Richard Herring, Executive Director of ATSCo and Operations Director of Reed Technology Group, said: "In the UK around 98 per cent of IT freelancers provide their services through their own personal service company and the majority of IT freelancers do not feel they require the type of protection which this Directive proposes. ATSCo will continue to lobby for those freelancers who do not operate through a personal service company to be excluded from this Directive."

Both organisations welcomed the removal of the ban on temp-to-perm fees, which agencies charge when workers become employees of their clients.

Recruitment agencies across all sectors had long-argued the proposed ban would remove their ability to recoup initial costs involved in recruiting workers and warned a ban on temp-to-perm fees would raise competition by reducing labour flexibility.

The European Committee also voted to make public agencies, like NHS Professionals, the NHS-run employment agency, abide by the same rules as private agencies.

Two key clauses of the Directive were left unchanged; attracting scorn from UK recruiters who called them 'critical' to their future operation.

The first concerned the 'time derogation period' - this specifies the time allowed before equivalent rights for temporary workers are enacted.

The draft AWD originally put the period at six weeks, but Commissioners later voted to shorten this to a single day. This lead to industry representatives arguing temporary workers would become less attractive for clients to use, leading to a fall in productivity.

Agencies also expressed concerns that lesser-skilled workers would be overlooked as they are forced to concentrate on workers who generate higher levels of revenue as they struggle to cope with higher costs.

The second area was on the issue of 'pay', which will remain a part of the Directive following the voting, despite opponents' objections that pay is outside of EU competency.

Tim Nicholson, REC's Chief Executive, said the maintaining of the two clauses meant the Directive would still be bad for the British economy.

He added: "At a time when many European economies are suffering structural weakness as a result of labour force rigidity, it is madness to be introducing a piece of legislation that increases these problems.

"We will urge the UK Government to push hard for changes in the Council of Ministers when it meets in December."

A spokesman from the DTI, which has just closed a consultation over the Directive, said: "This is just one stage in a very long European process of agreeing a Directive that protects and encourages the use of agency workers. We would like to see equal treatment kick in after a year - that would protect 'perma-temps' and would also be in line with other employment rights such as parental leave, additional maternity leave and adoptive leave."

The Directive will be voted on again in early November at a full plenary session of the European Parliament.

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Richard Powell, © Shout99.com 2002