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Because You Asked - CWS 30 June 2.11

Contingent Workforce Strategies 30





Dear Questioning,
The 27 countries within the European Union are obliged to adapt their national laws to comply with The Agency Workers Directive (AWD) Dec. 5, 2011. As a result, in many instances, the actual effects will not really be felt until 2012.

The aim of the AWD is to improve the quality of temporary agency work by applying the principle of non-discrimination and to establish a suitable framework for the use of temporary workers in the European Union. Under the Directive, "equal treatment" applies only to basic working and employment conditions of temporaries (e.g. pay, working time); the Directive does not affect the employment status of temporary workers.

There are two ways in which this could add to the cost of using temporary workers. First, the equal treatment requirement will add to temporary hourly wage costs in instances where a company is paying these workers at a lower rate than their corresponding traditional employees. This portion of the Directive is more likely to affect users of lower-skilled, light industrial temporaries than higher-skilled professional/executive temporaries who are quite often earning more than their traditional counterparts, anyway.

In addition, pay parity for temporary workers has been enshrined under law (to varying degrees) for a number of years in many European countries, including 24 out of the 27 EU member states. Therefore, in this respect, the AWD will only have a significant impact in markets such as the United Kingdom, Ireland and Hungary. However, even in these countries, the equal treatment requirement will only apply after 12 weeks in a given job.

The second way the AWD may increase costs is where the new legislation imposes an additional administrative burden or legal risk onto the staffing company. Not surprisingly, staffing companies will seek to pass on any additional costs to clients by increasing their margins. However, there is still some uncertainty as to whether or not this will have a significant impact as the AWD affords some flexibility to national governments in interpreting the Directive. In the United Kingdom, where a new "business-friendly" Conservative-led coalition government has been elected, any administrative burden is now more likely to be minimized.

But it's also important to recognize that there are a number of positives coming out of the new legislation. The Directive calls upon member states to review existing restrictions imposed on temporary agency work and sets clear limits to their justifications. Any existing, unjustified restrictions will need to be lifted. This could have a profound effect on continental European labor markets, where numerous restrictions still exist.

Again, on the plus side, one aim of the Directive is to improve the standing of temporary work. In some parts of continental Europe, especially those markets where temporary staffing through agencies has only been legalized for 15 years (such as Germany, Spain and Italy), temporary work is seen as a way for employers to circumvent their legal obligations in employing traditional staff. Therefore if, as a result of the Directive, public perception is improved; the quality and size of the candidate pool may also get better.

So, if most of your European temporary agency workers are coming from the United Kingdom, Ireland or Hungary, you may find that the AWD will add to your costs. However, if you use temporary agency workers across Europe, you may find that improving flexibility in labor markets outweighs any negative impact.

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