Employing temporary workers can be a good strategy if your business is seasonal or you experience peaks and troughs in demand. You only employ temporary workers when you have enough work for them to do. In quiet times, you are not paying people to hang around doing nothing. And if you suddenly experience a surge in demand, you can quickly make sure you have the manpower to cope with it. However, there are a number of potential issues that surface if you employ a temporary worker on a long-term basis.
Agency Workers Regulations
In 2011, the Agency Workers Regulations law was introduced. This gives a number of employment rights to temporary agency workers who have been used in the same role by the same employer for more than 12 weeks. After 12 weeks in the same job, an agency worker is entitled to, for example, the same basic hourly pay rate as a permanent employee, overtime, shift allowances, and bonuses. Employers who try to get around the regulations by dismissing and rehiring agency workers every 12 weeks will face fines.
Agency workers often receive higher hourly rates than permanent employees. This is because of the precariousness of their employment and general lack of benefits such as holiday pay and sick pay. However, if they appear to be employed on a long-term basis, it can cause resentment amongst employees and trades union representatives (if your business is unionised).
If you employ temporary workers through an agency, the agency is responsible for making National Insurance and tax payments. This reduces your work load, but it comes at a cost. The agency charges you for National Insurance payments, holiday pay and sick pay allowances. They will also charge you for their own administration fees and will add mark-ups to increase their profits. This may be worth it for a short-term, urgent contract, but makes long-term employment of temporary workers very expensive.
An alternative to employing temporary workers through agencies is to employ temps directly on a self-employed basis, whether as sole traders or with their own limited companies. The difficulty comes when you are their only client and you have been paying for their services on a long-term basis. The Inland Revenue may conclude that your arrangement is in fact an employment relationship in disguise, and that you should be paying National Insurance contributions on their behalf. Seek professional advice if you think you may be in this situation.