Results are based on an annual calculation for an agency worker.
If the Agency Workers Directive (AWD) comes into force UK businesses will be forced to also pay contractors for time off due to holidays and sickness.
Before: (Current situation)
- Contractor works for £25 per hour, 47.2 weeks per year, and takes 4.8 weeks holiday, with no sickness
- Business pays only for the time worked by the contractor.
- Gross cost to business: £47,200
After: (Agency Workers Directive comes into force)
- Contractor works for same rate as above. Again, no sickness.
- Business has to pay for all time off for holidays and sickness.
- Gross cost to business: £52,000 (An increase of £4,800 - 10.17%).
Cost of sickness
- If the contractor is unwell during the year, the business will have to cover this cost, which adds an additional overhead of 2.5% for each week of sick leave. Some sample calculations:
| Gross cost to business | Extra cost due to Agency Workers Directive | |||
|---|---|---|---|---|
| Weeks off for illness | Before | After | (£) | (%) |
| 1 | £46,200 | £52,000 | £5,800 | 12.55% |
| 2 | £45,200 | £52,000 | £6,800 | 15.04% |
| 4 | £43,200 | £52,000 | £8,800 | 20.37% |
Total Cost To UK Business
-
There are currently 1.3 million agency workers in the UK - temp workers and contractors.
Assuming each worker takes 4.8 weeks holiday, and 1 week for illness, each year, the cost based on an average hourly rate to UK business is:
| Average Rate | Cost to UK business |
|---|---|
| £5.52 | £1,700,867,325 |
| £7.50 | £2,310,961,039 |
| £10 | £3,081,281,385 |
| £15 | £4,621,922,078 |
- The CBI estimates up to 250,000 jobs could be lost in the flexible economy as a result of the Agency Workers Directive. This will undoubtably have a disastrous effect on the competitiveness of the UK.