The HR scene in Europe has been eerily calm of late, as we have been struggling our way out of the economic crisis over the past few years. Perhaps disturbingly calm, as trends are indicating an increasingly complex talent environment ahead. Scarcity is back, and it’s becoming hard to find talent with the right hard and soft skill sets in markets where unemployment is steadily decreasing. The regulatory trend has been towards greater liberalization, and various European labor markets have been modernizing. In Italy and Spain, for instance, we have seen a number of major reforms, as well as some more minor ones in Germany, Belgium and the Netherlands. This article provides a brief overview of what’s going on.
The latest reforms in European HR have opened the way to more flexibility and diversity in employment and work relationships. Germany, however, is an odd exception, introducing legislation that has restricted flexible work. Overall in Europe, dismissals have become less costly and less burdensome in terms of administration. Currently, France is working on major labor reforms, although those reforms will, of course, be of the European type, with flexibility attainable only after lengthy negotiations with trade unions at company level, and laid down in collective bargaining agreements. In this way, French politics will keep the unions alive and relevant for the time being, although ironically union membership is dwindling.
the gig economy
As we move into the gig economy, we will certainly need a large number of major structural reforms. Many middle-income jobs will disappear due to robotics and Artificial Intelligence. New jobs – often at both higher- and lower-income levels – will be created in their place. Of course, these new jobs are good news, but polarization on the labor market is a reality that will need to be dealt with: vulnerable workers, for instance, will need to be protected. The common denominator in all these developments is going to be an ongoing search for fairness, finding the right balance between flexibility and security for employers, employees and society as a whole. This will not be easy, as the boundaries of traditional sectors either blur or disappear, and new types of work relationships arise. At the same time, we will need to find new ways to enhance worker mobility and establish continuous upskilling as the norm, so that the right talent will be available at all times.
Another significant trend is the merger of HR with matters of social innovation and CSR. As a business community, we need to formulate our own answers to these questions before others answer them for us. The gig economy, as one of the latest issues to emerge in our field, is currently the subject of heated debate and in-depth research in Europe. As most gig workers are independent contractors or freelancers, the political debate is focused largely on issues of bogus self-employment (or misclassification), with the Uber cases in London being typical. Matters such as how to provide social security, healthcare, pension and training rights to certain groups of self-employed gig workers form a significant challenge, and a full section was devoted to this issue in the agreement recently reached by the new Dutch coalition government. Meanwhile, the political debate about the cross-border mobility of EU citizens in the internal market continues. In this context, some relatively small changes can be expected to the Posting of Workers Directive, mostly aimed at curbing illegal and informal work and improving enforcement.
strategic workforce planning
Another major issue on the minds of HR professionals in Europe is the digitalization of HR, specifically understanding it, and choosing what to implement and when. This is especially urgent given the need for companies to build a workforce that is more diverse in all respects.
Strategic workforce planning
Two out of three companies see a need to consider adopting an integrated talent management model or integrated workforce planning. This will help them find out what they will need in terms of acquiring, organizing and planning their talent over the next three to five years. They need to know what proportion of the workforce they would want to rent (through contracting or Statements of Work), buy (permanent hires), borrow (staffing solutions and independent contractors) or build themselves on the basis of their own internal talent.
Types of working arrangement in Europe
There are four main types of working arrangement in Europe: direct employment, agency work, contracting (Statement of Work), and freelancers/independent contractors.
Types of working arrangements
Apart from direct employment, the other three forms of working arrangement – agency work (or staffing), contracting (or statement of work) and freelancing – can be characterized as triangular work relationships, involving a worker, an intermediary and an end-user. This may involve risks of co-employership, equal pay and supply chain liabilities.
Agency work (staffing) is the least risky of all forms, as the European Agency Work Directive (AWD) defines agency work and lays down a regulatory framework for all EU countries. Co-employership is not an issue, as it is clear who is responsible for what. The agency is the formal employer, while the end-user only supervises the work and provides safe working conditions. Through solutions in the various EU countries, supply chain liabilities are minimized. The only drawback is that well-regulated flexibility comes at a cost, since equal pay is obligatory.
Contracting (Statement of Work) does not give rise to co-employership or equal pay issues, although there may be collective agreements that set compulsory pay levels. Supply chain responsibility is the main issue here. If any of your subcontractors goes bankrupt, you will be responsible for paying all wages (including taxes and social security contributions). Of course, there are ways of mitigating this risk, but it is certainly something to be aware of.
Freelancing (using independent contractors), especially in combination with the gig economy, involves the risk that a judge or fiscal/social authorities may view the arrangement as bogus self-employment. In that case, you will be deemed to be an employer, fully responsible for paying all wages (including taxes and social security contributions) retroactively for the full period of employment. So again, it is important to be aware of the legal arrangements and securities in place at national level. For a good overview, see Exploring self-employment in the EU published by the EU agency Eurofound.
Finally, let’s take a brief look at staffing regulations in several countries. This is the least risky form of flexible work, but also the most regulated. This means that in some cases it may be preferable to go for a Statement of Work or engage an independent contractor instead. The overview below summarizes staffing regulations in six EU countries that have license requirements. Let’s zoom in on some specifics.
Most countries (except the Netherlands and the UK) have a specific CLA in place for temps, which forms an integral part of the formal regulation.
In France and Spain, you may be required to specify why you are hiring a temp (e.g., for the development of a new production line; or due the sickness of a perm employee).
Most countries have set a time limit on the maximum length of temp assignments or contracts.
In most countries (but not in Spain or Belgium), the agency can place temps in nearly any sector, and temps can be given any kind of employment contract.
Within the EU AWD equal-pay framework, the remuneration for temps should be the same as that of a comparable worker in the end-user’s enterprise. However, in Germany, this requirement only comes into play after nine months into the assignment.
Staffing regulation in some major European markets
I hope this article will give anyone who is looking to rent, buy, borrow or build a workforce in Europe some food for thought. There will always be risks and threats, of course, but there are also many opportunities, especially if you are well prepared.