Labour costs for the London 2012 Olympics site may add an extra £240 million on to the cost, industry experts have warned.

One employment expert told ‘Contract Journal’ the demands for direct employment would send the wage bill soaring.

“You are talking about an extra 20% at least on the wages bill when you take into account the additional cost of employers’ National Insurance contributions and benefits like holiday pay and sick pay.”

Around a third of the total budget is allocated for labour costs; meaning about £3bn of the £9.3bn overall cost would be influenced by the employment bill.

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This warning comes as negotiations on an industrial relations agreement between the construction unions and the Olympic Delivery Authority (ODA) has reportedly reached a stalemate, with a divide emerging between the negotiating unions UCATT, GMB and Unite.

Some unions have called for a 100% directly employed labour force.

A UCATT spokesperson said: "It is a myth that so-called flexible working is cheaper. Wembley stadium and Holyrood were built on the backs of so-called self-employed workers. These projects were massively late and horrendously over budget. The direct employment model would have alleviated many of the problems experienced by these projects.

"Even if direct employment costs more, decent people and decent companies may decide that it is a price worth paying in order to prevent workers being exploited and an increase in deaths and accidents that are all too often major features of bogus self-employed sites."

(JM)