New draft regulations governing employment agencies will make it easier for employers to move to managed services offerings for their IT recruitment.

The initiative will lead to an increase in packaged services from staffing companies, industry experts are predicting.

Due to come into force next April, the new regulations change and limit the provisions that prevent temporary workers from taking permanent jobs unless a 'temp-to-perm' fee is paid to the agency.

Kevin Barrow, joint managing partner at law firm Tarlo Lyons, suggested that the new regulations would not be a huge issue in the IT industry because most employers negotiate the terms and conditions with their suppliers before they sign on the dotted line.

"They have their own preferred supplier terms. But if staffing companies cannot charge temp-to-temp fees, end users will find it easier to set up a managed service arrangement and deselect incumbent suppliers," he said.

"The long term result will be an increase in managed service contracts, and it will be one factor leading to consolidation in the industry."

The new regulations, due imminently, are expected to state that employment agencies will no longer be able to withhold workers' pay purely because they cannot produce an authenticated timesheet.

"Alleged abuses occur among low level temporary workers, but I don't think it's a prevalent issue in the IT industry," said Barrow.

Highly skilled IT contractors working through limited personal service companies will be able to opt out of the new regulations, although exactly how this will work has yet to be explained by the Department of Trade and Industry.

Barrow insisted that the opt out was good news for IT contractors. "Higher paid skilled workers don't really need the protection," he explained.

"Introducing these regulations could increase the overheads for staffing companies to the detriment of IT contractors who could end up with less in their pocket."

Employment Relations Minister Gerry Sutcliffe said in a statement: "The vast majority of agencies are well run but we are ensuring that they do not face unfair competition from those who abuse their workers."

Susie Hughes, editor of contractor portal Shout99, added: "As always the devil will be in the detail, but it seems to show an acceptance that contractors working through limited companies are not temp workers.

"But freelancers who are entrepreneurial small businesses want certainty and consistency. And if you look at IR35, that is still an attempt to treat them as disguised employees."