Staffing agencies challenging the Nordic model

What makes this employment model appear to be a challenge to the Nordic model? 0.8 - 1.3 percent of the Nordic region's employable population are temporary workers, compared to the European average of 1.7 percent. By the end of this year the EU directive on temporary agency work must be implemented.

"The EU directive on temporary agency work is a crucial issue for the Swedish model," says Henrik Bäckström, head of the employer and trade federation Swedish Staffing Agencies, which comes under Sweden's employer and trade organisation for the service sector, Almega. 

He is opposed to the idea of allowing temporary staff the same salary as staff in the company they are hired out to.

"In Sweden salary and terms of employment are agreed in negotiations between the parties to the labour market. The main part of this directive, however, says salary and terms of employment for hired workers should be stipulated in law and indirectly by somebody else - with no input whatsoever from the employee or the staffing agency. In other words there is a real risk that the core of the Swedish model will be legislated away," writes Henrik Bäckström on the Swedish Staffing Agencies website.

The hiring out of labour was in principle banned in the Nordic region until the early 1990s. This stemmed from a 1933 ILO convention which stated any labour exchange which was run for profit should be abolished. Employment protection legislation was based on full time employment being both desirable and the norm.

Need for flexibility

But a growing service sector and the need for flexibility meant there was soon a need for other forms of hiring people. Many businesses have chosen to maintain a small permanent staff while hiring extra temporary staff during busy times. Various forms of hiring out staff emerged. In Finland the shipyards were the first to make use of it, with companies hiring labour from each other. The easing of legislation gave rise to quite a few cowboy operators. 

In Finland the staffing agency trade still battles with the bad reputation it got during the 60s and 70s when agencies tried to find ways around labour, social and tax legislation, while speculating with bankruptcies so that many people lost their income. When temps were also used as strike breakers in the 80s the agencies' reputation fell even further. 

Risk of social dumping

The Nordic model is known for strong trade unions and organised employers. Staffing agencies represent a challenge because those working there are employed by the agency while working with the client. This creates a fuzzy situation in the workplace when figuring out who is really part of the business. Trade union membership is often low among staffing agency workers. Those who are organised are often members of unions that gather all of the different employment groups within the staffing agency.

The risk, as trade unions see it, is that staffing agencies weaken employees' salary demands. This becomes particularly evident when a company is downsizing. Employees can often be re-hired by the same company when the economy turns for the better, but now they'll be employed by the staffing agency. 

Ahead of Sweden's 2010 elections the centre-left opposition wanted to introduce an extra tax on companies using temps for long periods of time. The Left Party said such companies should pay an extra five percent employer's tax. 

"It is a good idea to punish those who have an employment policy which damages the individual worker and society," said party leader Lars Ohly.

Adecco, the world's largest staffing agency, has had a lot of negative press in Norway lately, after revelations the company had broken work environment law in nursing homes run by them on commission from Norwegian municipalities, and for wrongly claiming millions of Kroner through incorrect invoicing. 

"Most Norwegian employers feel a social responsibility and treat their employees well. But we need legislation to secure a minimum standard and which will identify the exceptions - that's what the Adecco affair has shown us. Without the working environment act Adecco would be able to legally carry on, which in the long run would squeeze out the serious actors in the trade," says Norway's Minister of Labour Hanne Bjurstrøm. 

Difference between contract and hiring

The debate on staffing agencies does not always distinguish between what could be damaging with the actual employment structure and other negative aspects which also - wrongly or rightly - are associated with staffing agencies. 

Norway's Adecco debate is similar to a debate in Sweden following revelations by enrolled nurse Sarah Wägnert who described how older people could lie for hours calling for help and often would develop bedsores at the old people's home Polhemsgården in Solna outside Stockholm. ISS Care had to pass the running of the home back to the municipality, and a new law, Lex Sarah, was later introduced. It says anyone who comes across information about serious abuse must report this to social services.

Although the Adecco case was about working conditions for employees and not about old people in a home, both cases saw agencies carrying out contracted work. Such work is not considered staffing activity and is not covered by the EU directive on temporary agency work which all EU countries plus EEA members Norway and Iceland must implement by 5 December this year. Contracted work on average makes up just ten percent of staffing agencies' activities.

Difficult issue also within the EU

Also within the EU the temporary agency work directive has been a difficult issue. The Commission presented its first proposal for a directive as early as in 1982. But as no agreement could be reached in the European Council, the proposed directive was withdrawn. The issue was left with the European social partners, which during the 1990s managed to agree on many issues. Yet there was no agreement on the temporary staffing issue. In 2002 the Commission tabled a new proposal. It was blocked by the UK. Finally, in December 2008, an agreement was reached. The directive has two main points:

• Basic work and employment conditions for employees who are hired out by staffing agencies must be equal to those they would have been offered if hired directly by the company in which they will work. 

• Staffing agencies must be allowed the freedom to operate. Existing state restrictions must serve the common good, particularly the employee's need of protection, the right to health and safety at work and the need to guarantee a well-functioning labour market and the prevention of abuse.

Many European countries have a minimum wage to prevent the erosion of good working conditions. Minimum wages are often set by the state, and the motivation is to fight poverty. In the Nordic region the minimum wage is considered to be problematic, as it reduces the responsibility of the parties to the labour market, while it could contribute to lowering the general salary level. 

Different Nordic strategies

That's why Sweden and Denmark's trade unions prefer to negotiate collective agreements directly with the staffing agencies, or that conditions covering the staffing agency trade are included in collective agreements with other employers. 

In Iceland wage and employment conditions in a collective agreement represent minimum standards covering all employees within a particular occupation and area of agreement. Employers and employees are automatically bound by the collective agreement's decisions on salaries and other employment conditions, no matter whether they are trade union members or members in employers' organisations. 

Finland and Norway have special boards which will say whether a collective agreement is of a generally binding nature or not, if one of the parties to the labour market asks for it. In Finland this happens almost automatically if the agreements are representative enough. Out of 160 national agreements in Finland, 120 are generally binding. 

Norway's board has been more restrictive. The country's first declaration of a generally binding nature of a collective agreement covered three unions within seven onshore plants within the oil industry, towards the end of 2003. Then followed the building industry, electrical industry and agriculture. Next up is the cleaning industry, for which the board is expected to publish its decision shortly.

New area of conflict

With the exception of the cleaning industry, where both employers and the trade union wish a declaration of a generally binding nature of a collective agreement, there has been disagreement over the way forward for other trades. 

"Generally binding collective agreements have become a new area of conflict. In other areas there is a joint understanding among employers and unions that collective agreements are a good tool. That understanding is lacking within the staffing agency trade," says Jan Olav Andersen, who heads the negotiating team at Norway's Electrician and IT workers' union.

He is also unhappy with the lack of information about what kind of of documentation which is needed for the so-called tariff board to make decisions on whether a collective agreement should be generally binding.  

"It's like sending in the proposal for the agreement to be generally binding into a thick fog," he said.

One of the prerequisites for a collective agreement to be declared generally binding is the ability to document that foreign workers perform jobs under less favourable conditions compared to those stipulated in the trade's collective agreement.  

Norway's large labour migration

Staffing agencies have provoked debate in Norway partly because the country has received more foreign labour from Eastern Europe compared to the other Nordic countries. These workers are often employed by staffing agencies.

"The past few years have seen an explosion in immigration from new EU member states in the wake of the 2004 expansion into Eastern Europe, especially from Poland. There are in all 74,000 immigrants and people born to parents from this area," writes Statistics Norway.

Norway's Institute for Labour and Social Research, Fafo, has measured attitudes among Norwegian companies that fall under generally binding collective agreements and which use Eastern European labour. A majority in both the building trade and in industry are positive to generally binding agreements, yet industry is more sceptical than the building industry. 70 percent of building industry bosses were positive in 2009. In industry just over half were quite happy or very positive about generally binding collective agreements, while 18 percent were quite or very negative. 

"If you think of the controversy surrounding the generally binding collective agreements, it is surprising that not more business leaders were negative. This could mean generally binding agreements feel less dramatic on a local level compared to centrally on the employers' side," writes Fafo researcher Torgeir Aarvag Stokke in the report "Generally binding collective agreements in the EU and in Norway".