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Miliband's agency worker plans could increase unemployment, warn business leaders

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Business leaders have reacted strongly to Ed Miliband's plans to prevent employers paying low wages to migrant workers.

The Labour leader said if his party wins the 2015 general election he would close a European Union loophole that allows employers to undercut the minimum wage legally by paying agency workers lower wages.

At present, a Swedish derogation allows businesses to waive the equal pay requirement of the EU Agency Workers' directive for staff permanently employed by the umbrella agency.

Writing in the Independent on Sunday, Miliband said the UK must change its "chronic dependency" on low skilled, low wage labour.

"What chance of raising living standards for all when unscrupulous firms can exploit workers from abroad to get around the minimum wage?" he said.

"What chance of giving everyone a fair shot when recruitment agencies are allowed to recruit only from overseas, excluding those in the area from even hearing about the jobs?"

Miliband's plans include:

  • Increasing fines for firms that breach minimum wage legislation;
  • Banning recruitment agencies from having a policy of hiring only foreign workers; and,
  • Stopping the use of "tied housing", which allows agricultural firms to pay less to workers who get accommodation as part of their job.

Tough times

The proposals have not been well received by employers' lobby group the CBI. Its chief policy director Katja Hall said the proposals put the UK's flexible labour market at risk.

"The flexible labour market in this country has saved jobs and kept our economy going during tough times," Hall said. "Undermining this flexibility would put the very system which has kept unemployment down at risk. The agency directive was not welcomed by business, and further gold plating of EU rules can only cost jobs.

"Many businesses prefer to pay an agency to provide temporary workers using the Swedish derogation. This is perfectly legal, was supported by trade unions at the time and also gives employees security of income between jobs."

Recruitment and Confederation chief executive Kevin Green called the comments describing the Swedish derogation as a loophole "misleading".

"Workers on these contracts are employed by their agency on a permanent basis, giving them greater security and all the benefits that come with permanent work such as protection from unfair dismissal, maternity leave and statutory redundancy pay," Green said.

"The pledge to ban recruiters from only advertising vacancies overseas is a ridiculous straw man. It is already illegal to do this. Ed Miliband has made this accusation against our industry before, we have asked to see any evidence that it is occurring and he has failed to produce any."

Labour's pledge comes days after rules restricting the rights of Romanians and Bulgarians to work in the UK were relaxed.

Yesterday, prime minister David Cameron insisted the Government was ensuring the minimum wage was being paid to all employees as attempts to curb illegal immigration continue.

Cameron said he was in favour of "managed migration", but would not predict how many people he expects to arrive from Romania and Bulgaria.