The European Union (EU) employment ministers' agreement this week on the rights of temporary workers and the Working Time Directive (WTD) will have significant consequences for the way the financial services industry employs a large percentage of its IT professionals, according to city employment law firm Osborne Clarke.
It said the current practice in the city is for banks and financial institutions to have as many as 100 or more of their IT staff as contractors hired through agencies. But the WTD changes, which will bring the minimum period an agency worker must work for the employer before they can claim the same terms and conditions as a full-time employee down from 52 to 12 weeks, are making banks re-think their IT recruitment practices.
Richard Brown, employment partner of law at Osborne Clarke, told IT PRO that under current agency worker rules it is common practice for many city businesses to cancel contracts at 51 weeks (to avoid the risk that the agency worker may be considered employee) and then renew after 52 weeks to ensure IT staff remain employed on an agency basis and not entitled to the same benefits as full-time staff.
"This new 12-week limit, alongside these potential anti-avoidance practices, will make current procedure excessively onerous," he said. "We've yet to find out who will pay for the increased costs for processing the higher staff churn involved in renegotiating contracts every 11 or 12 weeks."
Brown added that banks are still unlikely to increase internal headcount in response to the WTD changes, given the current economic situation.
Jon Butterfield, managing director of IT specialist ReThink Recruitment, countered that the changes were less likely to impact IT contractors, given that most were employed by the banks through their own limited companies.
"100 per cent of our books are limited contractors and it would take a change to company law for them to be affected by the WTD," Butterfield told IT PRO. "So I think its unlikely to have too much of an impact because, even if people we supply worked for 52 weeks, the client would always renew contracts during the four weeks' holiday they take each year anyway."
Although he did admit some contracts can also last as short a period as one day, Butterfield added it was far more likely the UK High Street would feel the changes more keenly, given the more transient nature of their workforce requirements.
But Brown added that, in his capacity of advising banks on the liability implications of this WTD change, some had considered "restricting their use of agency staff or drawing a centrally shared pool of talent" as potential alternative avoidance options.
Either way, the WTD changes are not due to become law until next year, with the UK due to issue guidelines on its adoption sometime after. But it's unlikely to offer IT pros much solace after news yesterday that banks were already trying to reign in spending on contractors in response to the credit crunch.
