Forcing employers to auto-enrol agency workers will be costly for businesses and deter saving among temporary staff, an MP has warned.
Brandon Lewis, Conservative MP for Great Yarmouth, has challenged pensions minister Steve Webb over the Department for Work and Pensions' (DWP) assessment of the impact for agency workers.
Lewis said: "With a requirement for employers to enrol agency workers into pension schemes there will be an increased cost attached to hiring temporary workers and will thus make them a less attractive option, potentially damaging the competitiveness ofthe UK temporary employment market."
The European Temporary Workers Directive 2008 was adopted in the UK in October 2008.
It forces employers to provide agency workers with equal benefits to their permanently employed colleagues once they have been employed for 12 weeks, meaning agency workers will be eligible for AE.
Lewis said auto-enrolment will not provide good savings outcomes in a temporary work context.
"As many agency workers are employed in numerous jobs for short periods of time, many will be put off saving into a pension fund and potentially opt out, especially if the placement is only for a couple of weeks," he said.
Webb has acknowledged the potential risk which AE poses to agency workers and the DWP is looking into a solution, Lewis said.
In response to written questions from Lewis, Webb said the DWP does not have any estimates on the cost of AE to the agency worker sector individually.
However, he said: "The total contribution costs for all employers are estimated to be £3.3bn each year in 2011-12 earnings terms once contributions are fully phased in.
"The estimated total administrative cost to all employers is £446m in year one and £126m in on-going years in 2011-12 earning terms."
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