New pay rights for part-timers

London's army of temporary workers today took a significant step towards winning equal pay with full-time staff.

A European directive has been drafted which would give agency workers - or temps - the same pay, pensions, holiday and health insurance as permanent staff. It would also include benefits such as interest-free loans, non-discretionary bonuses and share schemes.

But bosses' leaders have warned that the proposed rights would cost UK firms billions of pounds, remove any incentive to employ temps and damage the economy.

In a letter to European Commission president Romano Prodi, Digby Jones, the Confederation of British Industry's director general, urged an immediate rethink, warning that the plan would be "very damaging to the UK labour market [and] to all concerned".

Britain employs over one million temps - more than any other state in the EU - with half of them in London, ranging from secretaries and personal assistants to catering and computer staff, teachers, nurses and engineers.

Across the EU as a whole, it is estimated that there could be as many of 6.5 million temps in regular use by 2010.

The CBI argues that it should be up to employment agencies who recruit and hire out temps to ensure they are treated equally. It claims that comparing the rights of temps with long-term, full-time employees is incompatible with current UK practice, where the temps' relationship is with the agency, not their workplace.

If the directive comes into force, companies who take on temps would be involved in setting their terms and conditions.

At present - according to the TUC - almost half of temporary workers are paid less than permanent staff. They also miss out on benefits which permanent staff enjoy. While there is some protection for temps, many do not get sick leave or holiday pay.

The Government reluctantly agreed last November that legislation giving fixed-term employees equal rights should include pay and pensions.

Ministers are now believed to be worried the directive goes too far. However, if Britain tries to water it down it could be hard to attract the support of other member states. Spain, France and Italy already have stringent legislation restricting the use of agency labour, and in Germany and Holland temp agencies have to reach agreements at a national level with trades unions.

The Brussels draft directive, originally due to be published on 27 February, has now been delayed until March. It is then expected to go before the EU's Council of Ministers and, if approved, to national governments for them to examine the details.

Today Mr Jones said Britain enjoyed "the most flexible of labour markets" which was "the key driver for the most successful economy in Europe".

But he told Radio 4: "That flexibility is now under serious threat. Equal pay is not a problem. The CBI would fully support a move to equalise across other agency workers- - but not where you are saying to employers they must give agency workers the same pensions and holidays as their full time staff."

He added: "This is socialism straight out of Brussels and it's frankly depressing. I do wish Brussels would concentrate on doing something about unemployment in Europe."

He said that if a company was thinking of employing a temp for three months and was told that the temp would have to be taken on the company pension scheme and given holidays, the chances were it would say "no thanks".

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