Report of the Board of Management

 Legal environment

Temporary staffing legislation varies by market but restrictions usually fall into one of four areas; length of assignment, reason for the assignment, levels of pay and benefits, or sector prohibition. In certain markets, in addition to national and/or local legislation, the recruitment industry is also obliged to negotiate collective labour agreements with other social partners including unions. General changes to employment legislation may also have an impact on the competitiveness and the costs of the staffing industry.

The UK, US and Australian recruitment markets are the most liberal in the world. Northern continental Europe has long-established recruitment markets but here, regulators seek to balance the need for flexibility with an obligation to ensure that the salaries and other benefits of temporary workers are on a par with those of permanent workers. In Southern and Central European markets, recruitment is a relatively new industry sector and legislation is still maturing, as is the case with Japan.

There is a clear correlation between liberalisation and the size of the professional/executive recruitment sector in each market; the more relaxed the legislative environment, the larger the size of the professional/executive recruitment market. With liberalisation comes greater social acceptance for alternative work arrangements, a more positive image and a greater likelihood that more highly educated personnel will seek temporary or contract employment opportunities.

The positive role the temporary recruitment sector plays in EU labour markets was recognised in 1993 in the White Paper on Growth and Competitiveness and subsequently endorsed by the European Employment Taskforce which called on all Member States to better exploit the potential of temporary agency workers and to eliminate all unjustified restrictions on agency work thereby improving job opportunities and providing high employment standards. Such steps are also believed to play a role in enabling the EU to meet its objectives established at the Lisbon European Council in 2000 of creating the most competitive and dynamic knowledge-based economy in the world as well as those agreed at the Barcelona Council which defined full employment as the overarching goal of the EU.

A number of positive legislative developments occurred during 2004 providing some impetus to long-term growth in a number of Vedior’s markets:-

	In January 2004, a new collective labour agreement came into effect in Germany providing wage increases, more flexible overtime arrangements and less exposure to ‘idle-time’. Germany has historically been one of the world’s most restricted recruitment markets, however, recent changes are illustrative of the government’s desire to improve overall labour market flexibility.
	In March 2004, new industry sectors were opened to the relatively young Japanese staffing industry, including healthcare, and restrictions were also abolished on assignment length. Given the size of its population and the trend to adopt more flexible business practices, Japan remains a market with strong growth potential.
	In the Netherlands, a new collective labour agreement for temporaries came into effect from April 2004. This had the benefit of improving flexibility as well as reducing administrative complexity and thereby easing, to some degree, the structural issues which have caused a decline in the Dutch market over recent years.
	In the UK, the Employment Agencies Act came into force in April 2004 after four and a half years of consultation. While this placed some additional restrictions on the operations of staffing companies particularly relating to charges for temporary workers converting to a permanent employment position, these restrictions are not onerous and in keeping with the terms and conditions recommended by the REC, the UK trade association for the staffing industry. The new regulations also contained measures to protect the vulnerable, including making background checks for certain workers a statutory requirement.
	New labour legislation in Italy came into force in August 2004 providing recruitment companies with greater flexibility and allowing permanent placement and staff leasing for the first time.
	During 2004, it was announced that, from 1 January 2005, the French government will allow temporary recruitment companies to provide permanent placement for the first time. Previously, such services had to be provided through separate companies which made the provision of permanent placement services relatively expensive. The French government also confirmed that there will be no major changes to the 35-hour working week regulations which some industry commentators had identified as a potential risk to the recruitment industry. Minor amendments proposed in 2005, modifying the ‘Compte Epargne Temps’ (vacation rules), are not anticipated to have a negative impact on Vedior’s operations in France.

During 2004, under the Dutch Presidency of the European Union, discussions on an ‘EU directive on agency work’ were revived. Previous discussions had stalled following objections from a number of countries. In its last unapproved draft, the directive would have had a potentially negative impact on the more liberal recruitment markets such as the UK and Ireland and a potentially positive impact on the newer and more highly regulated European recruitment markets. It is possible that the directive may resurface at some stage in the future but it is difficult to predict what the impact will be given that agreement is unlikely without some form of compromise.

Inevitably, from time-to-time, we do see some legal developments that have a negative impact on our industry. However, the overriding worldwide trend is for further relaxation of legal restrictions providing excellent future growth opportunities for Vedior and the wider recruitment industry.