Follow-up:
Europe up to temporary employees
By Carter Dougherty International Herald Tribune
MONDAY, FEBRUARY 13, 2006
FRANKFURT Over the past five years, Adecco, the temporary employment agency, has found working in Germany tedious. These days, though, it is noticing a sea change that may inject flexibility into a rigid labor market - and make Adecco a lot of money as European economies edge out of a long slump.
Several years ago, Adecco, which is based in Switzerland, slogged through negotiations with six unions just to provide temporary workers to the company running the Expo 2000 world exhibition in Hannover, Germany, for five months. But then the company buckled down, working through a list of client companies, including the automaker Audi, and using its own employee organizations to persuade workers at other major German companies that the temporary work force posed no threat to their jobs.
"In many cases, this intensive contact helped us get our foot in the door," said Uwe Beyer, head of Adecco's German operations. "The stigma of temporary work was great."
Today, a subtle but important shift in attitudes toward temporary employment has taken root in Germany. It is also evident elsewhere in Europe as economies enter a period of extended recovery, politicians push for further changes in labor markets and unions back away from their longstanding opposition to this form of work.
The change has several implications for labor markets. For one, it is often a leading indicator of an economy's health. In the United States, for example, temporary employment was used reliably in the past two recessions as a measure of real employment and sustained economic recovery.
In Europe, temporary employment has accelerated in the past three years as economies have seen a slow but persistent recovery. According to the International Confederation of Temporary Agency Work Businesses, temporary work agencies now employ more than seven million workers, or 1.9 percent of the European Union's working population.
More important, in countries like Germany, where expensive social insurance and union memberships make companies extremely cautious about hiring, an expansion of temporary employment is also a sign that employers are looking for ways to increase work-force flexibility.
"For the first time ever, German industry is moving from a very traditional thinking to a very flexible way of staffing their businesses," said Jan Arie van Barneveld, chief executive of Brunel International, a Dutch-based employment company that recently expanded its operations in Germany. "It's an important development for us but also for the German economy."
Indeed, nowhere has the growth in temporary hiring been as noticeable as in Germany, where new laws and a deal with unions have ushered the market for temporary employment into something of a boom, according to industry and labor representatives.
After a decade-long process of gradually extending the maximum length of a temporary worker's contract to 24 months, the German government abolished such restrictions entirely on Jan. 1, 2004. On a parallel track, top staffing companies and labor unions agreed in that same year to the first comprehensive labor agreement specifying minimum remuneration for temporary workers.
The breakthrough was significant because unions had nurtured a widespread belief in Germany that temporary work was inferior to full-time employment. That image began to shift in the wake of the agreement, and staffing companies, in turn, shed their fears that a deal with the unions would tarnish the appeal of temporary work by locking them into fixed arrangements.
"No one knew each other before we sat down and worked out the details," said Nicola Hirsch, head of labor policy in the state of North Rhine-Westphalia for DGB, a union umbrella group.
"Financially speaking, we hadn't enjoyed our time in the German market," said Frans Cornelis, a spokesman for Randstad, a Dutch giant that also recently expanded its reach in Germany. "But that changed after 2004."
Now agencies like Adecco, sensing a shift in the tide, are seeking German acquisitions and investments to lock them into a market where temporary employment is expected to grow from 1 percent of the work force, or about 350,000 people, to between 600,000 and a million people over the next five years.
Early in January, Adecco announced that it would spend E636 million, or $757 million, for DIS, a top German staffing company in the high-margin business of placing engineering, financial and information technology specialists in temporary jobs. A day later, Randstad said it would buy Bindan and Teccon, two medium-size German companies, for an undisclosed sum.
Last year, another Dutch company, United Services Group, joined Brunel in the German market, taking control of several smaller German companies.
Manpower International, the American giant that earns 75 percent of its revenue in Europe, has grown in Germany to 200 offices from 40 over the past three years as it has been building a denser recruiting network.
"We see much more of a structural shift happening in Germany than we do in any other European country," said the Manpower chief executive, Jeffrey Joerres. "We've spent a lot of money there."
Underpinning the optimism is the current recovery's effect on temporary staffing. In Europe, when an upswing gets under way, good times often start in Belgium, where looser regulations and a generally open economy lead companies in light industry to begin hiring temporaries, a trend that was already under way in 2004. From there, the takeoff in temporary staffing tends to sweep toward the Netherlands, and then through northern regions of France and so on through Europe.
"The more open countries are already into the later phases of growth because the pickup started earlier," said Frank van Wijk, an analyst with SNS Securities in Amsterdam. "Now the others are following."
Today, in mature staffing markets like Britain, the Netherlands and France, temporary workers make up 3 percent to 5 percent of the total work force.
In the past, the hiring wave typically stopped at the German border.
This year, though, the debate in the industry is focused on how fast revenue from the German market can grow.
Tripling the number of people working for temporary agencies over five years and bringing Germany up to European norms - implying growth rates of more than 30 percent - will tax even the most agile companies, said Ron Icke, chief executive of United Services Group.
"It has to do with opening branches and attracting the right people at the right time," Icke said. "You always see these limitations in every market."
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