Gangmasters and others which supply temporary workers for businesses such as farms and food manufacturers will need to have a licence by around August 2006, according to the chairman designate of the new industry watchdog, the Gangmasters Licensing Authority (GLA).
Anyone found using an unlicensed gangmaster after then could face 10 years in jail.
The GLA, which begins its work in April, will develop and operate a licensing scheme, set licensing conditions and maintain a register of licensed labour providers.
Paul Whitehouse, who will chair the GLA, has set a deadline of around 18 months in which to develop the scheme. He said that the licence fee would be based on the number of gangmasters operating in the UK. The GLA, to be based in Nottingham, will have five staff, including chief executive Michael Wilson.
Whitehouse said the biggest challenge would be determining the number of gangmasters in the UK. "There are widely differing estimates, ranging between 200 and 4,000."
He also plans a drive to make gangmasters and employers aware of the scheme. He said that licensing might increase employers' costs but would create equality, so that ethical firms would not be undercut by those using unscrupulous gangmasters.
Whitehouse, a former chief constable of Sussex, and Wilson, who is currently chief executive of the Defence Vetting Agency, have been appointed for an initial three years. Their appointments were welcomed by the Transport and General Workers' Union, The National Farmers' Union and the Association of Labour Providers.