The Confederation of British Industry (CBI) was involved in brokering the deal and tried to push for a six-month interim period before the right to the same treatment for agency workers applied.

The Federation of Small Businesses (FSB) has warned that the move would be disastrous for small businesses. Meanwhile the Forum of Private Businesses (FPB) has said that this could lead to greater unemployment.

Under the proposals that have been agreed by the Government and unions temporary workers would enjoy the same pay and holiday entitlement as permanent employees after completing 12 weeks service in the same company.

Tina Sommer, FSB EU and International Affairs Chairman, said, "This is a disastrous deal for small businesses, which rely on the flexibility provided by agency workers.

"Agency fees and high hourly rates mean temporary workers, far from being seen as cheap labour, are already a costly but useful way of responding to fluctuations in demand. If that flexibility is lost, many small businesses will stop using temporary employees.

"Part of the reason for the UK's relative economic success in the past decade has been the flexibility of its workforce. This deal could put all that at risk at the worst possible time.

"After month-on-month increases in unemployment and with economic growth at its lowest point since the last recession, this is the last thing small businesses need," she concluded.

FPB, Chief Executive, Phil Orford said, "The initiative was originally intended to protect the rights of temporary workers at the hands of rogue employers. However, yet again, it is the law-abiding small-business-owner who will suffer from additional regulation. Increased costs and bureaucracy is an unwelcome burden for our members at a time of financial uncertainty, and we fail to see how these measures fit in with the Government's plans to reduce red tape for small firms by 25% by 2010."

David Frost, director general of the British Chambers of Commerce (BCC), said, “This is a bad deal for the country and a bad deal for business. The success of the UK economy over recent years has been down to our flexible labour market. When the economy is weakening this is not the time to further reduce flexibility.”

BUSINESS FORUM COMMENT

This agreement may do more harm than good to the very sector it is aiming to protect. Small businesses may think long and hard about taking on an agency employee if the cost and administrative burden is just the same as for a full time employee. 

Agency staff could well find themselves being restricted to 11-week contracts and being constantly on the move or getting no work at all.