UK temp rates increase by over 13 per cent

22 December 2011

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23 December 2011 | Adam Leach

Increases in inflation, VAT and National Insurance have resulted in the rates paid by UK companies for temporary labour rising by an extra 10.9 per cent since January 2010.

The UK Office IQNdex, published this month by IQNavigator, reported that the “robust” rise in temporary worker costs for UK companies was mainly down to tax and inflation, rather than as a result of increased competition in the marketplace.

John Martin, chief executive officer of emerging markets for IQNavigator, said: "We were surprised by the increases that enterprises saw in the first half of this year. However, they are largely explained by the additional statutory costs of employment earlier this year."

The index, which is based on figures from HM Revenue & Customs and the UK Office for National Statistics, reported that since January 2010 rates have increased overall by 13.6 per cent. Calculating the factors around the increase, the report cited annual inflation of 3.8 per cent a year over 23 months, which was responsible for more than half of the increase, and a 2.5 per cent increase in VAT since January 2011, which directly increased the rate firms paid for temporary workers. 

The report also cited the one per cent increase in wage contributions to National Insurance, effective since April, as having contributed because statutory costs are generally passed on to the client by employment agencies.

While companies have to pay higher than inflation rates for temporary workers, they are also under increasing pressure to treat temporary workers the same as permanent staff. Since October 1, temporary workers employed for 12 weeks or longer are given the same rights, such as pay and terms of employment, as those on permanent contracts. However, if the employee takes a break of over six weeks, provided it is not certified sick leave for no more than 28 weeks, statutory/contractual maternity, adoption or paternity leave, or time off for public duties (including jury service), then the term is reset.

 


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