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Feature: Crossing the Ocean - CWS 30 September 2.17

CWS 30


By Subadhra R. Sriram

Traditionally, American tourists have flocked to Europe in droves. The Grand Tour is almost a rite of passage. Now, American companies are following suit, slowly but steadily expanding their contingent workforce programs into the European continent. Of course, it's not as simple as planning a sightseeing tour.

Behind the Drift

Today, American companies are seeking the same efficiencies in Europe that their contingent workforce programs provide in the United States. Given that most U.S. companies have operations in the Continent, "It's natural [for them to want to] bring in the cost reduction and risk mitigation methods that have been pushed forward here in the United States," says Gregory A. Netland, executive board member and CEO of Randstad Americas.

Furthermore, the MSP model is so firmly entrenched in the United States that American companies are looking to "deploy similar programs across Europe and gain visibility into their contingent labor," Netland continues.

But one can't just cut and paste a U.S. CW program to the Continent. Several things should be considered when establishing a program in Europe, such as where your company's operations are, and which market would be (more) straightforward to establish your program in. Also, rather than trying to roll out your program across Europe at one time, companies would be better advised to pick a single market, establish themselves there and then consider spreading out.

Staffing Industry Analysts spoke with a cross section of contingent workforce program managers and vendors here and in Europe. Based on our interviews and research, we were able to rank European countries in terms of which ones would be the best candidates for companies to target for program expansion. Here we discuss the two markets that we think are the easiest to start off in.

United Kingdom

It was no contest. Hands-down, the United Kingdom is the easiest place to start in, our analysts say. One of the reasons is that it's an established, mature contingent labor market with almost no language barrier.

Unlike other European states, the United Kingdom relies heavily on professional staffing, such as engineers, accountants, IT and legal workers. There may be differences in terminology and in the way rates get structured, but for the most part, there are many staffing similarities between the U.S. and U.K. markets.

"The primary difference is in the statutories," says Jason Ezratty, who consults for Fortune 500 companies on contingent workforce strategy initiatives, such as taking contingent programs global. From a U.K. perspective, statutories refers to National Insurance (NI), which provides for the National Health Service, unemployment benefits, retirement pensions and other benefits (i.e. disability). Employers and employees are obliged to pay a contribution toward NI in addition to incomes taxes. Because these costs are part of an employee's direct labor rate, they aren't added to U.K. companies' overhead costs, which in turn translates to lower markups.

Also contributing to lower markups is that the United Kingdom is a highly competitive market. It has 11,500 private employment agencies, according to the International Confederation of Private Employment Agencies (CIETT). Staffing Industry Analysts, the publisher of this magazine, estimates there are about 8,200 temp staffing firms in the United States.

The Dutch Factor

We consider The Netherlands the second easiest place to establish a CW program in Europe.

A primary consideration contributing to this ranking is language. Because the use of English is widespread and well-established there, companies won't face significant language barriers.

The temporary staffing market is also very well-established in the Netherlands. And unlike other parts of Europe, it was faced with early regulation in the Netherlands. In fact, Dutch unions' participation in regulating temporary staffing services resulted in temporary workers being treated well in the region.

Other factors to consider: It's critical to work with a supplier with a strong European presence, Netland asserts. "It [would be] very hard for a straight American company to come into Europe and try to deploy an MSP," he says.

So get ready to partner with one of the big three suppliers: Adecco, Randstad or Manpower. The Netherlands is a consolidated staffing market, whereas the U.S. market is fragmented. The top five staffing companies in The Netherlands account for more than 40 percent of the market. Randstad is the leader, with market share of 24 percent.

Moreover, be prepared to pay more. Staffing margins are higher in The Netherlands than in the United States. Meanwhile, adoption rates of the managed service provider model are not as advanced in The Netherlands as in the United States, so there may be some resistance to it. Therefore, it would help to partner with an established brand.

Partnerships notwithstanding, you can be relatively confident about expanding your program to The Netherlands. It is a mature staffing market, and the language and culture are not as foreign as in other parts of Europe.

Laws Across Borders

No expansion effort like this is without legal risks, so take an incremental approach and do your research, experts advise. The European Union aside, each country still has its own jurisdiction. Therein lies the difficulty in using contingent workers across Europe: There are different rules and regulations with regard to one country's citizens being able to work in another state. For instance, the United Kingdom has specific requirements for people coming in from Bulgaria to work in England that are different for workers coming in from Poland.

Complicating the matter of understanding legal differences are differences in terminology. In the United Kingdom, an independent contractor would run his or her own business and an employed contractor is a contingent that comes through a staffing agency.

Complexities arise because immigration legislation is drafted around employment law and with an independent contractor, there is no employer. Many companies believe it is their staffing suppliers' responsibility to do the due diligence with regard to contingents' compliance, but that needs to be made clear.

Contracts should stipulate that the supplier or a third-party compliance firm is responsible for such due diligence, like checking to make sure the contractor is operating correctly and his/her professional indemnity insurance actually covers the area they are working in. "The client also needs to know whether its supplier needs a license/permit to operate in the country where the contingent will be operating and if so, ensure that this is provided," says Jane Woodhead, director of finance and European compliance at Hobson Prior International, a staffing agency focused on the European life sciences industry.

Given that it's fairly easy to cross borders in Europe, it's important for companies to understand under which jurisdiction the law applies when they are signing agreements. Data protection, intellectual property rights and confidentiality agreements all need to be viewed from that aspect.

In Holland, for example, 30 percent of an expatriate contingent's earnings are tax-free subject to three criteria being met. "It's an easy and clear enough rule for people to follow," says Brian Keegan, director at the 360 Group, a firm that handles global compliance for end users of contingent labor. The 30-percent rule levels the playing field and is one of the reasons that companies and workers are attracted to Holland. In England, however, compliance is a challenge. Not all payment models that support contractors are compliant.

"The governments and unions in Europe take an active role in employment," Netland says. Accordingly, companies and their suppliers need to be up-to-speed on legislation and changing rules in order to stay in compliance with the law. Experts recommend using a third-party compliance firm to ensure they are in compliance with the myriad laws and regulations.

Seek in-country or local advice and have access to employment attorneys with the right expertise before you think of establishing a CW program in a particular zone. Penalties for non-compliance vary from fines to criminal charges.

Cultural Differences

Locales notwithstanding, people across the world view contingents in different lights. In the United Kingdom, for instance, being an independent contractor with a hot skill set is prestigious. Perhaps because of Britain's colonial past and its far-flung empire, workforce specialists believe British contingents don't mind getting on a plane and flying to some corner of the world on assignment. "[They] command top dollar and are highly sought-after," experts say. In the Scandinavian countries, however, people lean toward being traditional employees.

Outside of the United Kingdom, the attitude toward temporary workers is far more inclusive. People are concerned that contingents should be treated fairly, so the operating models around using these workers are much more restrictive, such as in Italy, France and Germany.

The European Union, meanwhile, is working 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 its recent Agency Workers 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.

Legislation aside, there is no doubt that the global economic recession has fostered a new and growing appreciation for contingents. BMC is spending money in Ireland developing its CW program, as is IBM in Scandinavia, just to name a few.

"Europe is the way the United States market was six to seven years ago, where people were looking for fixed markups on a contracted rate card and they would hope to
find the best talent at a given pay rate range," Ezratty says. "It's only recently that competitive staffing bid systems, where pricing more closely tracks talent -- so popular in the States -- have started making their way into Europe," he says.

And as companies continue to leverage the expertise of contingents across the world, staffing models will evolve and the age of global CW programs will flourish.

How to Proceed in Europe

  • Do a full case study of the country you are planning to expand to.
  • Evaluate the suppliers, as well as legal and labor market environments.
  • Work with a global supplier (that is familiar and established in your target area) as to what the dynamics of an individual country are.
  • Assess why you want to go contingent versus traditional employee status in a particular area.
  • Have a predictable, repeatable solution for procuring contract/contingent workers.
  • Work closely with your legal department and third-party compliance firm.
  • Have an employment attorney handle risk, not your HR representative.

The IBM Way
IBM went global with its contingent workforce more than a decade ago. "Over the years, we have developed a global footprint for our strategy, but that includes taking into consideration the local realities," says Kirk Reade, subcontract services, global strategist. The multinational computer, technology and IT consulting corporation, headquartered in Armonk, N.Y., has roughly 400,000 employees worldwide.

The company's large global CW program developed around the fact that IBM had offices worldwide. "When our global businesses services group signs a contract with an end customer, we could need 50 people on site in 60 days," Reade says.

When necessary, IBM relies on the flexibility and skills of its contingents to meet business goals. With procurement operations throughout the world, IBM personnel create the appropriate strategy, run RFPs in each country and develop a core supplier agenda. So each country has its own unique program. "At the end of the day the idea behind the global effort is to be better managed and drive costs out of the supply chain," Reade says. "We have always been interlocked globally."

IBM's global program is administered by its internal VMS tool and is in 35 countries. The tool is adapted to each country's requirements with a manager overseeing operations. Meanwhile, Europe has a supervisor whose role is to make sure that each country is supported. IBM also has a contractor staffing application that it uses in Europe and Asia. This year alone, 10 more countries have been added to the application.

In the last four years, IBM has run a successful MSP program in Denmark, Sweden, Finland and Norway. "It comes down to understanding each country's dynamic. The best practice is to have a global vision but be adaptive to the local condition," Reade says.

The BMC saga
Headquartered in Houston, BMC Software develops, markets and sells software used for multiple functions, including IT service management, data center automation and performance management. The company helps other companies better align their IT operations with business needs and uses contingents around the world. Today, it has a $22 million CW program that is administered both internally and by MSPs (depending on the region) and a VMS (Fieldglass) in specific regions. The three European countries in-scope for a VMS are the United Kingdom, Ireland and the Netherlands.

"Prior to the roll-out of our global contingent management program, hiring managers did not consistently involve global procurement and we did not have a good handle on the number, location, tenure, and skill sets of our contingents," says Holly Olszewski, global procurement manager. The goal of the program was to gain that visibility and to ensure supplier compliance in proper vetting and onboarding of contingents, she says. Olszewski and her team did meet resistance from hiring managers who were used to operating on their own. In addition, because Europe is not as conversant with the MSP model as is the United States, there was resistance from vendors and managers to the model.

As a result, the global procurement team spent a lot of time handholding the managers as well as the suppliers and walking them through the system. Education on the advantages of the MSP and VMS and executive support helped change managers' attitude. But it took a while.

BMC uses contingents in 27 countries and 85 percent of its contingents (including SOW contingents) are processed through the VMS. The 15 percent of the workers that are not tracked by the VMS tool are on-boarded manually and then entered into BMC's Oracle ERP system, which is the system of record for the company's 850-plus contingent workers.

All contingents (defined as workers that need access to BMC systems) receive a contingent-specific BMC email account and access to the company intranet. Contingent positions in Europe range from administrative support, inside sales representatives, accountants, desktop support administrator, HR recruiters and coordinators.

BMC ran into issues with regard to Fieldglass' first global integration with Oracle, experiencing challenges around customizations and language barriers. For instance, the company has been unable to roll out the VMS in Brazil because many of BMC's suppliers only speak Portuguese but the VMS is not available in Portuguese. Even if Portuguese was supported, all the customizations such as job descriptions and onboarding items are still only in English. Therefore, the company has no plans to roll out the VMS in areas where the transactions are done in the local language.

"Do all your due diligence upfront," advises Olszewski. "After two very challenging years rolling out our global contingent management program and VMS, we are now able to provide extremely valuable contingent metrics and reports to our business units that were never available before," she says. "For the insight we now have into our contingent workforce and the related spend, it has been worth all the effort!"

Subadhra R. Sriram is managing editor of Contingent Workforce Strategies magazine. She can be reached at ssriram@staffingindustry.com










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