Temporary Agency Work: A viable alternative to the standard employment relationship?

Ida Regalia ida.regalia@unimi.it

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Abstract

General aim of the paper is to contribute to a conceptual clarification of different logics underlying ways of approaching the dilemma between employment security and labour flexibility

More specifically, after an introduction to the different meanings of the term “security”, having primarily in mind the Italian experience the paper discusses the conditions under which

temporary agency work (TAW) can be a solution to some of the limits for workers of flexible forms of employment in a post-fordist economy

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Introduction

The starting point is acknowledgement that in Europe, on the one side,the standard

employment contract is being eroded, but not disappearing;

on the other, the insecurities connected with the new forms of employment are considerable; high risk of dualism in the labor market.

Necessary to devise new solutions

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Introduction-2

From the workers’ perspective these insecurities and risks can be grouped into three categories:

i. risks connected with unemployment and job insecurity;

ii. risks of limited/inadequate development of human capital;

iii. risks of reductions in rights and deterioration in employment conditions.

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Introduction-3

NB. Added to these are other risks that derive to firms and public authorities from large-scale recourse to non-standard employment. the unwanted economic and social consequences of the

use of non-standard forms of employment have also implications for the performance of firms and the programs and policies of governments (local and central).

It is to deal with these new insecurities that new standards are necessary. New standards, not an unrealistic resumption of the old

ones

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Different meanings of term “security” Often, distinction between employment and job

security But it is not the only useful distinction:

1. it can mean employment security in a particular firm, 2. or security of being employed in a particular job and

developing one’s skills, 3. or security of permanence in the labor market

While standard employment contracts assure the first (and therefore the third) meaning of the term, they do not necessarily guarantee the second.

New, sustainable forms of employment may guarantee the third type of security, combined as far as possible with the second (not necessarily the first).

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Different meanings of term “security” 2 These distinctions useful to distinguish

between different logics underlying different initiatives intended to promote work security

And more precisely to distinguish between different aims of programmes

In following table the initiatives are classified according to whether they seek to promote security founded on affiliation with organized settings or permanence in the l-m, and according to whether they seek also to promote skills maintenance development.

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Different paths to “security”

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Different paths to “security”Combining those 3 dimensions we obtain the patterns identified in table 1. The first quadrant comprises programmes intended to favour the gradual

hiring of workers into firms on standard contracts after periods on non-standard ones. It is the approach often preferred by unions  .

The aim of programmes in the third quadrant is to encourage hiring on stable employment contracts, within organizational settings broader than those of individual firm, in order to promote use by several firms of HR of which firms have occasional need (because they possess specific skills and/or experience).

The aim of the schemes in the other 2 quadrants is to support workers entering and remaining in the labor market, by means of active employment policies structured according to the needs of the local economy.   The second quadrant comprises programmes intended to stimulate

labour-market (re)entry of inactive/unemployed workers through the provision of non-standard employment opportunities, accompanied by incentives or services which increase their attractiveness

The fourth quadrant comprises the various initiatives intended to identify appropriate forms of protection for workers who, because of their qualifications and skills, and because of the characteristics of the local economy, can accept and may prefer high labour-market mobility.

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TAW in Italy 1

For long in Italy, it was not permitted to use labour furnished by a subject (formal employer) other than the subject utilizing that labour (the user firm).

A law enacted in 1960 imposed an absolute ban on labour subcontracting seen as a form of unacceptable exploitation of labour This was at the origin of both

prolonged hostility against any form of labour supply by third parties

and the close protection for employees and workers provided by the law which in 1997 finally legalized the use of agency workers

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TAW and different logics of securityWith reference to Table 1, agency work offers

for a diversified pool of workers opportunities -to enter/re-enter the labour market (Q2), -to receive support in labour-market

transitions within a framework of rights and specific forms of protection (Q1, Q4),

-to increase their employability and therefore access to more stable positions in firms (Q1),

-to find forms of stability within the system of temporary work (Q3).

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An anomalous experience? TAW in Italy In Italy TAW was introduced late, only in 1997,

by a centre-left government – which could give guarantees that workers would be adequately protected – following a tripartite pact between government and the social partners on reform of the labour market.

From the very beginning quite stringent conditions were introduced to protect workers against abuses

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TAW in Italy 2

Four main points are to be emphasised As regards the actors, only agencies formally authorized by the Ministry of Labour,

enrolled on a special register, and fulfilling specific stringent requirements could furnish labour

As regards circumstances TAW could only be used in temporary circumstances (indicated by

the law or to be specified by nation-wide collective agreements) It was forbidden to replace workers on strikeAs regards terms and conditions The contract was to be in written form It had to guarantee parity of treatmentIn order to ensure suitable training A fund for the training of temporary agency workers was

established. It was to be financed with obligatory deductions from their gross wages

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TAW in Italy 3

the law was distinguished by its strong concern to prevent abuses in the use of labour by both agencies and user firms, as part of a more general endeavour to foster the growth of (regular) employment.

The general logic of the normative framework did not substantially changed when some of these requirements were removed or attenuated by the provisions of a further law reforming the labour market enacted in 2003 by the centre-right Berlusconi government (‘Biagi’ law).

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TAW in Italy 4Regulation by initiative of social partners 1

The introduction of TAW in 1997 - preceded and facilitated by a pact among trade unions, employers’ associations and the government – stimulated initiatives by the social partners.

Firstly, new organizations were created to represent agency workers and the agencies themselves.

Secondly, sectoral collective bargaining got under way.

Thirdly, new bilateral bodies were instituted to furnish temporary agency workers with specific forms of protection and welfare

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TAW in Italy 5 Regulation by initiative of social partners 2

1. new organizations to represent TAW and agencies creation of unions specialized in the representation of workers on

non-standard contracts NIdiL-Cgil, Alai-Cisl, Cpo-Uil neither industrial or occupational trade unions. But unions of an entirely

new kind: their memberships are not defined by common affiliation to a particular sector, or to a specific trade or occupation, but by the type of employment contract.

The organizations of the agencies Initially distinct organizations Then merger into a single one: Assolavoro

promote the development of TAW, and enhance its image among public opinion,

establish a code of behaviour for associate agencies, reach agreement with the trade unions on how TAW should be

regulated

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TAW in Italy 6 Regulation by initiative of social partners 3

2. Nation-wide collective agreements 1998

It fixed maximum permissible duration of contracts with same user firm; defined in detail how the equal pay principle was to be applied and what pay conditions were to apply in case of illness, workplace accident, or dismissal; established the trade-union rights of temporary workers (right of assembly at the user firm, right to elect trade-union representatives)

2002 It led to the creation of the sector’s two bilateral bodies

2008 It took further steps towards the construction of a specific welfare system

for temporary workers It introduced a clause on the stabilization of workers completing a specified

period of service with same agency 2009

Measures were introduced to cope with the sector’s crisis caused by the international recession

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TAW in Italy 7 Regulation by initiative of social partners 4

3. The bilateral bodies Formatemp devoted to the training of temporary workers

agencies set aside 4% of the gross wages paid to temporary workers for the purposes of training

“in Italy concessions to the flexibility needs of firms have been ‘off-set’ by measures to promote the skills and employability of temporary agency workers, and to support their incomes in periods of inactivity, or between one assignment and the next, through training”

Ebitemp delivers welfare services furnishes services to workers not fully eligible for protections and

benefits available to workers on permanent contracts. As its director, former trade-unionist and currently vice-president of a labour agency, said, Ebi.temp arose “from the need to reduce the hardships due to the discontinuity of service in temporary work”

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TAW in Italy 8The agencies

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TAW in Italy 9

Compared with other European countries, the USA and Japan, the Italian TAW sector is characterized by the small number of agencies, by their very large average size in terms of turnover, number of

branches, and employees per agency This marked concentration is the outcome of

strong barriers to entry (high financial guarantees, operation in several regions)

complex procedure to gain authorization established by law It favoured the presence in this new market of mostly solid and

reliable operators, able to undertake investments and commitments from a longer-term perspective.

Moreover presence of managers with connections to the world of work

one of the factors fostering the sector’s development has been the positive relationship with sectoral trade unions

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TAW in Italy 10

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TAW in Italy 11In the 10 years since the introduction of TAW, there has been a considerable expansion in this form of employment from a

quantitative point of view an increasing diversification from a qualitative one.

Starting from zero, the TAW sector has acquired a market share in line with the European average, although the intensity of use (1.2 percent of dependent employment, and 12 percent of total temporary employment, as shown in table 2) is lower than in several other European countries, (particularly France, the Netherlands, the UK)

An increasingly wider range of jobs and workers – diversified according to age and job tenure, gender and qualification, sector, geographical origin and location – are involved in this form of employment.

However, since the second half of 2008, the demand for TAW has rapidly decreased, and the sector is consequently in crisis. As surveys by the EbiTemp observatory report, the data for the first six months of 2009 show that the market has shrunk by around one quarter (-24%) because of a strong decrease in demand from the manufacturing sectors most affected by the economic crisis

Current indicators report however a recovery

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To conclude in light of the normative frame of reference

and initiatives by the social partners, TAW is not simply a new form of employment introduced with a view to greater flexibilization of the labour market.

It is also an opportunity – albeit limited in quantitative terms – which may contribute to improving the fluidity and the adaptability of the labour market, as well as the job security of temporary workers.

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TAW as an alternative to SFE?

Schmid (2010) lists the following conditions: a) minimum wages, guaranteed by law and/or

collective agreements; b) legal acknowledgement of collective agreements

through their extension on workers or employers not covered by these (usual sectoral) agreements;

c) provision of accumulating rights to transitions into open-ended employment contracts within a limited period of time;

d) reflection of higher risks through higher security provisions, for instance through higher contributions to social security or mandatory funds for training or employability provisions.

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TAW as an alternative to SFE?

Work for a TWA may be equally advantageous for workers, provided that they are offered:

(i) pay and working conditions equal to those of analogous permanent employees,

(ii) guarantees of employment continuity,

(iii) protection against the risks of human capital deterioration,

(iv) guarantees concerning social security and welfare, as well as union rights