The number of workers on a temporary contract has risen at the strongest rate in over a year as employers shun permanent contracts while they count the cost of the national living wage and the coming EU referendum.
Billings for temporary and contract staff at employment agencies were at a 13 month high in April, according to the latest figures from the Recruitment and Employment Confederation, as nervousness prevented employers from investing in permanent staff.
Permanent staff hires rose at the weakest pace since September, REC said.
Kevin Green, REC chief executive, described the UK labour market as "going through an unsettled patch", with uncertainty around the EU referendum and the impact of the national living wage changing employer behaviour and fuelling the switch from permanent to temporary hiring.
“There are concerning signs that permanent hiring in the public sector is in decline," Green said. “Employers are turning to temps and contractors to provide a flexible resource, as a way of hedging any possible change to the UK’s relationship with Europe, and the implications this would have for the economy."
Pay for temporary staff hired from recruitment agencies rose at the strongest rate since 2007, which recruitment agencies said was likely because of the introduction of the national living wage on April 1. Pay growth for permanent staff hit a three-year low.
Crowdsourced data from jobs site CV-Library has shown that the average UK salary for permanent staff decreased 3.4 per cent to £32,899 in April, compared to £34,055 in March.
The retail sector has been hit hardest, with an 8.9 per cent drop in salary month-on-month, pushing the average salary in retail down to £28,762.
