Pensions Act could damage temp industry

The Recruitment and Employment Confederation (REC) has called on the Government to “think long and hard” before introducing measures that could damage the flexibility of the UK labour market.

The REC has serious reservations about how the Pensions Act 2008 will work for people engaged on short-term assignments such as agency workers and contractors. 

The Pensions Act 2008 means that from 2012, all workers will be auto-enrolled into a qualifying pension scheme with the option of opting out after the initial enrolment.  

In a written response to DWP, the REC has said that it has serious reservations about the effect that a high number of workers opting out of the scheme will have on recruitment agencies and employers. 

Anne Fairweather, the REC's Head of Public Policy, said:

“The Government must recognise that many workers on short-term assignments will want to opt out of the pensions scheme for very good reasons. Under the current proposals, agency workers will have to opt out every single time they move to a different recruitment agency, a nuisance for the worker and the employer alike. 

“The legislation risks placing a serious administrative burden on recruitment companies who in many cases will have to refund the worker the contributions they have made so far. Government must recognise that the administration to do this is likely to be more than the value of the contributions themselves.” 

The REC has made representations to PADA, the Government’s own pension scheme, on the need to design a system that cope with the expected high turnover. REC also has serious concerns with how an effective compliance structure can operate in the temporary staffing sector. 

Whilst sceptical at the idea of including agency workers within the scope of the legislation, the REC makes several suggestions as to how to restrict some of the problems, namely: 

• to allow work seekers the realistic option of being able to opt out before they start their assignment and thus avoid the problem of having to refund the worker;
• to allow recruitment companies as well as the scheme provider to issue opt out forms for the worker to speed up the opt-out procedure; and
• to extend the period the agency has to first contribute to the pension scheme and so reduce the instances where the agency has to reclaim the money from the scheme to refund the worker.

Fairweather concludes:

“Temporary work is a vital source of flexibility within our labour market and will be imperative to help British business out of the recession. We need to ensure that this and other regulations such as the Agency Workers Directive do not restrict this flexibility.”