Business

Many packaging companies could struggle to be competitive after a deal agreed by the government, unions and employer groups to provide agency workers with equal treatment after 12 weeks of employment.

It is believed that more than one million workers will receive the same pay as permanent staff under the deal.

Tina Sommer, international affairs chairman at the Federation of Small Businesses, 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 costly but were a useful way of responding to fluctuations in demand. If that flexibility is lost, many small businesses will stop using temporary employees."

Meanwhile, the CBI described the deal as "the least worst outcome available for British business."

CBI deputy director-general John Cridland added: "Half of agency assignments will be unaffected as they last less than 12 weeks - protecting businesses' ability to deal with peaks and troughs in demand and shorter-term staff absences.

"While pay is covered, occupational benefits that recognise the long-term relationship permanent staff have with an employer, like sick pay and pensions, are rightly excluded."

The government said it was still in consultation over the "mechanisms" for resolving employment disputes, including establishing arrangements to enable both sides to reach agreements on agency workers and anti-avoidance measures to reflect repeat contracts and permanent contracts.