E U R O P E A T W O R K. Frans Mutsaers. Human Resources Director of SITA in the Netherlands

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1 E U R O P E A T W O R K A VISION ON # 1 TEMPORARY WORK JUNE 07 Following on ADP HR European Atlas, this new publication focuses on one specific HR theme and presents the opinions of two leading European experts and one HR executive. Welcome to the first issue of "Europe at Work. A vision on..." covering the challenges of temporary work at the European level. James Arrowsmith Associate Professor in Industrial Relations and Human Resources Management at Warwick Business School "Increase in temporary work is likely to continue" Page 2 Frans Mutsaers Human Resources Director of SITA in the Netherlands "A two-fold approach to temporary work in a personnel-intensive sector" Page 4 Tiziano Treu Former Italian Minister of Labour, Chairman of the Commission for Employment & Social Security at the Italian Senate "Towards smoother European harmonisation" Page 6 Facts and figures p. 8-9 An ADP publication

2 TEMPORARY WORK James Arrowsmith Increase in temporary work is likely to continue For more than 15 years, Dr James Arrowsmith has been studying diverse aspects of flexibility in EU employment. As he analyses the root causes of the current temporary work level, he forecasts that the increase in fixed-term employment will be a lasting trend. Europe at work: Looking at temporary work rates in Europe, we can see Spain above 33%, the UK below 6%, to take two examples why are figures so different in Europe? James Arrowsmith: I look at it from a different angle. Most of the historic EU countries, with redundancies or dispose of a worker, therefore employers more often opt for fixed-term employment. The UK is the exact opposite. Hiring and firing is cheaper and easier, so there is no hesitation in going for indefinite contracts. between social partners exist in Poland as in the historic western countries, so workers have less weight in the bargaining process. This is why temporary employment is going up in Poland. Large firms have more room for a core and peripheral model the noticeable exception of the UK, have fixed-term contract rates in the range 10-15%. There is a convergence in the western economy. The explanation for the radically different numbers in the UK and Spain lies with local regulation of permanent contracts. In Spain, it is difficult to make What about Poland, which also has a very high temporary work rate? Regulation in Poland offers a lot of flexibility. Firms that decide to set up there aim to take full advantage of it, and obviously don t use the same rigid models as in their country of origin. In addition, no such agreements James Arrowsmith, Associate Professor in Industrial Relations and Human Resources Management at Warwick Business School in the UK Many countries Germany for instance are experiencing a significant increase in temporary employment. Will this trend continue? I can t see it going down, simply because the three major governing factors are heading in the same direction. Therefore, temporary work is likely to 2

3 continue to increase. Germany is typical of a country coming out of recession. Employers are still reluctant to hire while unemployment remains high. A new political context made temporary work easier to use, facilitating deregulation and flexibility. Some indicators confirm this: between 2003 and 2006, the interim work agency Manpower multiplied the number of its branches in Germany by 5. Is temporary employment more frequently used in small businesses? There is no evidence for this, as large firms have more room for a core and peripheral model: invest in key strategic skills and use temporary workers as a buffer. Let s not forget that the traditional reasons for temporary work are seasonal requirements and substitution for low-skilled profiles. The first influencing factor is the sector of employment, which is interrelated to a certain extent with company size. Needs range from large manufacturing companies having to absorb production peaks to additional business in retail firms during the Christmas period. How are temporary work figures influencing HR strategies? Flexibility is a criterion that companies consider as they move facilities from one country to another. There are pros and cons to this approach. It puts questions on the table in HR departments. What about the training of temporary workers, especially when there are safety issues? Are temporary workers motivated and committed to quality results? Coexistence between permanent and temporary workers is also a matter of discussion. Do they work well together? The bottom line is to determine if gains from flexibility in numbers compensate for any resultant loss of skills. And again, this brings us back to our discussion on sectors, since different sectors have different requirements in terms of skills. >> Dr James Arrowsmith is Associate Professor in Industrial Relations and Human Resources Management at Warwick Business School, UK. His principal research areas are flexible working time arrangements and performancerelated pay. Some of his publications "Why is there not more annualizedhours working in Britain?", Industrial Relations Journal, 39, (forthcoming in May 2008) L interim en UE : les stratégies des acteurs sociaux en Europe, with R. Belkacem, C. Kornig and F. Michon ed. Les Mondes de l intérim (forthcoming in 2008) "Temporary Agency Work in the Enlarged EU", Luxembourg: European Commission, 2006 "The European cross-border dimension to collective bargaining in multi-national companies", with P. Marginson, European Journal of Industrial Relations, 12:3, 2006 EXPERT 3

4 TEMPORARY WORK Waste collection and treatment is the type of business where customers can t really wait. SITA Netherlands & Flanders (SITA NL/ FL) serves 60,000 clients, many of them small professionals, and can t afford to lose contracts because of absent personnel. In waste collection, we replace anyone who is sick, in training or on vacation by temporary agency personnel. A round that requires three people can t be done by fewer underlines Frans Mutsaers, Human Resources Director of SITA NL/FL. We have made a time commitment to our customers and need to adjust our blue-collar workforce. In short, we must be very flexible. On the top of the company s 3,500 people in operation, 350 workers on average come from temporary agencies for periods that can be as short as one day. Close-up on SITA in the Netherlan A two-fold approach t in a personnel-intensiv The waste collection business requires accurate ope team staffing, and SITA Netherlands constantly calls interim personnel. It also hires most of its new emplo under one-year contracts, which is a common practi This two-sided approach to temporary work is facilita the so-called Dutch flexicurity model. Above the national average This intensive calling on interim workers leads to high temporary work figures at SITA NL/FL. With peaks of 25% interim workers during the July/August period, we are no doubt above the Dutch national average* analyses Frans Mutsaers. We are highly dependent on temporary work. This is simply due to the nature of our sector. SITA has a comparable level of interim workers in other countries where it operates, such as the UK, France and Germany. At SITA, temporary work is managed locally in each country, and there is no policy shared at the European level. Besides sector-driven short-term employee substitution, there is another facet to temporary work at SITA NL/FL that also adds to the total. The company hires its new staff with fixed-term contracts, which is a common integration practice in the Netherlands. As our legal frameworks permit, people usually start with us under a one-year contract, though this is not systematic and depends on profiles and vacancies, SITA NL/FL HR director explains. We consider such employees as though they had signed a permanent contract, and 95% of them eventually stay with us. Flexibility and protection With interim workers for short-term substitution on the one hand and fixed-term contracts for new recruits on the other, SITA NL/FL s temporary work policy makes good use of Dutch regulations, described by some experts as an example of flexicurity**. For instance, interim workers are considered permanent employees of their agency after 26 weeks of regular service. And public employment policies encourage interim agencies to engage in training their staff. Our interim workers are also trained on safety by their agency points out SITA NL/ FL HR Director. Our law gives us enough 4

5 ds o temporary work e sector rational on yees ce. ted by flexibility for business on the one hand and the possibility to protect our people on the other. One-year fixed-term contracts for new employees also provide both parties with flexibility. Employees can resign on short notice, explains Frans Mutsaers, it s a well-accepted way to start that helps workers to integrate. The contract can be extended twice, but after three years the employer has to switch to a permanent contract. But under market pressure, this also remains a matter for social bargaining: For specific profiles that are difficult to recruit, like some sales representatives, We need to adjust our blue-collar workforce Frans Mutsaers, Human Resources Director of SITA in the Netherlands some higher management or some ICT (Information and Communication Technologies) positions, we sometimes propose permanent contracts, concludes the SITA NL/FL HR Director. * 15.5% in 2005 (source: Eurostat) ** The concept of flexicurity : a new approach to regulating employment and labour markets by Ton Wilthagen and Frank Tros ( home.medewerker.uva.nl/f.h.tros/ bestanden/2004_transfera.pdf) >> Frans Mutsaers, 50, is the Human Resources Director of SITA Netherlands/Flanders (Belgium), based in Arnhem (NL). He is a member of the Board of Directors of SITA Netherlands/Flanders and a member of the SUEZ worldwide "350 TopEx" group. His responsibilities cover general HR activities for SITA Netherlands/Flanders, with direct management of an HR Department of 45 people. As a director, Frans Mutsaers is also in charge of all Environment, Quality & Safety (EQS) aspects for SITA Netherlands/Flanders, for which he manages a dedicated EQS team of 35 people. SITA Netherlands & Flanders A leader in waste collection and treatment SITA Netherlands & Flanders (Northern Belgium) is a service provider in the collection, recycling, and treatment of waste. The company employs 3,500 employees and has a turnover of e 640 million. SITA Waste Services is a part of SUEZ, an industrial and services group active in sustainable development that provides innovative solutions in energy and the environment. SUEZ has 170,000 employees and a total revenue of e 40 billion, 80% of which is generated in Europe. PRACTICES 5

6 TEMPORARY WORK Tiziano Treu Towards smoother European harmonisation An expert observer of the European labour market and former Italian Minister of Labour, Tiziano Treu underlines the link between rigidity of regulations and temporary work contracts in various European countries, as well as existing differences from North to South. To reconcile labour flexibility with social cohesion, he has presented a series of recommendations to the Council of Europe. Europe at work: Why are temporary employment rates, as measured by fixed-term contract figures, steadily rising throughout Europe? What is your view on this? Tiziano Treu: The fact that the number of employees with fixedterm contracts is slowly growing confirms a continuous need for some degree of flexibility in the company. These figures are not worrisome as such with a few exceptions, like Spain, where the fixed-term employment rate is significantly higher than in other European countries. The most preoccupying aspect is the recent trend that can be observed in hiring young people with fixed-term contracts to give an example which is the case with 50% of them in Italy. This trend doesn t seem to be uniform throughout Europe though. Why are there such differences from one country to another? The factors that explain the gap between European countries in terms of temporary employment also explain the acceleration I just mentioned. Indefinite contracts are considered to be too rigid and the costs associated with dismissals too high. When it is easy to terminate an indefinite contract, as in the UK for instance, the fixed-term employment rate remains low. This explains why some countries are easing their regulations Italy recently reduced labour costs for indefinite contracts by 3% and Spain has decreased the cost of dismissal. A move towards flexicurity by collective agreements Tiziano Treu, former Italian Minister of Labour, Chairman of the Commission for Employment & Social Security at the Italian Senate 6

7 How has temporary employment changed the human capital of companies? Subordinate employees are still a great part of the workforce, but other work arrangements, notably with independent workers, have emerged. Some of these workers, even though not legally speaking subordinates, find themselves in a situation of economic dependence on one or many companies. They form a new grey area between dependent employment and self-employment. What are the drawbacks of that situation? The level of protection may vary within the same company. There is a need to tailor the level of protection to the various types of workers. On the one hand, new regulations should consider extending some, but not all, standard rights to workers in the grey area, like protection against abrupt termination, health or safety. On the other hand, highly independent, skilled employees that are hired with a subordinate contract could be given more room for self-determination, for instance in the field of working time. What would be an alternative approach then to flexibility in Europe? Given the differences between countries, there is no general answer. In my view, some Mediterranean countries need to improve flexibility in their regulations. Simultaneously, labour market and welfare services must be developed, pretty much as in the nordic countries. A general idea is that workers should be protected rather than jobs. In such a model, trade unions could contribute as service providers on the labour market. With that in place, new employment policies could be designed to combine the flexibility required for competitiveness and the security expected by workers a move towards real flexicurity. When workers benefit from a safety net in case of unemployment, they feel more secure. Flexibility can then increase. Can this be harmonised at the European level? This must be tailored country-bycountry, sector-by-sector. In my view, quantitative limits should not be fixed by law, but by collective agreements. A three-fold approach is required for the system to self-regulate. First, move towards flexible regulation by agreement. Second, develop labour market and welfare services for workers. Third, provide an incentive so that employers use fixed-term contracts only when necessary. But with the existing differences between countries, the most sensible approach can only be smoother harmonisation. >> Tiziano Treu was the Italian Minister of Labour and Social Security from 1995 to 1998 and Minister of Transport and Navigation from 1998 to He has been a Senator since 2001, and is Chairman of the Commission for Employment and Social Security at the Italian Senate. He has been a Professor of labour law at the Catholic University of Milan since 1988, and has written numerous books and publications on labour law, trade union law and industrial relations Italian and comparative including Labour Law in Italy, whose revised second edition has just been published (ed. Kluwer Law International). Mr Treu has presented his vision at numerous public meetings, notably in November 2005 before the European Council in Strasbourg at a session entitled "New forms of flexibility: how should labour law evolve?", and in November 2002 before the International Labour Organization in Geneva with "Labour law and social change". EXPERT 7

8 facts & figures Ratio of employees with limited duration contract FI 16.5 NO 9.5 EE 2.7 IE 3.7 Océan Atlantique UK 5.7 Mer du Nord FR 13.3 BE 8.9 NL 15.5 LU 5.3 DK 9.8 CH 12.8 DE 14.2 IT 12.3 SE 16.0 CZ 8.6 AT 9.1 SI 17.4 Mer Baltique SK 5.0 HU 7.0 PL 25.7 LT 5.5 RO 2.4 LV 8.4 Ratio of employees with limited duration contract as a % of total employment < 5% 5-8% 8-10% 10-15% 15-20% > 20% Source: European Communities Eurostat 2006 Data 2005 BG 6.4 Mer Noire PT 19.5 ES 33.3 GR 11.8 Mer Méditerranée MT 4.5 CY 14.0 Did you know? In EU 25, on average, part-time employment rate was 11.4% in Usual hours worked per week by part-time employees in 2006 in EU 25 was 19.9 hours. In Eu 25, over 25 million people worked with a limited duration contract in

9 facts & figures Ratio of employees with limited duration contract: variation ES PL PT SI FI SE NL DE CY FR CH IT GR DK NO AT BE CZ LV HU BG UK LT LU SK MT IE EE RO Source: European Communities Eurostat Data Limited duration contract: variation % Source: European Communities Eurostat 2006 % of temporary employees

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