Stephen Booth is Research Director for Open Europe.
As if the eurozone crisis wasn’t already sufficiently threatening UK growth and jobs, soon another EU-conceived measure will provide another heavy blow. Unless the Government intervenes, on Saturday 1 October, new EU regulations will come into force which will make life yet harder for UK businesses. The Agency Workers Directive, as it’s called, gives agency workers the same rights as permanent staff after only 12 weeks, making it more expensive for employers to take on temporary staff. This is particularly critical, as agency work provides many young people with a way into the labour market, something which is increasingly difficult in the current economic climate.
As a result of the new rules, thousands of young workers will be faced with either being out of a job or in search of a new assignment within the next three months. New Open Europe research estimates that, in the UK, around 28,000 temporary employment contracts for those aged between 16 and 24 are under threat.
This comes when the number of young people (16-24 year olds) not in education, employment or training (NEET) stands at 979,000 and the Government is actively trying to get this age group into work. In May 2011, David Cameron and Nick Clegg announced a new initiative aiming to provide funding for 50,000 work placements in each of the next two years (100,000 in total). The 28,000 young people with assignments under threat therefore represent half of the placements that the Government plans to create for the age group in the next year. The Government estimates that the cost of the new regulations will be £1.8bn a year, with £1.5bn of this falling on private sector employers, which the Government is calling on to pick up the economic slack.
It is not only a matter of exceptionally poor timing, the UK also risks implementing the Directive in an unnecessarily burdensome form. Letters from the European Commission, obtained by the Association of Recruitment Consultancies (ARC) and the Institute of Directors (IoD), back in 2009, confirmed that many small and medium sized businesses could be exempted from the rules. The ARC and IoD estimate that £1.16bn could be saved every year by avoiding this gold-plating.
Given the circumstances, shouldn’t the Government be doing all it can to protect employers and young workers?
In fact, the Government could still theoretically delay the introduction of these rules at the 11th hour and then explore ways to implement them in the lightest way possible, giving businesses every chance to create growth and new jobs. This was reportedly still under consideration in Downing Street as little as two weeks ago.
There’s a precedent for this, where other countries have in the past severely delayed or partially implemented an EU law at the last minute. For example, Sweden has so far refused to implement the EU’s Data Retention Directive, which member states had until 15 September 2007 to transpose into national law, and until 15 March 2009 to implement the retention of communications data relating to Internet services. The European Commission has launched infringement proceedings at the European
Court of Justice asking for fines to be imposed but Sweden has appealed and the ECJ has yet to make its final ruling.
The Government has also said that it cannot lessen the impact of the agency worker rules because it fears losing the Trade Union Congress’ (TUC) support for the deal brokered with the Confederation of British Industry (CBI) in 2008, which meant the European Commission allowed the UK to apply equal rights after 12 weeks rather than from day one. However, it is not clear whether the CBI and the TUC – which only represent a fraction of the workforce – legally qualify as the entire range of “social partners” and how the deal would therefore be treated in a court of law. In any case, for as long as the UK does not implement the regulations, the 12-week qualifying period will not be a factor.
The UK currently has by far the largest number of agency workers in the EU. In 2009, agency workers made up around 3.6% of the UK workforce, compared to a European average of 1.5%, which means that the Directive will have a disproportionate impact on the UK. This should be all the reason the Government needs to justify a last minute rethink of these rules and protect the UK’s economic interests and why, in the long-term, the Government should explore the repatriation of employment law from the EU level altogether.