The Government's agreement with the Trade Union Congress (TUC) and the Confederation of British Industry (CBI) for UK agency workers to receive equal treatment after 12 weeks has made headlines. The TUC have heralded the agreement as "good news for agency workers" and "a victory for union campaigning" while the CBI has described the deal as the "least worst" option.

The hope is that the agreement will lead to a Temporary Workers Directive in Europe that the UK can support and incorporate into UK law in the next Parliamentary session. But why now, what has been agreed and what are the implications of this agreement?

Why now?

The Government has been under increasing pressure from unions, Europe and its own backbenchers to improve employment protection for the estimated 1.4 million agency workers in the UK.

Domestic pressure

In addition to six years of campaigning by unions, the Government was facing a campaign by its own backbenchers. In December 2007, a private members' bill seeking to apply the principle of equal treatment to temporary and agency workers was introduced into Parliament. The Temporary and Agency Workers (Equal Treatment) Bill had the support of more than a third of MPs. Although the Government refused to back the Bill, at the end of February, it agreed to consider protections given to agency workers. In light of the new deal reached, the Bill was withdrawn the next day.

European pressure

In March 2002, a draft Directive on temporary (agency) workers was introduced by the European Commission. It aims to give agency workers the right to equal pay and conditions to those of comparable permanent employees of the business where they are placed. The terms of the draft Directive have proved highly controversial. Separately, in 2003 the European Commission commenced a review of the Working Time Directive (including the controversial future of the UK's 48-hour opt out and "on-call" working time), which has also been hotly debated.

In December last year, the proposed Temporary Workers Directive as well as proposed amendments to the Working Time Directive were last debated by the EU Council. As no agreement could be reached, the future of both Directives was linked to enable "work on a simultaneous and integrated solution, allowing member states to find a balance between the two Directives that would be acceptable from the political point of view". It is expected that pressure to reach an agreement on both Directives will intensify when France take over the presidency of the EU Council in July.

What has been agreed?

According to the Government press release, agreement has been reached that after 12 weeks in a given job there will be an entitlement to equal treatment. Furthermore, equal treatment will be defined to mean at least the basic working and employment conditions that would apply to the workers concerned if they had been recruited directly by that undertaking to occupy the same job. It will not cover occupational social security schemes. The Confederation of British Industry (CBI) press release adds that "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"

We will have to wait to see the precise terms of any proposed legislation, which will no doubt be highly contested and influenced to a large degree by the European debate. It is notable that during the debates over the now withdrawn private members' bill, high-earning IT and engineering contractors were to be excluded from its scope.

What are the implications?

One of the sticking points in the negotiations of the draft Temporary Workers Directive for the UK has been the proposed six week qualifying period, with some Member States suggesting no qualifying period. The UK has been holding out for a 12 month qualifying period. Now that the UK has conceded to 12 weeks (somewhat closer to the six weeks contained in the draft), agreement at the European level may be possible.

As the Government has now removed a significant stumbling block to reaching agreement over the Temporary Workers Directive, it will be unwilling to concede on the sticking point for the Working Time Directive amendments: the 48 hour opt-out. It is this to which the CBI is no doubt referring when saying agreement is the "least worst outcome".

The success of the deal struck hinges on the agreements that can be reached at European level not only in relation to agency workers but also on the 48 hour working time opt-out. Although the qualifying period is the most noted point of variance between the UK's proposals and Europe's, it is certainly not the only one with a number of key issues currently unresolved. Under the UK proposals, agency workers will be entitled to equal pay and holiday entitlements after 12 weeks in a job but not sick pay or pension payments. However, the European proposals are more far-reaching including working time and sick pay. If the Government reach another deal, which is more in line with European proposals than this week's announcement, then it may draft UK legislation similar to the existing Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002. This could have extensive implications for employers including redundancy obligations for ending an agency worker's assignment and costly pay and benefits.

Precisely what the consequences for the UK's labour market will be are unclear, as ever the devil will be in the detail. Nevertheless, employers who utilise agency workers should begin to consider now their business reason for using such workers and when planning for the future, that those agency workers may soon be gaining the same rights as permanent employees. Only time will tell whether, as John Hutton believes, "this is the right deal for Britain".