Government pension reforms will hit UK's flexible labour market

In both good and bad economic times, businesses value the flexibility provided by hiring agency staff and temporary contract labour.

A recent British Chamber of Commerce (BCC) survey showed that 25% of businesses use agency staff – in Doncaster this figure reaches 33%, meaning that the effects will be felt disproportionately in Doncaster than elsewhere in the country. Overwhelmingly the main reason business gave for using agency staff was to improve the flexibility of their workforce (67%). Businesses highlighted the need to get temporary cover for staff on sick leave or annual leave.

In a recession, it is even more important that businesses can respond to changes in demand by utilising flexible labour. In uncertain times, businesses may not be able to commit to a full-time permanent member of staff and so using agencies and ‘temp to perm’ staff gives them more options.

Commenting, Daniel Fell, Head of Policy at Doncaster Chamber, said:

“Doncaster Chamber is supportive of the intentions of the Pensions Act 2008. We understand the need to encourage better retirement savings and acknowledge that the demographic changes in the UK make these reforms essential.

However, as businesses will have to pay a minimum 3% contribution of earnings to all eligible employees, more effort should be made by the Government to ensure that the administrative burden is as low as possible. We do not believe that this has been the case particularly when Doncaster businesses continue to cite regulation and red tape as the second biggest barrier to growth for their business.”

From 2012, all workers will be auto-enrolled into a qualifying pension scheme but they can opt-out after the initial enrolment.

“We believe that temporary workers, who are twice as likely to opt-out as permanent employees, should not have to go through the process of opting-out every time they start a new assignment. The administrative costs of doing this, which the current proposals suggest, are so severe that there is a real risk of pricing temporary workers out of the market altogether as agencies defer their extra costs onto their clients.

The Chamber recommends that rather than going ahead with reforms, which promote the continuous process of opting-out, agency workers should only have to opt-out once every three years. This would dramatically reduce the overall administrative burden on agencies and avoid the added costs being passed on.

It is logical to suggest that temporary workers should not have to opt-out after each assignment they take on. The administrative costs of doing this are so high that they risk pricing temporary workers out of the market.

One example of this is that employers will have to inform their employees if they have filled in the opt-out form incorrectly. It is small administrative tasks such as these that should be kept far away from employers so they can concentrate on adding value back to the local economy.

Put in the context of the other changes that will be going on around 2012; pension reforms, the implementation of the temporary agency workers directive, and the increase in National Insurance Contributions, this could have a devastating impact on our essential flexible labour market.

The effects of such legislation will be felt disproportionately in Doncaster than elsewhere in the country, as 33% of Doncaster businesses use agency staff.”