Chartered Institute of Personnel and Development (CIPD), warns that the rise in unit labour costs and fall in productivity will test the resilience of the labour market further.

UKlabour productivity fell by 0.9 per cent in the second quarter of 2012 on an output per hour basis, and was particularly marked in the manufacturing sector which saw a 1.5% fall. This is consistent with CIPD research which showed that almost half (43%) of firms in the manufacturing sector have maintained staff levels higher than was required by their level of output during the past year. Meanwhile, whole economy unit labour costs (which include employers’ pension contributions and social security contributions) increased by 0.3 per cent in the second quarter and were 3.2 per cent higher than a year earlier.

Recent research published by the CIPD suggested that one in four private sector firms are maintaining staff levels higher than they need, with as many as two thirds of these reporting that they will be forced to make redundancies if output or service delivery does not pick up by the first half of 2013.

Gerwyn Davies, labour market adviser at the CIPD, comments: & lsquo;Labour hoarding has to be a part of the explanation why productivity and unit labour costs are moving in the opposite direction desired by employers. As CIPD research shows, many companies are holding on to people with vital skills and experience, even if there isn’t all the work available for them. What’s more, the introduction of the Government’s auto-enrolment pension scheme next week will only add to firms’ unit labour costs. This will put more pressure on those employers that are increasingly facing a stark choice in response to lower levels of demand. Either they will continue to hold on to staff, and in many cases restricting pay rises and reducing working hours, or they will feel compelled to start preparing for redundancies”.

Davies continues: “There are other plausible explanations behind the fall in productivity. The rise in the number of people on part-time or temporary contracts against their wishes and the sharp rise in the number of part-time self-employed are symptoms of low levels of demand. It is also notable how the US appears as the standout nation in the G7 for its productivity numbers. Easy access to finance to fund small businesses and help them grow is a factor that many economists will point to. However, all these factors point to the central problem of how to increase demand, which is tough when our own economy is in the doldrums and our main export markets in Europe are in the same place.”


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