New pension rules could adversely affect temporary employment

12 June 2009

The government has been advised to give serious consideration to the impact that new pension rules may have on temporary workers, employers and the flexibility of the labour market.

The call came from the Recruitment and Employment Confederation (REC).

The REC said that it had reservations about changes made by the Pensions Act. Under the Act, as from 2012 all workers will be enrolled automatically into a qualifying pension scheme, but can then opt out if they wish to.

Should temporary workers opt out in large numbers, the REC believes this will create a genuine administrative headache for many 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.”

Although the REC is sceptical about the wisdom of including temporary workers in the new pensions scheme, it has put forward proposals that would help reduce some of the problems.

These include allowing temporary workers or contractors the chance to opt out before they start their assignment, and allowing recruitment companies as well as the pension scheme providers to issue opt out forms for workers in order to speed up the procedure.

Ms Fairweather concluded: “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.”