Recruiters have reacted strongly to the European Court of Justice (ECJ) ruling that temporary workers have the right to paid leave from the first day of their employment.

The new legislation will force agencies to raise fees, said Simon Garbett, chief executive of The Employment Agencies Movement. Agencies will now have to ‘revise their contracts with temp workers, create new payroll systems, and retrain their staff. Inevitably there will be higher costs for clients.’

Currently, agencies do not have to pay their temps holiday leave until they have been working for 13 weeks. The REC expressed concern at the new ruling: ‘We believe the government’s original interpretation of the regulations was a very good compromise, and we are disappointed they were overruled in the European courts,’ said Marcia Roberts, REC director of external relations.

John Mortimer, MD of secretarial recruiter Angela Mortimer, said he might have to increase the cost of employing temps by about 4%: ‘Until now we have been charging employers 3-4% of the wage for holiday pay, but this will certainly increase.’ The legislation will be ‘wage inflationary’, he said.

The CBI disagreed, however. The legislation will ‘be more of an inconvenience than a cost for a company using the worker’, claimed head of HR policy Susan Anderson.

The TUC’s senior employment rights officer Sarah Veale argued that the qualifying period ‘encouraged employers to use those contracts to avoid having to give people holidays’. She also warned against agencies trying to avoid the legislation. ‘What has not been tested is the "fiddle" a lot of employment agencies use where they put holiday pay in your basic rate of pay, and it is up to you to decide whether to take time off or get extra money.’

The government has issued a consultation document proposing that workers should accrue paid annual leave during the first year of employment, at the rate of one twelfth of the entitlement per month worked.