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Temps: signs of recovery

Hungary’s temporary work agencies in general report strong growth for 2010.

In the case of clients in sectors such as electronics, shared service centers (SSC) and cosmetics, Kelly Services Hungary managed to steer clear of the crisis, according to managing director Anikó Jónás. Last year saw the firm’s turnover increase to new highs, a trend they expect to continue in 2011. But even sectors that suffered in previous years seem to have recovered – faster than expected.

Trenkwalder, the temporary employment market leader in the country, had been strongly affected, but by last year its business already surpassed pre-crisis levels, seeing numbers as high as 10,500 leased employees per week, with manufacturing leading the rebound. Even the usual drop in numbers experienced in January failed to occur at Trenkwalder this year, and the company expects a further increase in business in 2011. Ottó Vég, managing director of Adecco Hungary, confirmed that the market showed a strong recovery in 2010, especially automotive parts suppliers, electronics, SSCs and call centers.

Companies are remaining cautious post-crisis, and tend to turn to temporary employees to fill new positions. Judit Kiss, country manager at Manpower Hungary, believes that uncertainties in the global economy and fast-changing regulations in Hungary will keep pushing employers toward such flexible solutions. Meanwhile, JOB Személyzeti Tanácsadó announced a merger with Tele-Scope placement agency, thus creating one of the largest Hungarian-owned businesses in the sector.

Debilitating social tax

Some enterprises mentioned the so-called disability tax as one of the main hurdles they will have to overcome. According to a new regulation that entered into force at the beginning of 2011, companies where the percentage of disabled employees does not reach 5% have to pay a “rehabilitation contribution”.

While enterprises and clients support the idea of integrating disabled people into working life, implementation is proving difficult. Temp agencies say that they received no help from the government, and they have no database of such less able workers. Also, the final decision to hire someone lies with the client, who may not have the incentive to do so. In that case, extra costs are paid solely by the temp agencies.

Another law expected this year will concern the EU Directive on Temporary Work, which every member state has to incorporate into its national law by December 5. Major issues are new limits for the maximum duration of assignments and a provision of equivalent wages for permanent and contingent workers. Balázs Köves, deputy chairman of the Hungarian Association of Recruitment and Executive Search Companies (SzTMSz), explained that the organization, in cooperation with employers, drew up and sent a draft bill to the government. In maintaining the market’s trend, a pivotal question is how the directive will be implemented. “Will the new rules be more or less flexible than the current ones?” asked Köves.

Vég at Adecco is similarly cautious: “If new regulations are more supportive, new jobs will be generated. However, if they prove to be rigid administrative rules ignoring the players, then there will be actual jobs lost.” Would employers, in such a situation, hire new employees with fixed-term contracts in place of temporary workers? Vég fears that they would instead try to solve everything with their current staff – by resorting to overtime work, for example.

Room for growth

Hungary lags behind Europe in the share of temporary employment in the overall economy, which stands at just 1.5%, below the EU average of 2%, and well behind that of Western countries like the UK (4.5%) or Germany (2.5%). This means, however, that there is a lot of room for growth, which is good for employment in general. “It is a myth that temp agencies are merely mediators, that they don’t generate new jobs,” said Köves. Surveys show that 78% of temp jobs would not exist if not for this legal framework. Together with other “atypical” forms of work (such as distance work and part-time work), they represent a way to enter the market for people such as first-time jobseekers or women on maternity leave.

Temporary employment also has an effect of “whitening” the grey economy. It is said that a 1% increase in temporary employment should lead to a 13% drop in the grey market. All in all, with carefully designed regulation, it can significantly increase employment levels.

This article was published in the BBJ's HR special edition on April 8, 2011.