The crackdown is due to come into force on April 6 and hit more than 200,000 construction workers.
The move could push up labour costs by as much as 25%.
The Recruitment and Employment Confederation has now written to the Chancellor ahead of next week’s Budget warning that “the plans will remove self-employment as an option for anybody sourcing work via an employment agency.”
The confederation is calling on the government to delay implementation of the proposals laid out in the recent Onshore Employment Intermediaries consultation to give businesses time to renegotiate contracts and adjust project budgets to accommodate the changes.
REC chief executive Kevin Green said: “This draft legislation was sprung on businesses at very short notice.
“There is now less than a month to go before the new rules would come into effect and the government still hasn’t published its final guidance for employers.
“This scramble to implement shows a lack of understanding about how business works and the complexity of contracts for long-term projects.
“If these changes are rushed through they risk having a negative impact on job creation and growth in sectors that are vital for the recovery of the British economy.”
An agency looking to fully comply with the legislative changes would need to take a typical self-employed worker onto their direct payroll.
That would mean paying 13.8% employer NICs, along with increased employee NICs and income tax liabilities and other statutory payments leaving a compliant agency looking at a minimum 25% cost increase for the supply of labour.