Orchestrating the Evolution of Private Employment Agencies ... - Ciett

Orchestrating the
evolution of Private Employment Agencies
towards a stronger society
Copyright notice
This report has been produced by CIETT. The research described in this report was conducted by McKinsey & Company.
CIETT can be contacted through Eva Casado Alarcón, CIETT Secretary General (tel. +32 2 733 0427, fax +32 2 733 5444, e-mail
info@ciett.org). Copyright CIETT, Brussels, 2000.
CIETT, 142-144 Avenue de Tervuren - Bte1, 1150 Brussels, Belgium
www.ciett.org

Preface
The International Confederation of Private Employment Agencies (CIETT) has been reflecting on the current and
potential contribution of the Private Employment Agency 1 (PrEA) industry to the economic and social fabric of
Europe. According to CIETT, there is a need for a comprehensive fact base on, and overview of, the PrEA industry’s
role in Europe’s changing labour markets. Therefore, CIETT has commissioned this study into the evolving economic
and social value of the PrEA industry, to act as a platform for initiating a discussion towards the re-regulation of the
European PrEA industry.
The study was commissioned to McKinsey & Company, while Deloitte & Touche Bakkenist conducted a European
Union data gathering exercise. Additionally, ten external advisors, with outstanding reputations in their fields, kindly
contributed their views on the subject and on the study’s findings. These advisors, who are not responsible themselves
for the content of this report, are:
• Prof. Christian de Boissieu, University of Paris I – Sorbonne, Advisor to the Chamber of Commerce of Paris;
• Mr. Innocenzo Cipolletta, Director General of Confindustria Italian Employers Association;
• Mr. John Martin Evans, Expert on Employment Analysis & Policy, OECD;
• Dr. Peter Hartz, Director of Human Resources, Volkswagen, Germany;
• Mr. Bill Lewis, Director of the McKinsey Global Institute;
• Prof. Karel van Miert, University of Nijenrode, former European Commissioner;
• Mr. Bill Morris, Secretary General of the T&G Union, United Kingdom;
• Mr. Manuel Pimentel, former Minister of Labour, Spain;
• Mr. Zygmunt Tyszkiewicz, former Secretary General of UNICE;
• Mr. Lodewijk de Waal, President of the Dutch Confederation of Trade Unions, FNV, the Netherlands.
A database and further information on the study will be available on the CIETT website (www.ciett.org), which also
contains information about CIETT itself as well as links to other useful websites.
1 Traditionally, private employment agencies have been defined as private enterprises that employ workers to make them available to a third party that assigns
and supervises their tasks. In countries where this is not allowed, private employment agencies act as brokers between workers and companies. However,
private employment agencies are evolving as they increasingly offer more comprehensive services beyond these basic staffing services.
1

2
Orchestrating the evolution of
Private Employment Agencies towards a stronger society

Contents
Introduction
Executive Summary
Main document
1. Changes in European Union Labour Markets
2. The Role and Impact of the PrEA Industry
3. The Recommended Course of Action
Reflections of the Outside Advisors
Glossary
Bibliography
3

Introduction
One of the aspirations of modern society has been the
attainment of full employment, that is, making available
appropriate work under appropriate conditions for all
who desire to engage in productive activity. While factors
such as economic cycles and labour costs influence the
degree to which full employment is attained, the
mechanics of the human resource market are also of
critical and increasing importance. Unfortunately, in
Europe these mechanics – or the interaction between the
supply of and demand for workers – are far from perfect.
A key challenge in this regard is to balance the increased
need and desire for flexibility in employment relations –
both on the part of workers and employers – with the
basic human need for continuity and certainty. While the
latter need has always been present, the need for
flexibility is relatively new and can be expected to
increase in importance in the future. Workers, on the one
hand, are seeking more flexibility in their employment
through part-time or temporary work, mobility between
companies – and between functions – sabbaticals and
other such work arrangements. Employers, on the other
hand, are increasingly interested in greater economic
flexibility which, more generally, is critical to ensuring
Europe’s competitiveness in the global economy.
firms, if properly guided, could contribute to full
employment while also increasing the flexibility of
Europe’s economy.
Flexibility is often associated in the public mind with
precarious working conditions. However, the PrEA
industry could act as a catalyst in shaping new forms of
employment relations that engender more flexibility and
better working conditions. PrEAs could contribute to the
career development of workers in such a way that an
optimum balance is found between their needs and those
of employers.
For this to happen, what is needed is a new
understanding of the PrEA sector and a re-evaluation of
the regulations governing it. Current practices among
PrEAs differ widely across Europe. In some countries,
agencies have begun to offer full human resource
management services. In others, the industry still offers
basic services and is viewed with suspicion by workers. If
PrEAs are to make the contribution to Europe they are
capable of, then any future reform of the industry should
be based on a European-wide understanding of its
potential, together with national adjustments of practices
and self-regulation, where appropriate.
Private Employment Agencies (PrEAs) have long
complemented the traditional employment market,
which is based on bilateral employment contracts of
indefinite duration. This complementary role could be
enhanced significantly. Although PrEAs accounted for
1.5 per cent of total European employment in 1998, their
further evolution into full human resource management
4
The objective of this study is to provide a platform for
the discussion of the re-regulation of the European PrEA
industry, which will allow it to meet the needs of
European workers and contribute to the social and
economic future of the continent.

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
5

Executive Summary
1. Changes in European Union labour markets
To evaluate the role of the PrEA industry in Europe, it
is important first to understand the current and future
requirements of the European (or 2.2 million people on
an average day) labour market. Currently, about 1.5 per
cent of the European Union’s working population is
employed in the fast-growing PrEA industry. Looking
ahead, the PrEA industry can contribute to addressing
three challenges facing European labour markets.
The first is the need to reduce overall unemployment
levels. Following the March 2000 Employment
Summit, and on the recommendation of the European
Commission, all European Union Member States have
agreed to try to raise the European Union’s
employment rate from 60 per cent to 70 per cent, and
to reduce its unemployment rate from 10 per cent to 4
per cent by 2010 (the Lisbon Objectives). However,
despite high unemployment, there are millions of job
vacancies in Europe. While resolving this paradox,
Europe particularly needs to create opportunities for
specific disadvantaged groups of ‘outsiders’ – such as
young people, the long-term unemployed, women and
older people – who do not fully participate in the
labour market.
Second, workers are demanding more flexibility in
their employment relations. This trend is visible across
the entire population, although it takes on different
forms for different groups of workers. For example, the
young are often actively looking for temporary work;
women frequently prefer part-time work; and older
workers increasingly want ‘post-career jobs’ that meet
their financial and time considerations.
Third, companies have a clear and growing need for
flexibility in the supply and deployment of their
workers. This is because product lifecycles are
shortening, consumer demand is changing at an everfaster
rate, and new technologies are causing seismic
shifts in the economic landscape. Small and medium
sized enterprises (SMEs), have an especially strong
need for labour flexibility. These enterprises account for
two-thirds of European union employment and
function as a seedbed for innovation.
2. The role and impact of the PrEA industry
The PrEA industry makes a significant contribution to
the social and economic fabric of Europe. It is our
belief that an orchestrated evolution of the industry
can greatly increase this contribution in the years to
come.
From a social point of view, PrEAs enhance
employment opportunities for workers. A survey of
PrEA workers in the European Union, conducted for
the purposes of this report, indicates that many agency
workers are ‘outsiders’ to the labour market and
typically spend little time between enrolling at a PrEA
and being assigned to work. Furthermore, a significant
number of agency workers move to longer-term jobs
after agency work, and many have a genuine preference
for agency work because of the flexibility it offers.
From an economic point of view, PrEAs meet
companies’ flexibility needs mainly by providing
workers to deal with temporary variations in output or
workforce. The results of another survey, also
conducted for this report, of European Union
companies that use PrEAs, indicate that the service
6

offerings of PrEAs complement various internal and
external flexibility solutions available to companies.
PrEA workers are seldom a substitute for permanent
workers: companies would have hired permanent
workers for only 14 per cent of work now done by
agency workers, had these not been available.
While enhancing employment opportunities for
workers and helping companies manage their flexibility
needs, PrEAs actually create new employment both by
themselves and in partnership with governments. It is
estimated that, between 1996 and 1998, the PrEA
industry increased European Union employment by 0.1
per cent and accounted for around 11 per cent of total
new job creation, or 251,000 full-time jobs.
We feel that these contributions can be magnified in
the future and that a well orchestrated evolution of the
industry - with the participation of all concernedf the
parties - is the best way of attaining this. As a first step,
PrEAs are already addressing concerns about the
conditions of agency work in those instances where the
industry is in a position to do so -- namely, in the areas
of training, wages and job security.
In the long run, there are good reasons to expect that
PrEAs will develop a comprehensive human resource
management capacity and could become attractive
organisations for the development of people talent.
3. The recommended course of action
To realise the long-term economic and social potential
that PrEAs offer in Europe, workers, employers,
governments and the PrEA industry itself could
consider the following three-part course of action.
First, it would be useful to gain an understanding of the
evolutionary potential of the PrEA industry. If the
industry is allowed to develop in response to the
apparent demand for its services, then it could increase
European Union employment by 1 per cent by 2010,
thus accounting for around 10 per cent of the
employment growth target embodied in the Lisbon
Objectives. By 2010, PrEAs could provide work for up
to 18 million people a year (6.5 million people would
be employed on an average day).
Second, it would be necessary to craft measures to lift
the constraints on the evolution of PrEAs, while
ensuring appropriate working conditions for agency
workers. Current legal conditions that restrict the
extent to which companies can use agency workers
hold back employment creation, particularly among
SMEs. If these constraints were removed, then the
terms and conditions governing agency work should be
ensured through appropriate labour regulation.
Third, it would be productive to engage in a dialogue
to implement these measures at various levels. At the
European level, the European Union could establish
common ground for the conditions under which
agencies operate, taking into account the principles of
ILO Convention 181. At the national level, the
evolution of the PrEA industry needs to be structured
either by collective agreements on agency work
negotiated by employer and worker organisations, or by
national legislative authorities. At sector level, the **
7

1. Changes in European Union Labour Markets
To appreciate the significance of the PrEA industry, it is
essential to understand the current and future
requirements of the European Union labour market. In
our view, this market faces three particular challenges.
First, unemployment must be reduced. Second, the
growing demand by workers for increased flexibility in
their employment relations must be met. And, third, the
clear and evolving need of companies for flexibility in
the supply and deployment of workers has to be
addressed. These issues are explored in the first half of
this chapter.
The evolving labour market in Europe clearly calls for
new solutions. The PrEA industry’s ability to offer
flexible employment provides part of a solution to the
increasing flexibility needs of workers and companies.
The various forms of labour flexibility provided by PrEAs
are described in detail in the second part of this chapter.
REDUCING UNEMPLOYMENT
Despite some improvement in recent years, European
labour markets are not creating sufficient jobs, in
particular for certain disadvantaged groups. It is beyond
the scope of this report to provide comprehensive
reasons for Europe’s unemployment problems. However,
it is important to note some of the issues relevant to the
debate on the role of the PrEA industry in reducing
unemployment.
The employment problem is a priority for Europe
The average European Union unemployment level more
than tripled from around 3 per cent in the early 1970s to
around 10 per cent in the 1990s (Exhibit 1). These
1. The unemployment problem in Europe
Europe, United States and Japan, 1972-1999
Unemployed as percentage of active workforce
Major European countries, 1999
12%
10
EU-15
Spain
16.8%
8
Italy
11.3
6
4
2
US
Japan
France
Germany
United Kingdom
6.1
9.1
11.0
0
1972 1976 1980 1984 1988 1992 1996
Source: Eurostat; EU Directorate-General for Economic and Financial Affairs; WEFA
Netherlands
3.2
EU-15
average
9.2 %
8

aggregate figures mask significant differences across
Europe, with official unemployment levels in 1999
varying from 3.2 per cent in the Netherlands to 16.8 per
cent in Spain.
Following the March 2000 Employment Summit, and on
the recommendation of the European Commission, all
European Union Member States have agreed to try to
increase the European Union employment rate from 60
per cent to 70 per cent, and reduce the unemployment
rate to 4 per cent by 2010. These targets are set out in
the so-called Lisbon Objectives. The European
Commission has urged all policy actors to engage in a
dialogue and to develop proposals to meet these targets.
The development of the PrEA industry can be seen as
part of the solution to Europe’s employment problem.
Labour mobility is crucial for employment growth
Paradoxically, today’s high level of unemployment in
many European countries co-exists alongside significant
numbers of job vacancies. For example, in France, where
unemployment exceeded 10 per cent in 1999, there are up
to 50,000 vacancies for construction workers and 20,000
for truck drivers. Such figures suggest that Europe is
incapable of effectively matching workers with jobs. Some
of these mismatches are visible on the pan-European
level, with pockets of unemployment in some countries
and other countries where labour is scarce.
To realise the employment targets set in the Lisbon
Objectives, most new jobs will have to be created in the
service sector, because employment in the agricultural and
industrial sectors will continue to shrink. In the European
Union over the past 25 years, the share in total
2. Employment growth by sector
Employed workforce by sector 1975-1998, EU-15
Annual employment growth 1975-1998, EU-15
100% = 131 million 100% = 150 million
49%
Services
66%
Services
2.0%
Industry
-0.7
40%
Industry
29%
Agriculture
-2.7
11%
Agriculture
1975 1980 1985 1990 1995
5%
Source: OECD
9

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
employment of the agricultural sector more than halved,
from 11 per cent to 5 per cent, while that of the industrial
sector dropped from 40 per cent to under 30 per cent
(Exhibit 2). Furthermore, the ‘tertiarisation’ of industrial
activities suggests that many jobs created in industry are,
in fact, service sector jobs.
Thus, Europe needs improved labour mobility if the
unemployed are to be matched with new jobs and the
service sector is to expand. In the second chapter, we will
argue that PrEAs are effective organisations for facilitating
worker mobility between companies, sectors and even
countries.
Europe creates insufficient employment opportunities
for ‘outsiders’
Recently, there has been extensive public debate on the
causal relationship between strict Employment Protection
Legislation (EPL) and high unemployment among certain
social ‘outsider’ groups – for example, young people, the
long-term unemployed, women and older people.
In essence, Europe’s relatively strict labour laws protect
‘insiders’ – a group of mainly middle-aged male workers –
to the detriment of ‘outsiders’, who are typically job
seekers and non-participants in the labour market.
Confirming the so-called ‘insider-outsider’ theory, the
OECD has found that there is a statistically significant
correlation between EPL strictness and the share of
‘outsiders’ among certain social groups (Exhibit 3). For
example, European countries with a high level of EPL
strictness suffer from relatively high youth unemployment
(24 per cent, versus 10 per cent in the United States), and
high long-term unemployment (6.4 per cent versus 0.4 per
cent in the United States). They also have lower labour
market participation rates for women in general and for
people aged between 55 and 64 in particular.
3. Europe creates insufficient opportunities for ’outsiders’
Unemployed, 1998
Young aged 15-24 1)
% of young
workforce
Long-term 2) unemployed
% of total
workforce
Non-participants, 1998
Women
Older people aged 55-64
% of female % of older
population
population
United States 10.0%
More ’flexible’
EU countries 3) 12.2
Less ’flexible’
EU countries 4)
23.6
0.4%
2.3
6.4
29%
32
45
41%
3 54
61
1) Young aged 16-24 for United States
2) Unemployed for more than one year
3) Unweighted average of major EU countries with Employment Protection Legislation index below 2.0 (Austria, Denmark, Finland, Ireland, Netherlands, Sweden, United Kingdom)
4) Unweighted average of major EU countries with Employment Protection Legislation index above 2.0 (Belgium, Germany, Greece, France, Italy, Portugal, Spain)
10
Source: OECD

In the next chapter, we will show that PrEAs create an
entry ‘portal’ to the labour market for these ‘outsiders’,
by providing them not only with short-term job
opportunities, but also with qualifying experience and
training for longer-term positions.
INCREASING FLEXIBILITY FOR WORKERS
Changing demographics and shifting social values are
leading workers to demand more time flexibility and job
diversity than ever before. This growing desire for more
personal flexibility is evident across the entire
population. The number of people in part-time jobs is
increasing steadily, and this trend will probably continue
in the future. Although some part-time employment is
involuntary, in general, part-time working arrangements do
appear to meet the specific needs of many workers. Other
forms of time flexibility, such as leaves-of-absence or
sabbaticals are also becoming more popular, albeit mainly
for highly skilled workers. Flexibility in the form of ‘jobhopping’
is also widely perceived to be on the increase.
The demand for new forms of employment is especially
strong among certain groups of workers. Many young
people have a view of work and employment relations
that differs radically from that of their parents, and
prefer temporary jobs 1 to permanent ones (Case 1).
Some women favour temporary or part-time work
arrangements (Case 2), while older workers increasingly
demand ‘post-career jobs’ that offer time flexibility and
Case 1: Young people actively
look for flexible employment
Research in several countries
shows that ‘Generation X’ (that is,
people born between 1960 and
1980) and the group that has
tentatively been called
‘Generation Next’ (those born
after 1980) value leisure time and
family life above success or
material gain. This leads them to
look specifically for temporary
positions with flexible time
schedules, rather than permanent,
full-time jobs.
Other young people, in particular
the less educated, are hard
pressed to find a job at all and
need a ‘portal’ to gain access to
the job market.
PrEAs can cater for both groups of
young people. For ‘Generation X’,
PrEAs can provide flexible work
opportunities. For the less
educated, PrEAs can provide a
‘portal’, allowing both employers
and workers to get to know each
other in a relatively risk-free
manner. Many of these young
starters get their first job through a
PrEA and gain their initial work
experience in this way.
Young: genuine demand for flexibility
Percentage of new entrants into labour market
specifically looking for flexible 1) employment, EU-15
Young entrants
Returning women
Unemployed
8
1) Agency work and fixed-term contracts
Source: European Foundation for the Improvement of Living and Working Conditions
11
48%
1 Part-time employment is defined as working fewer hours per week then the average employee (38 hours in most European countries). Temporary employment is defined as employment for a limited
number of consecutive days in a year. Temporary employment could also be part-time if, for example, an employee works only mornings for 3 months. Permanent employment is defined as
employment on an indefinite contract. Nowadays, however, few contracts are indefinte.
11

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
Case 2: Women want to work in
a different way
More and more women are
working, but in a manner that
differs from that of men.
Women have traditionally been less
interested in employment than
men: while 82 per cent of
European men aged 20–65 want to
be employed, only 69 per cent of
women share that desire. A key
reason for this difference is that
women sometimes
Women: large demand for part-time work
Part-time work 1) as percentage of active workforce, EU-15
give priority to
family
Women Men
responsibilities.
Such women
Actual
37%
9%
typically seek parttime
Preferred
1) Jobs considered part-time by employee
53
21
or temporary
work.
It is clear that
Source: European Foundation for the Improvement of Living and Working Conditions
traditional, inflexible
working arrangements do not
always cater for the needs of these
women. As a result, women
consider it harder to find work than
men: up to 15 per cent of
European women of working age
would like to work, but cannot find
an attractive job; for men, this
figure is much lower at 9 per cent.
PrEAs typically offer flexible work
arrangements and, in some
countries, have developed offerings
specifically for women. PrEAs in
Nordic countries have particular
expertise in catering for the specific
employment needs of women.
Case 3: Older workers want
‘post-career’ jobs
The low participation rate of older
workers is a major economic
problem for Europe, given the
Older people: working less and less
Participation rate of people aged 55-64
70%
60
50
40
30
20
10
continent’s ageing population.
The decline in the participation
rate of older workers is being
driven by two factors. On the one
hand, older workers often look for
0
1979 1983 1988 1993 1998
Japan
United States
United Kingdom
Germany
Italy
France
less demanding jobs in the
knowledge that they are financially
secure thanks to private pensions
or generous social security
provisions.
On the other hand, employers are
often biased against older workers,
believing that they lack the
necessary skills and ability to learn.
An alternative approach would be
to revitalise the skills of older
workers, by providing them with
adequate training and a number of
short-term assignments to gain
experience. Some PrEAs have
successfully implemented such
programs.
Source: OECD
12

less stress (Case 3). In short, all these groups are looking
for different types of flexible work.
In the next chapter, we will demonstrate that many
workers have a genuine preference for the flexibility
provided by PrEA work.
INCREASING FLEXIBILITY FOR COMPANIES
European companies in particular, and European
countries more generally, need increased flexibility to
maintain their competitiveness in an economy that is
becoming more global, fast-changing and customer-
Car manufacturing: increasing volatility of production
Annual European production of Volkswagen Polos
Number of cars
Thousand
1,200
1,000
800
600
400
200
Polo '81
Case 4: Car manufacturers need
more flexibility
The automotive industry has
undergone tremendous changes
over the last decades. The industry
has shifted from a product-driven
to a demand-driven production
schedule, introduced lean
manufacturing and, because of ongoing
intense competition, can
expect continued pressure on timeto-market
and margins.
Car manufacturers are having to
cope with ever-shorter demand
cycles and unforeseeable
production peaks. Such trends
reinforce the sector’s increasing
need for labour flexibility. Flexible
work schedules – such as the fourday
week – have been introduced
to maximise capacity utilisation. A
good example is Volkswagen. Due
Polo '93
Polo '99
0
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
to a shift from product-driven to
demand-driven production of
consecutive Polo models, the total
life span – the time between the
first and last year of production –
has been cut from 14 years for the
first Polo model, to less than 8
years for the third. Also, the
number of cars produced annually
varies increasingly, and the
difference between the maximum
and the average annual production
volume has increased significantly.
Volkswagen introduced a four-day
week in 1993, and later extended
this idea to a ‘Volkswagen Week’,
offering greater individual control
over working hours. In Wolfsburg,
Volkswagen joined forces with the
city council to create a PrEA with
the express purpose of staffing
former Volkswagen workers at
Volkswagen and other local
companies. The PrEA has to
perform to commercial standards
and, so far, has been very
successful in finding suitable jobs
for its workers.
Source: McKinsey & Company
13

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
oriented. This need will be reinforced as the economy is
transformed – at least partially – into an Internet-based
economy. There is a broad consensus on these overall
changes, which are clearly evident in the cases of car
manufacturing, retail banking and small start-up
companies (Cases 4 to 6). We use these as examples to
show the evolving needs of European labour markets.
For car manufacturers and other industrial companies,
the need for labour flexibility has increased dramatically
as they have shifted from product-driven to demanddriven
production, and introduced new, lean
manufacturing systems to increase productivity (Case 4).
Car manufacturers have suffered major social shocks in
the past few years, and can only survive by implementing
more dynamic production systems based on flexible
working schedules.
In the traditional service sector, labour flexibility is also
important. Retail banks, for example, have undergone
substantial changes, as they have become more clientfocussed
and as their service offerings have become
available globally and around-the-clock (Case 5).
Changing customer requirements have also prompted
banks to become more flexible in their use of labour.
Case 5: Retail banks introduce
flexible labour practices and
extend services
The introduction of the Euro and
the recent merger wave among
European banks have changed this
sector fundamentally. Banks used
to be stable, secure businesses.
Now they are dynamic, flexible
and innovative. This has had a
major impact on both back and
front office operations. In the back
office, increased pressure on
productivity has led to changes in
workflows and organisation. In the
front office, there has been a clear
shift from administrative to
commercial functions, and from
product orientation to client
orientation. Thus, work schedules
have been altered to improve
service offerings – for example,
longer opening hours – while part
of the work has been shifted from
branches to new channels, such as
call centres and e-banking.
A study for a German bank
showed that optimising branch
flexibility and introducing parttime
work could lead to savings in
personnel capacity, while
maintaining service levels and
addressing the desire of many
workers for more flexible work
arrangements.
Case 6: Start-up companies
need labour flexibility
The labour flexibility provided by
temporary workers is crucial to
the success of some small, start-up
companies, as the following
example shows.
Two entrepreneurs decided to
launch a new mailing company in
the Netherlands in late-1999.
During the start-up phase, they
considered it too risky to take on
permanent staff, so they took on
20 temporary agency workers. The
business survived its start-up
phase and, six months later, 10 of
the agency workers had received
permanent contracts with the
mailing company. Today, the
company engages 35 workers (20
of whom are agency workers) and
expects to employ 130 workers by
the end of 2001.
14

Small and medium enterprises (SMEs) are the backbone
of the European economy, accounting not only for twothirds
of European employment but also functioning as a
seedbed for innovation. Accordingly, the promotion of
SMEs is a corner-stone of European Union employment
policy. For example, Article 137.2 of the Treaty of
Amsterdam notes that European employment directives
should ‘avoid imposing administrative, financial and
legal constraints in a way which would hold back the
creation and development of small and medium-sized
undertakings’. One of the conclusions of the Lisbon
European Council Presidency is that economic policy
should create ‘a friendly environment for starting up and
developing innovative businesses, especially SMEs’.
For SMEs, and start-up companies in particular, labour
flexibility is critical. In comparison to established
companies, start-ups often face an uncertain financial
4. External flexibility complements internal flexibility
Quantitative
needs
varying the
amount of work
Qualitative
needs
varying the
content of work
Internal flexibility
using own labour force
• Overtime
• Shift work
• Part-time work
• Hiring and firing
• Multi-skilling
• Job rotation
• Vocational training
• Career planning
future. To hedge themselves against this uncertainty,
they typically organise their working practices in a
flexible way. Hence, start-ups often use temporary
workers to postpone incurring the high sunk costs of
employing permanent workers until their financial
situation becomes more secure (Case 6).
Labour flexibility, then, is critical for the success of
European companies. As the United States Department
of Labour notes, ‘employers that have flexibility in
adjusting labour requirements to meet product and
service demands have a competitive edge over those
with less flexible human resource polices’ 1 . European
companies are trying to raise their productivity and
compete successfully in a global economy by forging
flexible relationships with their workers. PrEAs offer a
key solution to these flexibility requirements.
External flexibility
using external labour force
• PrEAs (basic services)
• Fixed-term contracts
• Labour on-call
• Inter-company lending
• PrEAs (specialist services)
• Secondment
• Freelance
• Consultancy
• Outsourcing
INCREASED FLEXIBILITY
DEMANDS NEW SOLUTIONS
The new requirements of Europe’s
evolving labour market demand
different solutions. The PrEA
industry offers flexible
employment, which can provide
one solution to the growing need
for flexibility of workers and
companies.
Flexibility comes in many forms
The flexibility needs of workers
1 United States Department of Labor, Report on the American Workforce (Washington, 1999), p. 18.
15

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
and companies can be both ‘quantitative’ (varying the
amount of work) and ‘qualitative’ (varying the content of
the work) (Exhibit 4). They can also be ‘internal’ –
building on the company’s own labour force – and
‘external’ – using an external source of labour. Internal
solutions include: varying the working hours of the
permanent labour force through overtime, shift- or parttime
work; adapting the size of the in-house labour force
through hire and fire policies; and increasing mobility
through multi-skilling, job rotation and vocational
training. External solutions include: flexible hiring of an
external labour force through PrEAs, fixed-term contracts,
secondments and the outsourcing of non-core activities to
third parties.
The role of PrEA solutions
External flexibility solutions are popular in the European
Union: a total of 42 million people – 27.7 per cent of the
total workforce on a full-time equivalent basis – have
flexible employment contracts, either in the form of
agency work (1.5 per cent), fixed-term contracts (11.4 per
cent) or self-employment (14.8 per cent) (Exhibit 5). In
addition, roughly 30 million people consider themselves to
be part-time workers.
However, the labour flexibility needs of workers and
companies may not always coincide. For example, a
company that increases working hours to meet a
production peak may impose undesired irregularity on
individual workers; workers who adjust working hours to
their own needs, can bring unwanted uncertainty to their
companies. The challenge is to identify ‘win-win’ solutions
through careful human resource management, and to
find an optimal balance between the inevitable trade-offs.
5. Growth of non-permanent forms of employment
Percent of employed workforce EU-15, 1991-1998
Major European countries, 1998
25% = 33 million 27.7% = 42 million
0.7
Spain 31.6 20.1 52.4%
0.0
25
Italy 8.4 24.5 32.9
2.5
20
Self-employed
14.8% France 11.6 10.9 25.0
14.7%
4.5
15
Netherlands 7.8 11.0 23.3
1.6
10
Belgium 5.9 15.2 22.7
Fixed-term contracts
0.6
11.4%
9.7% 5
Germany 11.7 10.0 22.3
3.2
PrEA
0.6% 0
1.5% United Kingdom 12.1 18.5
1991 1992 1993 1994 1995 1996 1997 1998
3.2
PrEA Fixed-term contracts Self-employed
Source: OECD; Eurostat; Deloitte & Touche Bakkenist
16

6. Grey market activities
Undeclared labour as percentage of
officially reported labour hours, 1998 estimate
Italy
Spain
Belgium
France
United Kingdom
Netherlands
Germany
Source: European Commission; Deloitte & Touche Bakkenist
10-25
10-20
10-20
5-20
20-40
20-35
35-50%
negotiating individual contracts through ‘illegal
matchmakers’, at significant cost to themselves and
society.
It is beyond the scope of this report to suggest solutions
to the complex issues relating to the grey market for
labour. However, it is critical to note that PrEAs provide
an organised, transparent and regulated solution to the
flexibility needs of businesses. This is clearly more
preferable for workers and society than an unregulated
grey market for labour. In this way, PrEAs can provide
‘win-win’ situations between the flexibility needs of
workers and companies.
In comparison to other forms of flexible employment,
the contribution of PrEAs is still relatively small, but the
industry has grown rapidly. In 1991, PrEAs accounted for
0.6 per cent of (on a daily average basis) total European
Union employment; since then, PrEA employment has
grown at an annual rate of 10 per cent and forecasts
suggest that this growth will continue in the future.
These official data are almost certainly understated
because many jobs are hidden in ‘grey’ undeclared labour
market activities. Although it is difficult to quantify the
size of the grey market, it is thought that undeclared
labour hours total between 5 and 50 per cent of officially
reported labour hours in the European Union (Exhibit
6). Grey market activity is particularly common in
sectors such as construction, which accounts for 45 per
cent of all undeclared working hours in Germany. The
grey market is a very unattractive form of employment,
because it frequently involves unprotected workers
17

2. The Role and Impact of
the PrEA Industry
In helping to meet the changing needs of the European
Union labour market, the PrEA industry contributes to
building a stronger economy and, in doing so, a stronger
society. Socially, PrEAs enhance employment
opportunities for workers; economically, they help
companies manage their flexibility needs. In fulfilling
their social and economic functions, PrEAs create jobs,
often in partnership with public institutions. In the first
half of this chapter, we look at these contributions in
detail.
In the second half of the chapter, we discuss how PrEAs,
as a first step, are currently addressing some of their
traditional weaknesses and evolving into attractive
organisations for the development of people talent.
7. Many agency workers were previously ’outsiders’ 1)
Employment status prior to agency work 2)
Percentage of total agency workers
Unemployed
Starters and students
Other non-participants
PrEAS ENHANCE EMPLOYMENT
OPPORTUNITIES FOR WORKERS
PrEAs enhance employment opportunities for workers.
This is the central finding of a survey of 700 European
Union agency workers in France, Germany, the
Netherlands, Spain and the United Kingdom, conducted
by Deloitte & Touche Bakkenist, for the purposes of this
report. Specifically, the survey shows that PrEAs provide
‘outsiders’ with a ‘portal’ to enter the labour market and
generally assign workers to jobs very rapidly. PrEAs also
help agency workers find longer-term jobs by improving
their employability through initial work experience.
Finally, PrEAs meet the genuine demand of a significant
number of workers for flexible work.
8. Agency work enhances employability
Conversion into non-agency 4) jobs after one year
Netherlands
8
22
22
52%
Netherlands
53%
France
25
15
10
50
Spain
52
United Kingdom
5
19
12
36
France
46
Spain
10
12
11
33
United Kingdom
40
Germany
10
6
8
24
Germany
29
EU-15 3) 40%
EU-15 5)
43%
1) These estimates are based on very conservative definitions of the three groups; other surveys show much higher figures (averaging 70%). The discrepancy lies in the time spent as 'outsiders'
2) Only respondents who had taken on their first agency job were selected and, therefore, the sample size was 595
3) Estimated based on data for France, Germany, the Netherlands, Spain and the United Kingdom; weighted by number of agency workers per year
4) Permanent or fixed-term contracts
5) Other non-participants, such as housewives, people temporarily unable to work, pensioners, etc..
Source: survey of 700 agency workers, Deloitte & Touche Bakkenist, May 2000
18

PrEAs provide work opportunities for ‘outsiders’. It was
noted in Chapter One that a key employment challenge
facing Europe was that of creating jobs for ‘outsiders’. In
this context, the survey of agency workers shows that
between 24 and 52 per cent of first time agency workers
were ‘outsiders’ (Exhibit 7). Starters and students are the
largest sub-group of ‘outsiders’. For these workers, PrEAs
provide an excellent portal to entering the labour
market.
PrEAs rapidly place agency workers into assignments. The
survey of agency workers revealed that, on average, the
time between their enrolment at a PrEA and assignment
at a company was around 4 weeks. Indeed, 35 per cent of
agency workers surveyed had been placed on an
assignment within a week of enrolling at a PrEA. In
Germany, this figure was 54 per cent.
This suggests that the PrEA industry contributes to the
efficiency of the European labour market by reducing the
rate of frictional unemployment, or the number of
people who are unemployed while between jobs.
PrEAs enhance long-term work opportunities. PrEAs also
play an important role as a ‘stepping-stone’ towards
other forms of employment.
The survey of agency workers indicates that between 29
and 53 per cent of PrEA workers find a long-term job
within a year of starting agency work (Exhibit 8). About
half of this group attributes finding a new job to
experience gained through agency work. This suggests
that PrEAs act as ‘stepping-stones’ to longer-term
employment, by allowing agency workers to demonstrate
their skills to prospective employers and to be tested and
9. Agency work appeals because of a variety of reasons
People taking first available job opportunity
People with genuine preference for agency work
Main reason to work for agency
Motivation to start work
Main reason to work for agency
Could not find
permanent job 39%
Flexible schedule
21%
Gain work experience 26
Work between jobs 13
Work for different
employers 7
67
33%
Genuine
preference
for agency
work
Gain work experience
Work for different
employers
Be able to quit
19
19
18
Flexible schedule 6
Be able to quit 5
First available
job opportunity
Work between jobs
Could not find
permanent job
8
9
Work for short period
4
Work for short period 6
Source: survey of 700 agency workers, Deloitte & Touche Bakkenist, May 2000
19

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
hired on that basis. By providing a ëstepping-stoneí to
longer-term employment, the social benefits of agency
work can be substantial, since up to 6 million workers
currently pass through the PrEA sector every year.
PrEAs meet a genuine demand for flexible work. In our
survey, 33 per cent of agency workers had chosen to work
for a PrEA because they genuinely preferred that form of
employment. PrEAs can provide working conditions that
are unavailable in other forms of employment - for
example, the opportunity to try out different employers, a
large diversity of jobs, time flexibility and short-term
assignments. A genuine preference for agency work is
In this section, we explain how PrEAs help companies
meet their flexibility needs. First, we describe the base
services of PrEAs which is to manage the supply of, and
demand for, workers. Then we explain how this service
complements other flexibility solutions available to
companies. Finally, we explore how the PrEA industry is
expanding its base service by offering complementary
value-added services.
PrEAs primarily help companies manage
changes in output or workforce
highest among women ¤ 40 per cent versus 28 per cent for
men ¤ and is equally favoured by high- and low-skilled
workers.
Although 67 per cent of agency workers surveyed had
started agency work because it was the first available job
opportunity, only 39 per cent of such agency workers had
done so because they could not find a permanent job
(Exhibit 9).
In other words, only 26 per cent of agency workers
surveyed had taken on agency work as a clear second
preference.
PrEAS HELP COMPANIES MEET THEIR
FLEXIBILITY NEEDS
In the first chapter, we noted that individual workers have
increasing needs for flexibility, while companies need to
be flexible if they are to compete in the global economy
The base service of the PrEA industry is the provisionof
external workers to companies, primarily to help them
deal with temporary changes in their output or workforce.
But agency workers also perform tasks that require
specialised skills that companies do not have in-house
and, where permitted, are also used to fill regular
positions.
PrEAs help companies manage changes in output or workforce.
Companies primarily engage agency workers in order to
manage changes either in output or in the supply of their
workers (Exhibit 10). This is the clear message that
emerged from a separate survey of 500 European Union
companies in France, Germany, the Netherlands, Spain
and the United Kingdom, conducted by Deloitte &
Touche Bakkenist for the purposes of this report.
The most prominent reasons for using a PrEA relate to
20

peaks in demand and workersí absence for health reasons:
per cent of agency workers, while replacements due to the
absence of regular personnel account for 27 per cent.
unexpected production peaks account for the hiring of 21

Apart from these ‘peak and sick’ reasons, companies also
engage agency workers to cope with seasonal fluctuations
in work – these account for 23 per cent of agency
workers. Finally, companies use agency workers as a
flexible labour reserve that can be reduced during
downturns in the economic cycle without affecting
permanent workers; around 10 per cent of agency
workers are employed for this purpose.
PrEAs provide specialised skills. Agency workers are also
used to perform work that requires skills that companies
do not have in-house. This is still a marginal activity,
accounting for 4 per cent of all agency workers.
Nevertheless, in some sectors, such as the information
technology sector, highly skilled workers often use
agencies to find work. Recently, many PrEAs have
started developing these specialised services and this
market offering is expected to grow rapidly in the future.
In countries where it is permitted, PrEAs provide agency
workers for regular positions. Around 15 per cent of
agency workers are employed for regular, permanent
positions. In such cases, PrEAs are essentially used as a
recruiting channel (11 per cent of agency workers). In
this regard, a key finding of this report is that companies
rarely employ agency workers because they are a cheap
substitute for permanent workers. The company survey
revealed that only 1 per cent of agency workers are
engaged for this purpose.
PrEA offerings complement other flexibility solutions
In the spectrum of instruments that create labour
10. PrEAs supply companies with workers for managing changes in output or workforce
Question: could you please indicate what percentage of the agency
workers you contracted for what reason
Reasons for engaging agency workers
Percentage of agency workers
Provision for regular jobs 1)
Percentage of agency workers
Provide employees
for regular jobs
37
100
15%
4
To recruit them
Because they are cheaper
Other reasons
1
3
11%
Provide specialised skills
Absorption of fluctuations
Percentage of agency workers
Help absorb fluctuations
81
Replacements
27%
Seasonal fluctuations
23
Unexpected peaks
21
Economic cycle
10
1) Providing agency workers for regular jobs is not permitted in all European Union countries
Source: survey of 500 client companies, Deloitte & Touche Bakkenist, May 2000
21

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
11. Limited substitution of permanent employment
Question: can you please express in percentage which
alternative solutions you would have chosen had you been
unable or not allowed to hire agency workers
Alternatives solutions to agency work
Percentage of agency workers
Not do
the work
Internal flexibility
solutions that do not
increase employment
(e.g. overtime)
17
38
14%
Hire permanent
workers
External
flexibility
solutions
(e.g. outsourcing)
Source: survey of 500 client companies, Deloitte & Touche Bakkenist, May 2000
flexibility, PrEA service offerings complement internal
and other external flexibility solutions available
to companies. Our survey confirms the importance of
PrEAs in addressing companies’ needs for flexibility
(Exhibit 11). A significant part – 17 per cent – of all
agency work is not substitutable, and would not have
been carried out had agency workers not been available.
Another 38 per cent of agency work would have been
carried out using internal solutions that would not have
created more jobs and which could – for instance, in the
case of overtime – have been at the expense of the
quality of life of permanent workers. Finally, in the
absence of PrEAs, companies would have hired
permanent workers for only 14 per cent of the jobs now
performed by agency workers.
PrEAs increasingly provide value-added human
resource services
PrEAs are expanding their basic service offering and are
31
assuming a more important role in wider human
resource-related services, such as recruiting, training and
the management of human resource-intensive processes.
This is occurring particularly in European countries with
higher PrEA penetration rates. Our survey of user
companies suggests that there is a strong demand for
these services, although in some European countries,
PrEAs are prohibited from offering them.
PrEAs provide recruiting services. In countries where this
is permitted, PrEAs not only help companies recruit
agency workers, but they also use their recruiting,
assessment and matching skills to find permanent
workers for the company (Case 7). In the company
survey, 41 per cent of respondents indicated that they
would probably use this service in the future (Exhibit 12).
12. PrEAs provide value added human resource services
Question: could you indicate if in the future you would “probably”,
“possibly” or “probably not” use PrEAs in the following areas
Percentage of companies indicating “probably”
Recruitment of permanent employees
Offering specialised services via Internet
Supervising internal transfers
Managing external flexibility
Managing mobility pools
Out-placement
Managing internal flexibility
Human resource administration
Source: survey of 500 client companies, Deloitte & Touche Bakkenist, May 2000
8
10
14
13
20
23
21
41%
22

PrEAs provide training services. PrEAs also help
companies to train new workers, to retrain existing
workers and to redeploy redundant workers. PrEAs not
only execute training programs, but also help assess the
individual worker’s development needs and map out
personalised development plans. In the survey, 21 per
cent of companies indicate they will probably use PrEAs
to help manage internal transfers. In the event of forced
staff reductions, PrEAs typically help search for new jobs
and retrain workers with the skills needed to reintegrate
them into the working population. In some instances,
PrEAs place workers on their payrolls for a fixed length of
time, and commit to their development and placement
during this period. PrEAs and companies often work in
partnership to provide these services (Case 8).
PrEAs manage human resource-intensive processes. As
companies increasingly focus on their own core
activities, they are outsourcing the ‘technical’ parts of
human resource management to third parties. Numerous
examples exist of PrEAs taking responsibility for
administration, legal matters and personnel planning.
Our survey of companies using PrEA services indicates
that between 8 and 20 per cent would be interested in
using these kinds of services in the future. Increasingly,
PrEAs also offer full business solutions in which they are
responsible for the management of human resourceintensive
processes (Case 9).
PrEAS HELP CREATE JOBS
In enhancing the employability of workers and helping
companies to manage their flexibility needs, PrEAs
create jobs. Between 1996 and 1998, it is estimated that
the PrEA industry increased European Union
employment by 0.1 per cent and accounted for around
Case 7: Managing recruitment
Two cases, one from Belgium and
the other from the Netherlands,
illustrate the role that PrEAs can
play in managing recruitment.
In the case of a Belgian
automotive assembler, the PrEA
runs an automotive ‘job centre’
together with the public
employment agency to manage a
mobility pool of workers. The
impact of this ‘job centre’ is
significant: around 1,000 agency
workers have been recruited,
trained and counselled to work
either at the automotive assembler
or at its suppliers, while the ‘job
centre’ recruits permanent workers
for some of its client companies.
In the southern Netherlands, there
is an acute shortage of care
personnel. A mobility pool called
‘Transvorm’ helps care institutions
increase their flexibility and fill
their vacant positions, by
transferring people within the
health sector and re-integrating
the unemployed and partially
disabled into the nursing labour
force. Transvorm is a partnership
between local social organisations,
the local public employment
service and a PrEA. Its main
activities are matching,
recruitment and selection,
searching for jobs for mobility
candidates, managing crosshospital
mobility pools and
counselling potential workers. In
1999, Transvorm placed 103
people in new jobs. This
amounted to 16 per cent of
vacant positions in the area and
around 25 per cent of new
personnel joining the workforce.
23

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
11 per cent of total new job creation (Exhibit 13). This
estimate is based on our company survey and represents
only pure job creation – that is, the use of agency
workers to perform tasks that either would not have
been performed or would have been performed using
internal flexibility solutions that do not increase
employment. It does not take into account ‘indirect’ job
creation, through the significant number of workers who
find longer-term jobs through their PrEA assignments.
American studies also confirm that PrEAs create
employment opportunities and reduce unemployment.
According to one estimate, PrEAs created at least 1.9
million jobs in the United States during the economic
expansion of the 1990s 1 . According to another estimate,
American unemployment was 0.8 percent lower in 1998
than at the peak of the last economic cycle in 1989,
largely because of the growth of agency work 2 .
Case 8: Managing reemployment
The following two case studies
demonstrate how PrEAs help
mitigate the human costs of
restructuring.
A Swedish multinational uses a
PrEA to help find alternative
employment for workers made
redundant because of global
competition and changing
business strategies. The PrEA helps
redundant workers asses their
knowledge base, work experience,
interests and resources, in order to
plan their future employment. The
PrEA also delivers training and
active job-search assistance by
exploiting its contacts with
employers and working with
government job agencies.
A Belgian manufacturer of car
seats had to reduce a substantial
part of its workforce of 184
workers. In a joint venture with a
PrEA, the company started a nonprofit
organisation to re-employ 38
of them. Income security was
guaranteed for one year while the
PrEA provided the workers with
suitable jobs. By the end of the
year, 28 of the 40 workers had
found new permanent jobs, 6
remained with the PrEA, 2 were
still unemployed and the
remaining 2 had left the scheme.
Case 9: Managing human
resource-intensive processes
The following two cases show
how PrEAs can manage human
resource-intensive processes.
A mobile telecom provider outsources
its coverage measurement
process to a PrEA: the mobile
telecom provider specifies the
processes and related outputs, and
the PrEA delivers the service using
its own resources, including staff,
vehicles, tools and equipment.
A computer manufacturer uses a
PrEA to deliver support services to
its clients. The PrEA delivers these
services according to processes
and service levels specified by the
manufacturer. The PrEA supplies
some of the necessary technology
and resources for the service, such
as tools and vehicles, and is
compensated according to the
number of products serviced
successfully.
1 United States Government, Economic Report of the President, 2000 (Washington, 2000)
2 Cited in “In praise of temps”, The Washington Post, 8 December 1999, p. A32
24

In the European Union, PrEAs provided some work for
up to 6 million people during the course of 1998. This
translates into 2.2 million agency workers, on average,
on any given day (Exhibit 14), or 1.5 per cent of total
European Union employment. In addition, the industry
itself employs a substantial number of staff: on average,
agencies employ one permanent staff member for every
20 workers placed on assignments. From this ratio, it is
estimated that the total number of European agency staff
is equivalent to 120,000 full time employees.
In terms of revenue, the PrEA industry is of major
significance (Exhibit 15). In 1999, PrEAs in the
European Union had a combined turnover of almost
Euro 59 billion and made a total fiscal contribution of
approximately Euro 28 billion. In the United Kingdom
and the Netherlands, the fiscal contribution of PrEAs
equalled around 1 per cent of national income.
In the next chapter, we will argue that if the PrEA
industry evolves in a well orchestrated manner, it could
increase European Union employment by 1 per cent and
provide employment for an additional 4.3 million people
by 2010.
13. PrEA industry contributes to employment growth
Impact of PrEAs on employment EU-15
Percent of population
Estimated direct job creation by PrEA industry
Thousands of DAAW 1) , 1996-1998
EU employment level 1996
59.1%
France
79
United Kingdom
73
Direct job creation by PrEAs
0.1
Netherlands
37
'Indirect' job creation by PrEAs
Germany
30
Other factors
0.7
Spain
Belgium
5
13
EU employment level 1998
59.9
Other
14
EU-15
251
1) DAAW = Daily Average Agency Worker = number of agency workers at work through PrEAs
on any given day
Source: McKinsey & Company
25

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
14. PrEAs have over 2 million workers in the EU
Thousands of DAAW,1998
United Kingdom
France 1)
570
880
more with PrEAs in this task. The optimal form of
partnership between public and private employment
agencies has not yet been determined, but several
gradations of partnership have been implemented with
apparent success.
Netherlands
Germany
Spain
Belgium
Italy 2)
Other
290
200
90
60
10
100
Most parties – public employment services, private
employment agencies, European policy makers and the
ILO – agree that PrEAs could play an important role in
enhancing public employment policy execution in
conjunction with public employment services. 1 A key
reason for this is that PrEAs have developed cost-efficient
matching and people management processes that place
workers in jobs quickly, cheaply and successfully.
EU-15
2.2 mln
15. PrEA turnover in the European Union
Euro million, 1999
1) According to French government figures, there were 458,000 PrEA workers in France on a fulltime
equivalent basis in 1998. The 570,000 figure reported here has been calculated on a daily
average worker basis
2) Italy liberalised the PrEA sector only in June 1997
Source: Deloitte & Touche Bakkenist; national CIETT federations
PrEAS CAN CREATE JOBS IN PARTNERSHIP
WITH GOVERNMENTS
One objective of public employment services is to reduce
unemployment, especially among disadvantaged groups.
Typically, this is achieved by registering vacant positions
on the one hand and unemployed people on the other
hand, and then optimising the match between the two via
integration and training programs. Over the past decade,
public employment services have started to co-operate
United Kingdom
24,708
Others 1) 1,964
France
15,073
Netherlands
Germany
Belgium
Spain
Italy
6,398
6,188
2,236
1,750
571
EU-15 1) 58,888
1) Excludes Greece
Source: Deloitte & Touche Bakkenist; national CIETT federations; Fortis Bank; ABN AMRO
1 ILO, Relations between Public and Private Employment Agencies: Development of a Framework for Cooperation (Geneva, 1998)
26

All gradations of public-private partnerships are based
on information sharing. This is mostly informal and, as
yet, not very developed. Experiments with partnerships
that go beyond information sharing – for example in
France, the Netherlands and the United Kingdom –
have generally been successful, although aligning the
myriad of local employment policies remains a challenge.
The Australian system goes beyond partnerships by
privatising the execution of public employment services,
and has yielded promising results. Some examples of the
different forms of public-private partnership are
presented in Case 10.
PrEAS ARE ADDRESSING THEIR
TRADITIONAL WEAKNESSES WHERE THEY
CAN
A well-developed PrEA industry today offers an
organised and transparent work arrangement that
enhances employment opportunities for PrEA workers.
Still, agency work is often associated with a number of
negative attributes, particularly in countries where the
agency market has been deregulated only recently.
However, many of these negative attributes should be
associated with the sectors in which agency workers are
particularly active, rather than with agency work itself.
Other negative attributes are the result of obsolete social
Case 10: Forms of
public–private partnership
In countries such as Austria,
Denmark, Finland, France,
Germany and Sweden, public and
private agencies share job-vacancy
information. Such co-operation
often occurs locally and on an adhoc
basis. However, in France, the
Netherlands and the United
Kingdom, co-operation is more
elaborate, since some PrEAs in
these countries have access to the
job-seeker registers of the public
employment services.
A more extreme form of private
sector involvement can be found
in Australia’s Job Network system.
In 1998, the Australian
government decided to outsource
the execution of public
employment tasks to private
providers. These, including both
commercial and non-profit
organisations, now tender to
provide employment services.
Public job centres advise potential
workers on the job-seeking
channels open to them. A public
authority supervises the tendering
process and audits complaints.
The system has so far been very
successful, in providing both jobs
and training to difficult-to-employ
groups.
Job Network, Australia
Percentage improvement after one year 1) compared to public system
Customer satisfaction
Registered vacancies
Successful placements:
Normal groups
Low-skilled after
basic training
Disadvantaged groups
after intensive training
1) Performance of private system from May 1998 - April 1999 compared to public performance May 1997 - April 1998
Source: Government of Australia
7
42
54
60
66%
27

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
regulations. We feel, therefore, that only a limited set of
negative attributes is linked specifically to employment
by a PrEA; these are training, wages and job security. In
the context of the evolution of the industry, PrEAs are
actively addressing these issues, while the others have to
be addressed within the context of the overall
orchestration of the industryís future.
A number of negative attributes are not related
specifically to agency work
Differences in terms and conditions of agency work
compared to other forms of employment are often
wrongly attributed to the PrEAs themselves.
significantly worse than those of their non-agency
colleagues. Adjusting the Dublin Foundation data for the
characteristics of agency workers, it appears that, in most
respects, their working conditions are comparable to
those of their non-agency collagues (Exhibit 16).
Health and safety risks, in particular, are not significantly
different; job content, time flexibility and control of the
job situation are also similar. Therefore, the challenge is
to ensure appropriate working conditions for all workers
in such sectors. Given that agencies are very active in
these sectors, they should be key partners in such
initiatives.
Some perceived negative attributes are related to particular
occupations. Research by the European Foundation for the
Improvement of Living and Working Conditions (the
'Dublin Foundationí) on 30,000 European workers in
1996,* has raised concerns about the working conditions
of different groups of European workers. Agency workers,
in particular, are perceived to have low health and safety
standards at work, low control over work situations and
uninteresting work content.
However, for a correct assessment of working conditions,
it is necessary to consider that a disproportionate number
of agency workers are young, low skilled and recent
entrants to the labour market. Unsurprisingly, such
agency workers are often assigned to economic sectors
where general working conditions are relatively
unattractive. However, there is no evidence that the
working conditions of agency workers in those sectors are
Some perceived negative attributes are related to obsolete
social regulation. The bulk of European social security
regulation is still based on the outdated assumption that
workers remain in their jobs for long periods of time This
assumption is no longer valid, even for so-called
permanent workers. As a result, workers who change
jobs frequently, return to education, or take a leave of
absence can lose some of their pension, health and
unemployment benefits. The adaptation of social
regulations to this new reality is something that requires
appropriate social security reforms in the relevant
countries.
**** by PrEAs
PrEAs are actively engaged in addressing the perceived
negative attributes of agency work. The key issues in this
respect are training, wage levels and employment security.

1 European Foundation for the Improvement of Living and Working Conditions, Working Conditions in the European Union, (Luxembourg, 1996)

Agency workers receive less formal training, but PrEAs are
taking training initiatives. Research by the Dublin
Foundation shows that, while formal training is
uncommon among European workers in general, agency
workers in particular receive less formal training than
permanent workers 1 .
Nevertheless, these figures may under-value the
importance of PrEAs in career development. Agency work
provides many unemployed workers with a social link to
the job market. Furthermore, agency workers do acquire a
diverse set of work experiences, which adds to their
overall career development and employability. Given the
short time that workers generally stay with an agency,
such on-the-job learning may be more useful than formal
training. Indeed, in the survey of agency workers, only 1
per cent of those who went on to find longer-term
employment indicated that this was due to formal training
given by the agency, although 27 per cent did actually
receive some formal training.
Levels of training for agency workers vary across Europe.
In countries such as the United Kingdom, individual
agencies are active in developing training programs for
their workers, because this gives both the agencies and
agency workers a competitive edge in the labour market.
16. Unattractive working conditions are not always related specifically to agency work itself
Data after adjustment for difference in population 1)
P = Permanent SE = Self-employed FT = Fixed-term A = Agency workers
Working conditions are comparable
Percentage of people experiencing
Working conditions are different
Percentage of people experiencing
Health and safety 2)
issues
Control of job
situation
Interesting job
content
Time flexibility
Stress free
pace of work
P
SE
FT
A
P
SE
FT
A
P
SE
FT
A
P
SE
FT
A
P
SE
FT
A
73%
Training P
75
70
70
68
Job security
90 (unadjusted)
66
61
76
Involved in
73
discussions
73
about work
70
situation
40
71
47
40
43
51
43
47
SE
FT
A
P
SE
FT
A
P
SE
FT
A
20
27
21
22
29
36%
56
46
54
50
44
78
1) Computed by a logistic regression model; variables that could not be fitted have not been shown. Scores are averages of answers to different questions
2) Weighted average of physical and ambiental risk factors
Source: European Foundation for the Improvement of Living and Working Conditions; McKinsey & Company analysis
1 European Foundation for the Improvement of Living and Working Conditions, Working Conditions in the European Union, (Luxembourg, 1996)
29

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
In Belgium, France, Italy and the Netherlands, PrEA
federations have concluded collective agreements with
trade unions to allocate part of their gross wages to
special training funds and training activities. The French
situation is detailed in Case 11 and other innovative
PrEA training initiatives are outlined in Case 12.
PrEAs are increasing their wage levels. It is difficult to
compare wage levels among different populations of
workers. There are often valid reasons why wages differ,
such as differences in qualifications, seniority, experience
and job content. Comparing the wages of highly diverse
populations is even more problematic. Pay differences
among companies within a sector can be significant, and
are sometimes larger than pay differences between
agency and non-agency workers.
In almost all European countries PrEAs are the
employers of agency workers and, in this respect, agency
worker wages should be determined by PrEAs and
agency workers only. There are various models of agency
worker wage determination across Europe, and some of
these are described in the remainder of this section.
In the Netherlands, over the past years, agencies have
raised wages through collective agreements with agency
Case 11: Training initiatives in
France
In France, an independent fund
(Fonds d’Assurance-Formation du
Travail Temporaire) is managed
jointly by representatives from
trade unions and employment
agencies. The fund collects 2 per
cent of gross wages from all
agencies, and uses this levy to
finance three types of training
programs: 1.3 per cent of the
wages finances programs aimed at
increasing the employability of
workers by helping them adapt to
technological change; 0.3 per cent
finances individual leaves-ofabsence
for training; and the
remaining 0.4 per cent finances
programs combining formal and
on-the-job training (‘formation en
alternance’).
In the latter program, PrEAs help
companies to define which skills
they lack, and organise the
placement of young agency
workers with companies both
during and after their formal
training. In 1999, about 4,500
unskilled young workers benefited
from these programs. After 6
months, 30 per cent of them had
obtained an employment contract
of indefinite duration, 14 per cent
a fixed-term contract and 34 per
cent were still employed by the
agency. Such programs have been
particularly useful in matching
workers’ qualifications with the
specific needs of companies.
Apart from formal training
programs, there is also an
experimental program aimed at
validating the training that agency
workers receive on-the-job. The
worker is observed and assessed
by a jury during a simulated work
situation, and receives a
‘Certificate of Professional
Competencies’ when performance
matches a set of objective criteria.
By acquiring a certain number of
these certificates, the worker can
earn a recognised diploma.
Between June 1999 and March
2000, 93 agency workers acquired
132 certificates and 15 diplomas.
The experiment’s success has led
to plans to extend the program.
30

worker unions. These collective agreements now mostly
supercede legislation which sought to guarantee equality
of pay between agency workers and user company
workers. A vital step in this process has been the
recognition of the PrEA industry as a sector in its own
right, able to conclude agreements independently of
other organisations.
Similar initiatives have been undertaken in Germany,
where agency workers still tend to receive lower wages
than their non-agency colleagues. Some of this wage
differential may relate to the regulatory restrictions on the
German PrEA sector and, in particular, the
synchronisation ban 1 . Nevertheless, recently, a number of
German PrEAs concluded agreements with different
labour unions to improve the wage situation.
However, there are some other approaches to setting
agency worker wages. In the United Kingdom, agency
worker wages, like wages in other sectors, tend to be set
by the market. Consequently, agency workers in the
United Kingdom often earn more than the industry
average because they have skills that are in short
supply.
In Belgium and France, agency wages have been
regulated since the establishment of the industry in the
1970s. In both these countries, regulations have
Case 12: PrEAs are starting
innovative training initiatives
The following cases demonstrate
some of the innovative training
initiatives that PrEAs are
undertaking.
One global PrEA has developed
an ‘on-line university’ that offers
free training, skills assessment and
career management services to all
its workers. The on-line university
offers more than 1,000 software
and information technology
training modules, and more than
100 business skills courses
covering topics such as finance,
marketing, business law, human
resource management and
accounting. By early 2000, almost
20,000 of the PrEA’s workers had
used the on-line university to
enhance their skills and career
prospects.
A large PrEA in the United States
has formed a partnership with
local employers and the local
community college. The PrEA and
the college together provide life
skills and technical training. The
PrEA employs students on a parttime
basis while they are on the
course, and provides them with a
full-time job after graduation. So
far, 88 per cent of all students
have been placed successfully.
Joint ventures between
educational institutions and PrEAs
are potentially an excellent way to
address the training issues facing
the industry.
Proyecto Maestro in Spain is a
partnership between a multinational
PrEA and the Spanish
Olympic Committee, and is aimed
at finding jobs for athletes who are
approaching the end of their
sporting careers. Athletes who
participate in Proyecto Maestro
receive intensive career
counselling and, so far, the results
have been positive: 84 per cent of
the 36 athletes who took part in
the first year of the project in
1999 are now in a new job.
1 The synchronisation ban prohibits the end of the contract between the PrEA and the agency worker from corresponding to the end of the assignment with the user of the agency worker
31

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
ensured that agency workers receive the same wages as
non-agency workers in user companies. In Spain,
regulation was introduced in 1999 that guaranteed
equal wages for agency and non-agency workers in user
companies.
These regulations introduce rigidity to the labour
market by fixing wages and discouraging workers from
switching between economic sectors with different
compensation levels. Nevertheless, such measures may
be necessary in order to increase the social
acceptability of agency work, but only in cases where
PrEAs and agency workers, or the organisations
representing agency workers, are unable to tackle the
wages issue by themselves.
In establishing wage levels, two forms of equality need to
be balanced carefully: the equality between two agency
workers working in different sectors or companies, and
the equality between an agency worker and an employee
at the client company. However, the over-riding
principle has to be that it is the agencies that are the
employers of agency workers and, like other employers,
have the right to determine the wages of their workers.
PrEAs also provide employment security. A third
perceived negative attribute relating to the PrEA
industry is low job security. Although the industry will
continue to be characterised by workers who change
assignments frequently, PrEAs can offer its workers
income security over the longer-term, by providing
them with a continuous stream of assignments. Since
PrEAs manage a portfolio of employment opportunities
with multiple employers, they are in an excellent
position to provide security of employment to their
own workers. Indeed, French official statistics show
Case 13: Increasing job security
in European countries
Governments and PrEAs are
developing initiatives to increase
the job security of agency workers.
In France, a special fund has been
set up to help agency workers find
housing, because they often face
problems due to the temporary
nature of their contracts. The fund
issues ‘housing passports’ which
are a guarantee to landlords that
the social fund will pay the rent in
the event that the worker fails to
do so. In this way, agency workers
may secure housing rights
comparable to those on indefinite
contracts.
In the Netherlands, PrEAs are
important employers and offer a
wide range of services. The size of
the sector has enabled PrEAs and
unions to agree on offering agency
workers greater security after they
have worked for a PrEA for a
certain period of time. The
collective agreements introduced
following the Flexibility and
Security Act (‘Flexwet’) stipulate
that, after 26 weeks of work,
agency workers must receive
career advice and start
accumulating pension benefits.
After 12 months, agency workers
are considered to be in a normal
fixed term contract to which all
relevant labour laws apply and can
receive up to eight renewable
three-month contracts from the
agency. After a maximum of 36
months, they can receive a longterm
employment contract with
the PrEA. These qualifying periods
are shorter if the agency worker is
assigned to a single user company.
32

that, typically, French agency workers are substantially
less likely to draw on unemployment benefits than
workers on fixed-term contracts 1 .
In some countries, PrEAs have introduced longer-term
contracts with their workers. When a worker has a longterm
contract with a PrEA, the PrEA has an even
greater direct financial incentive to find a steady stream
of engagements for the worker. Nevertheless, initiatives
to enhance job security can only be developed on a
national basis, as there are highly diverse regulatory
conditions across Europe and large differences in the
developmental stages of the industry. Some initiatives in
France and the Netherlands are examined in more detail
in Case 13.
PrEAS ARE EVOLVING INTO HUMAN
RESOURCE DEVELOPERS
The benefits of a strong and healthy PrEA industry are
convincing and manifold. In addition, the PrEA industry
is evolving a comprehensive human resource
management function and this is expected to continue
in the future. Basic on-call services form the base from
which these more advanced service offerings are
evolving (Exhibit 17).
Despite the time and attention that businesses invest in
developing their workers, it is becoming increasingly
apparent that businesses are focussing their efforts on
workers that generate the highest value. In the
meantime, non-essential tasks are being outsourced to
17. Evolution of the PrEA industry
Added
value
Human resource
developers
Value added
service
Base service
Service
to
companies
• Provide human
resources, both low
and high skilled
mainly for 'peak and
sick' use
• Help manage human
resource intensive
processes within client
companies
• Bundle human
resources into dedicated
services using
professional skills in
people development and
people management
Service to
individual
employees
• Provide ad hoc work • Provide training, reschooling
and
or a job to workers
employment services
• Provide comprehensive
career management
and counselling
1 Ministère de l’emploi et de la solidarité, Premières Informations et Premières Synthèses. Le marché du travail 1999
33

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
third parties. In response to this business demand, PrEAs
are beginning to bundle human resource offerings into
dedicated packages. Such offerings can range from call
centres to event organisation services and specialised
consulting.
PrEAs are already responding to this market demand by
exploiting their professional skills in people development
and people management. Building on these skills, PrEAs
are broadening their porfolio of services even further by
providing comprehensive career mangement
capabilities. This developmen is beneficial to both
agency workers and the economy. Agency workers are
able to combine the security of longer-term employment
with a dynamic career development plan, in line with
their skills and market opportunities. The economy
benefits from a more optimum quantitative and
qualitative allocation of human resources.
PrEAs already create value for workers with
opportunities of flexible work, and for companies with
solutions to their flexibility needs. However, reregulation
is needed to enable PrEAs to offer their base
services, let alone their advanced services.
Orchestrating the evolution of PrEAs is the subject of
the next chapter.
34

3. The Recommended Course
of Action
To release the economic and social potential that PrEAs
offer in Europe, workers, employers, governments and
the PrEA industry itself could consider the following
three-part course of action to ensure the orchestrated
growth of the industry. First, it would be useful to gain
an understanding of the evolutionary potential of the
PrEA industry. Second, it would be necessary to craft
measures to lift the constraints on the evolution of
PrEAs and increase their social acceptance, while
ensuring appropriate working conditions for agency
workers. And, third, it would be productive to engage in
European, national and industry dialogues to implement
these measures at the relevant levels.
UNDERSTANDING THE EVOLUTION
POTENTIAL OF PrEAS
As a first step to releasing the long-term economic and
social potential of the PrEA industry, it is useful to
understand the potential for the industry’s evolution and
to know that this will vary by country.
If the PrEA industry is allowed to evolve, expand its role
and increase its economic and social contribution in
response to the inherent demand for its services, then
some 18 million workers a year could be working in the
PrEA sector by 2010. This would translate into 6.5
18. Potential growth of the PrEA industry
Possible scenario, EU-15, 2010
Million daily average agency workers
Projected employment by sector, 2010
Million persons
Manufacturing
32.2
9% 1)
4.3 6.5
Social and service
Public authorities
30.1
29.8
Wholesale, retail trade
28.8
Penetration
level 3) 0.6% 1.5% 3.7%
1991 1998 Potential 2010
growth
1998-2010 2)
1) Compound annual growth rate
2) Estimates based on past growth and stage of development of PrEA industry by country
3) Agency workers as percentage of the total employed workforce; median estimates
4) Agency workers are already included in figures for other sectors
Source: OECD; broker reports; McKinsey & Company analysis
36
9% 1) 2.2
1.1
Banking, insurance
Construction
Transport, communication
PrEA 4 )
Agriculture, forestry, fishing
Restaurants and hotels
Electricity, gas, water
Mining and quarrying
18.9
12.5
10.7
6.5
6.4
6.3
1.3
0.2

million workers on a daily average agency worker basis,
making the PrEA sector a larger employer than
agriculture in 2010 (Exhibit 18). Based on this estimate,
the PrEA sector could create some 4.3 million new jobs
between 1998 and 2010.
If such an increase in PrEA employment takes place,
PrEAs could raise European Union employment by 1 per
cent by 2010 and meet about 10 per cent of the
employment growth target embodied in the Lisbon
Objectives (see Chapter one). These estimates are based
on the company survey and represent only net job
creation, that is, the use of agency workers to perform
tasks that either would not have been performed or
would have been performed using internal flexibility
solutions but without increasing employment. These
estimates do not take into account ‘indirect’ job
creation, because of the significant number of workers
who find longer-term jobs through their PrEA
assignments. It also does not take into account the extra
agency staff required to cope with such an increase.
Naturally, the anticipated growth rates will vary across
European countries, depending on the current status and
maturity of their PrEA industries (Exhibit 19).
19. Highest growth in low penetration countries
Penetration rate of agency
workers, 1998
Percentage of total employment
Potential growth in the number
of agency workers 1) , 1998-2010
Compound annual rate
Penetration rate of agency
workers 2) , 2010
Percentage of total employment
Netherlands
4.5%
3-5%
6.2%
United Kingdom
3.2
2-4
4.2
France 3)
2.5
4-7
4.2
Belgium
1.6
8-11
4.2
Spain
0.7
15-19
3.4
Germany
0.6
13-21
3.8
Italy
0.0
35-43
2.0
EU-15 average 1.5% 9% 3.7%
1) Compound annual rate based on Fortis Bank, ABN Amro, Deutsche Bank and Merrill Lynch estimates
2) Average estimates
3) According to French government figures, there were 458,000 PrEA workes in France on a full-time equivalent basis in 1998. This yields a penetration rate of 2.0 per cent.
The 2.5 per cent penetration rate for France is based on the 570,000 agency workers in France in 1998, calculated on a daily average agency worker basis
37

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
In developed markets, PrEAs need to offer new services. In
the United Kingdom, PrEAs employ more than 3 per cent
of the workforce; in the Netherlands, they employ up to
4.5 per cent. In these developed markets, PrEAs supply
agency workers to diverse economic sectors and
increasingly provide work for highly skilled professionals.
PrEAs also play an additional role as screening
organisations for the recruitment of long-term workers. In
these countries, the industry is expected to go beyond its
traditional role by offering a more comprehensive
portfolio of services to agency workers, particularly by
positioning itself as a longer-term partner for their career
management, and by further facilitating the reintegration
of ‘outsiders’ into the labour market.
In some other markets, such as Germany, the industry has to
enhance its basic service offering. Germany represents more
than 25 per cent of potential job creation by the PrEA
industry in Europe. However, regulatory constraints keep
this potential unfulfilled. Most German PrEA workers are
low-skilled, industrial workers. A number of restrictions
on the activities of PrEAs were removed recently, but the
industry needs to enhance its service offering and attract
more skilled and specialised workers. Further evolution
will require PrEAs to develop new high value-added
services targeted at large companies; however, this
probably requires some consolidation in the highly
fragmented German PrEA industry.
In southern Europe, the industry has to build social
acceptance. Permanent employment in southern European
countries is strictly regulated and flexible alternatives are
often seen as precarious employment. Although the recent
legal recognition of agency work (Spain, 1994; Italy, 1997;
Greece, 1998) has led to exponential growth (Case 14),
the industry is expected to mature gradually and to
develop a more comprehensive service offering. Still, a
significant number of constraints remain.
In the Nordic countries, the market is still emerging.
Denmark, Finland, Norway and Sweden are all small
markets with penetration levels below 0.7 per cent. The
Case 14: Deregulation in Italy
‘Lavoro interinale’ was prohibited
in Italy until 1997. In that year, the
PrEA industry was legalised, as
part of a package of measures
aimed at stimulating the labour
market. The new regulatory
regime, however, was still one of
the most restrictive in Europe, and
included time limitations, sector
constraints and several
administrative burdens on PrEAs.
In December 1999, further
deregulation occurred with the
lifting of restrictions on low-skilled
and white-collar labour, and a
reduction in the constraints on
agencies. For example,
compulsory payments to training
funds were reduced from 5 per
cent to 4 per cent of gross wages.
Although constraints still remain,
the PrEA industry has grown very
rapidly, especially in northern Italy.
In its first year of existence, the
sector staffed 52,000 assignments.
This figure rose to 250,000 in the
second year. Most of those staffed
were young, high-skilled workers.
If further regulatory adjustments
were made, the sector could
employ 2 per cent of the
workforce by 2010.
38

Nordic PrEA industry provides flexible employment
solutions mainly for female workers in the service sector.
The industry was deregulated recently and there remain
few legal restrictions on its activities. Analysts agree that
the sector has substantial growth potential, particularly
given the improved image of the small number of large
agencies operating in these markets.
LIFTING CONSTRAINTS WHILE ENSURING
APPROPRIATE WORKING CONDITIONS
industries in recent years (Exhibit 20). Greece, Italy and
Spain have legalised the operations of PrEAs, while time
and sector constraints are being progressively relaxed in
other European countries. These reforms are in tune
with changes in other OECD countries: in the late
1990s, for example, Japan eased the constraints on its
PrEA industry 1 . France, however, is an exception to the
general European trend, as it has moved to a more
stringent regulatory framework in the 1990s and is still
considering additional constraints.
Most European countries have deregulated their PrEA
Nevertheless, in many European countries, a significant
20. Trend towards deregulation
Regulatory change 1989-1999
Prohibited
Prohibited Restrictive
Greece 1)
Germany 2)
Spain 4)
Austria
Italy
France
Luxembourg
Portugal
Belgium
Denmark
Norway
Finland
Sweden
Netherlands
United Kingdom
Ireland
Liberal
Main Changes in regulation
Legal recognition of the industry (99)
Extension of maximum length; allow detachment (92-97) 3)
Legal recognition of the industry (94)
Legal recognition of the industry (97)
Tightening of time and reason restrictions (90)
Legal recognition of the industry (89)
Extension maximum length of assignment (97)
Lifting of sector constraints (90)
Lifting of restrictions (99-00)
Legal recognition of the industry (94)
Legal recognition of the industry (93)
Lifting time limits and sector restrictions (98)
1) Greece prohibited PrEAs until September 1998. Since then, the creation of private job counselling agencies has been allowed
2) Germany has a synchronisation ban prohibiting that the end of the contract between the PrEA and the worker corresponds to the end of the assignment with the user of the agency worker
3) Detachment, re-employment and fixed term employment allowed once per employee
4) Following the legal recognition of the industry in 1994, the regulatory framework was tightened in 1999, with the requirement that agency workers be paid equal wages to non-agency workers in user companies.
However, over the whole period 1989 to 1999, the aggregate Spanish regulatory environment has become less prohibitive
Source: Deloitte & Touche Bakkenist; ETUI; Morgan Stanley Dean Witter Research; McKinsey & Company analysis
1 Despite easing constraints on the PrEA sector in line with the provisions of ILO Convention 181, Japan still prohibits PrEAs from operating in the manufacturing sector. This is a significant
constraint on the Japanese PrEA industry, given that manufacturing accounts for a quarter of Japanese output.
39

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
number of constraints still remain (Exhibit 21). Sector,
time and ‘reason’ constraints are direct barriers to both
PrEA evolution and growth. We believe that removing
these constraints will create work opportunities and
stimulate the development of the PrEA industry.
However, while this is done, it is important that any new
terms and conditions governing agency work –
particularly in the areas of wages and security of
employment – are ensured through appropriate labour
regulation.
All these measures will improve the image of the sector
and increase the social acceptance of agency work. This
is vital if the PrEA industry is to develop further. The
Netherlands provides an example of how a progressive
change in the social acceptability of agency work has
enabled the development of the Dutch PrEA industry
(Case 15) and has created a platform for future growth.
Removing sector constraints
PrEA activities in certain economic sectors are
prohibited. These restrictions represent a significant
limitation on the expansion of PrEAs, because such
prohibited sectors often account for a large share of
employment. This is the case, for example, in the
construction sector in Germany and the public
administration sector in Belgium, France and Spain. If
PrEAs were to reach a penetration level of 3 per cent in
all prohibited sectors in the European Union, they would
be able to expand their service offerings and help employ
21. Barriers on PrEA growth and evolution
Overview of restrictions on PrEAs in more regulated European countries, February 2000
Portugal
Belgium
Spain
Germany 1)
Luxembourg
France
Italy
Maximum length of assignment
Months
0-3 3-6 6-9 9-12 12-18 18-24
Sectors
Sectors in which the use of agency
workers is prohibited
Construction
Removal
Public Admin.
Agriculture
Dangerous
prof.
Reasons
Reasons for which the use of agency
workers is allowed
Unusual
work
Seasonal
fluctuations
Bridge
recruitments
Replace
absent workers
Temp. increase
in workload
1) Germany has a synchronisation ban prohibiting that the end of the contract between the PrEA and the worker corresponds to the end of the assignment with the user of the agency worker
Source: ETUI; national CIETT federations; McKinsey & Company analysis
40

up to 500,000 additional people within a decade.
Stretching time constraints
In most European countries, there is a statutory limit on
the length of the assignment of an agency worker to a
company. In Germany and Luxembourg, for instance,
the maximum length of an agency assignment is 12
months. This is to prevent companies from using agency
workers instead of workers with longer-term contracts.
The company survey shows that agency workers are
rarely used as a substitute for permanent workers. In any
case, such restrictions can be harmful to the job security
of agency workers.
These time constraints are an important obstacle to the
growth of the industry. In Germany, each lengthening of
the maximum period of assignment has been followed by
a corresponding expansion of the PrEA industry. These
time constraints prevent PrEAs from developing some
potentially useful offerings.
Lifting ‘reason’ constraints
In some European countries, in addition to sector and
time constraints, companies are only allowed to use
agency workers for a limited number of reasons. For
example, in all these countries, agency workers may not
be used to bridge recruitments, that is, to fill a long-term
position for which a long-term worker is not
immediately available. There is no evidence that these
regulations meet their apparent objective of protecting
Case 15: A progressive change
in mindsets in the Netherlands
In the Netherlands, a debate has
been taking place since the 1960s
regarding flexibility at work. The
debate has resulted in a
transformation in the attitudes of
unions and regulators towards
agency work.
In the 1960s and 1970s, unions
were lobbying to ban the PrEA
industry but, a decade later, the
mindset began gradually to shift.
First, the sector was recognised as
a second-best means of fulfilling
the flexibility needs of companies,
to be used as a last resort after all
forms of internal flexibility had
been explored. Then, agency work
was regarded as a valid option,
but one that needed to be limited
either by reason or volume
restrictions. Finally, the relevance
of PrEAs was recognised for
longer-term flexibility solutions,
provided that they were properly
organised and framed in
appropriate labour regulations and
collective agreements.
The evolution in Dutch attitudes
towards agency work has been
accompanied by regulatory
changes. In 1970, after a long
debate, the government
introduced a licensing agreement
obligation for PrEAs. In the 1980s,
laws on agency work became
more rigid: PrEAs were forbidden
to operate in some sectors, and
the maximum length of
assignment was reduced from 6 to
3 months. Today, the Netherlands
has a very liberal regulatory
environment for PrEAs, and
virtually all restrictions have been
lifted, while new laws ensure
appropriate social protection and
working conditions for agency
workers.
These new regulations, and their
corresponding social acceptance,
are enabling the Dutch PrEA
industry to expand and offer
newer services.
41

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
long-term workers. On the contrary, the company survey companies, which tend to rely heavily on temporary
strongly suggests that agency work is used mainly to workers.
complement internal and other external flexibilty
Other constraints severely restrict the ability of PrEAs to
solutions rather than to replace long-term workers.
become high value-added service providers. For example
Therefore, in some countries, reason constraints prevent
in France, Spain and several other countries, the law
PrEAs from offering new products that are already
prohibits PrEAs from conducting any other activity
offered in more developed PrEA markets.
parallel to placing workers at the disposal of companies.
Removing other constraints
In addition to the above constraints, other countryspecific
regulations further limit the growth of PrEAs.
This, in effect, prevents PrEAs from offering value-added
human resource services under one roof, to the
For example, the ësynchronisation baní in Germany
requires that the duration of the contract between the detriment of agency workers and companies that could
agency and the worker be established independently of benefit from such integrated services.
the duration of the workerís specific assignment. This
imposes an important burden on agencies because they
have to bear the cost of the non-utilisation of the worker In many countries, agencies are subject to complex
between assignments. The ësynchronisation baní makes authorisarion procedures that may run counter to
PrEAs more reluctant to take on ëdifficult-to-placeí principles of the Single Market, since they limit the
workers and limits the sectorís ëstepping-stoneí function. free offering of services across the borders of the
European Union. Also, complex national legal
Furthermore, irrespective of the fact that agencies have provisions constrict the growth of cross-border agency
the obligation to give their workers an open ended
work. Solving these legal problems would result in a
contract from day one, they are still subject to a
more efficient distribution of workers across the
maximum length of assignment restriction.
European Union, particularly in the construction,
information technology, health care and professional
In some countries, SMEs are constrained in the extent to
services sectors. Multinational PrEAs, with their
which they can employ agency workers. For example, in
international information networks, are in an ideal
Italy, the number of temporary workers recruited over a
position to facilitate such cross-border agency work.
three-month period must not, on average, amount to
more than 8 per cent of the user companyís workforce on
Ensuring appropriate working conditions for PrEA
open-ended contracts. As an exception to this rule,
workers
SMEs may recruit up to 5 temporary workers. However,
If constraints are lifted, then re-regulation should be
even this could constrain the development of start-up

used to ensure appropriate terms and conditions of
agency work, in particular with regard to wages,
training, collective representation and security of
employment. These should be addressed, where
needed, by regulation and/or self-regulation, and by
guaranteeing appropriate working conditions to
agency workers across Europe.

ORCHESTRATING IMPLEMENTATION AT
THREE LEVELS
To ensure that the PrEA industry develops in a way that
is beneficial to workers, employers and society at large,
the initiatives described above could be orchestrated at
three levels. First, discussions at the European level
could set the direction for the overall regulatory
frameworks in each country, taking into consideration
the provisions of ILO convention 181. Second, national
parties could start a dialogue at the national level to lift
the constraints on PrEAs while ensuring adequate
working conditions for agency workers. Third, the PrEA
industry itself should embark on a parallel self-regulation
process.
Change is required at the European level
In the context of the Lisbon Objectives to reduce
European Union unemployment to 4 per cent by 2010
(see Chapter 1), the European Union and other parties
operating at a European level could play a useful role in
the development of the European PrEA industry.
The European Union could develop common goals for
the harmonisation of the conditions in which agencies
operate, taking into consideration the provisions of ILO
Convention 181 (Case 16). The European Union may
also be the best institution to deal with the legal
impediments relating to the cross-border placement of
agency workers.
Case 16: ILO paves the way for
a change in PrEA regulation
The International Labour
Organisation (ILO) issues
conventions that have a binding
effect on all Member States that
ratify them. After 1949,
employment agencies were
regulated by Convention 96,
which banned the activities of
‘fee-charging agencies with a view
to profit’. Technically, this made
employment agencies a state
monopoly.
However, by the 1990s, the PrEA
industry was expanding rapidly as
many Member States had treated
them as legal employers of agency
workers and, therefore, placed
them outside the scope of
Convention 96.
A critical step towards the
recognition of PrEAs occurred in
1994 when, at the 81st Session of
the ILO, employers, unions and
regulators unanimously
acknowledged that labour
flexibility was important if labour
markets were to function
efficiently. As a result, the ILO
recognised the increasingly
important role played by PrEAs ‘in
the face of the dual challenges of
unemployment and poverty in the
world’.
This led the ILO, in 1997, to issue
Convention 181, officially
recognising the role of both public
and private employment agencies
in making labour markets more
efficient. The new convention
allows for the operation of PrEAs,
provides a framework for the
protection of the rights of agency
workers, and encourages cooperation
between private and
public employment services.
Convention 181 was adopted by
347 votes out of 382, with all
representatives from European
Union countries, except the
government of Luxembourg, voting
in its favour. A number of
European Union Member States –
including Finland, Italy, the
Netherlands and Spain – have
already ratified the Convention.
43

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
In parallel, European employer and worker organisations
(UNICE / CEEP and ETUC) have started a social
dialogue and a negotiation process that may result in a
European framework agreement on agency work. CIETT
and UNI-Europe have also begun a social dialogue at the
sector level. Due to the different stages of development
of the PrEA industry across countries, it will be critical
to avoid over-specificity at the European level. In
accordance with the subsidiarity principle, issues should
be devolved to the national level, as far as possible.
Platforms for constructive dialogue should be created
at the national level
At the national level, the evolution of the PrEA
industry needs to be stimulated either by collective
agreements on agency work negotiated nationally, or by
the national legislative authorities.
Depending on the particular context, specific points
need to be addressed, such as the constraints on the
growth of agencies, measures discriminating against
agencies, and the risk of insufficient protection of agency
workers. However, in general, regulations should
concentrate on protecting the rights of agency workers
rather than constraining the activities of PrEAs.
National parties could also benefit from comparing their
experiences with other countries in a ‘peer-review’
approach. This is already encouraged by the European
Union through the National Employment Action Plans.
The PrEA industry should embark on a self-regulation
process
PrEAs have to demonstrate their commitment towards
further improving the working conditions of agency
workers as the industry evolves. The experience of many
sectors suggests that self-regulation – which requires a
pro-active attitude towards the sector’s future – is an
Case 17: Self-regulation in the
travel industry
The travel industry relies heavily
on self-regulation to ensure the
protection of travellers against
abuses. National federations of
travel agencies in Europe have
generally applied codes of conduct
on their members and established
commissions to deal with
complaints.
Travel agent codes of conduct
have typically supplemented
legislative provisions by imposing
additional regulations to protect
travellers. Breaches in the code are
dealt with by the federation, which
can expel the guilty travel agency
from its ranks. Expulsion can have
a severe impact on the activities of
the affected travel agency if the
federation that it belongs to is
powerful, since most international
operators (such as hotels and
airlines) would refuse to do
business with it. Independent
complaint commissions handle
disputes between travel agencies
and travellers and both parties
have the right to file a complaint
with the commission.
Many European countries have
such independent complaint
commissions. In Belgium, for
example, 1,500 complaints are
filed every year, 300 of which lead
to a decision by the commission,
the remainder being withdrawn or
resolved prior to a commission
decision. The creation of a
European commission is currently
under discussion.
44

effective means of ensuring the rights of stakeholders in
an industry. The travel industry offers a good example of
the success of self-regulation (Case 17).
There is already a degree of self-regulation in the
European PrEA industry. This is commonly embodied in
a code of conduct that specifies the service levels to be
delivered to both agency workers and user companies.
For example, in the United Kingdom, the Recruitment
and Employment Confederation investigates complaints
against its members and has the right to acquit, suspend,
reprimand or expel a member and to make its decision
public.
In several countries, codes of conduct have been
supplemented by auditing procedures and collective
agreements. In the Netherlands, the national PrEA
federation has taken self-regulatory measures in the form
of rules of conduct and collective agreements that are
binding on all its members. Further, a strict, progressive
membership procedure requires a PrEA to pass through
two intermediary stages before being recognised as a full
member of the federation. After membership is acquired,
the quality standards of the agency are examined
periodically by an independent committee.
No code of conduct exists in France, but self-regulatory
measures initiated by the French PrEA federation have
been formalised and further enhanced by a
comprehensive collective agreement. Independent
institutions, jointly managed by representatives from
PrEAs and trade unions, collect and distribute
contributions for pensions, health benfits, social action
and training. In addition, a mutual fund has been
established to ensure the payment of wages and charges
to workers of bankrupt agencies.
The CIETT Code of Conduct, developed in the 1980s,
could serve as a first step in the self-regulation process at
the European level. The Code of Conduct aims to ensure
that the obligations of CIETT members to workers,
companies and society as a whole are met in accordance
with the highest standards. In addition, CIETT members
have the right to supplement the Code with a national
code of conduct. At present, it is the responsibility of
national PrEA federations to undertake disciplinary
measures when needed to enforce the Code.
The CIETT European Committee has proposed to
strengthen the Code of Conduct and use it as a first step
towards the self-regulation process at the European level.
It has proposed adding some provisions, such as avoiding
discrimination among comparable agency workers unless
justified on objective grounds, and encouraging PrEAs to
develop partnerships with public employment services.
To ensure its effective enforcement, however, the Code
of Conduct would need to become binding on all
European PrEAs. This would mean bestowing specific
sanctioning powers to an independent party for breaches
of the Code.
45

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
***
CIETT has tried to provide a transparent and candid
assessment of the PrEA industry today and of its
potential evolution. The over-riding conclusion of the
report is that PrEAs address the flexibility needs of
workers and companies and, in the process, create jobs.
In this way, PrEAs help to build a stronger society.
Supported by the heads of the multi-national PrEA
organisations, as well as by the national federations
that group PrEAs of all dimensions, we gladly take up the
challenge to create 4 million new jobs by 2010, and
invite other parties to support this worthy cause. In this
respect, we strongly believe that the interests of workers,
employers and governments are very much aligned. If the
evolution of the PrEA industry is well orchestrated, it
can offer excellent conditions for its workers, while
fulfilling the flexibility needs of businesses.
Therefore, we actively seek a constructive dialogue with
all affected parties, in the expectation that, together, we
can orchestrate the evolution of the industry in the
interests of the people of Europe.
Jean-Claude Daorst
CIETT president
Fred van Haasteren
CIETT First Vice president for Europe
And yet, if the potential of this sector is to be fully
realised, the approach towards its regulation needs to
tomorrow's labour market challenges, rather than as a to
problem of yesterday. Regulations should be aimed at
promoting the development of well-functioning PrEAs
and ensuring proper protection for agency workers. They
should not be about arbitrary restrictions on sectors,
reasons for use and lengths of assignment. Such
restrictions not only hamper the development of the
PrEA sector, but also restrict the ability of agency
workers to carry out their work.
46

Reflections of the Outside Advisors
Prof. Christian de Boissieu
University of Paris I – Sorbonne, Advisor to the Chamber of Commerce of Paris
Mr. Innocenzo Cipolletta
Director General of Confindustria Italian Employers Association
Mr. John Martin Evans
Expert on Employment Analysis & Policy, OECD
Dr. Peter Hartz
Director of Human Resources, Volkswagen, Germany
Mr. Bill Lewis
Director of the McKinsey Global Institute
Prof. Karel van Miert
University of Nijenrode, former European Commissioner .
Mr. Bill Morris
Secretary General of the T&G Union, United Kingdom
Mr. Manuel Pimentel
Former Minister of Labour, Spain
Zygmunt Tyszkiewicz
Former Secretary General of UNICE
Mr. Lodewijk de Waal
President of the Dutch Confederation of Trade Unions, FNV, the Netherlands
49

Reflections of the Outside Advisors
Prof. Christian de Boissieu
University of Paris I – Sorbonne, Advisor to the Chamber of
Commerce of Paris
I support the main argument of this paper: there is, in our
European economies, an increasing demand for labour
market flexibility and private employment agencies could
satisfy part of this demand. To be sure, the demand for
flexibility is larger on the part of employers than employees
(this asymmetry is integral to both the problem and the
solution). Private employment agencies can solve only part
of this asymmetry problem. In this connection, we must
not underestimate the role of the other structural factors
that contribute to the high level of structural
unemployment (NAIRU) in most European countries.
The very concept of flexibility remains ambiguous in the
European political and economic debate. For a significant
section of public opinion and policy markers, flexibility
still has the negative connotation of precarious
employment. This report rightly underlines the other side
of the coin, namely, the positive dimension of flexibility:
increased labour mobility, more solidarity between the
‘insiders’ and the ‘outsiders’, greater ‘employability’ of
workers, and so on.
The European debate concerning the role of private
employment agencies must be less ideological and more
oriented towards two main considerations: economic
efficiency and social cohesion. From both viewpoints this
report is excellent, even if it underestimates somewhat the
second consideration.
50
Turning to the future, the following issues may be relevant:
• How to relate the role of private employment
agencies to each phase of the economic cycle. The
substitutability or complementarity between
permanent and temporary jobs is a function of the
rate of economic growth. It is likely that the
functions of private employment agencies will not
be the same in the years to come, with the return to
‘full employment’. This debate relates to the
diversification strategy of private employment
agencies and the possibility for them to develop new
activities (‘possibility’ refers here to the market
conditions and the regulatory framework).
• In some European countries, there is clearly a trend
towards partnerships between private employment
agencies and the public sector (in France, for
example, between interim agencies and ANPE, the
public body). My view is that this trend will continue
where it has already started, it will develop elsewhere
and it will have many implications for some topics
already touched upon.
• The Single Market and Single Currency dimensions
of this topic must not be underestimated. Even if the
very concept of a ‘social Europe’ remains ambiguous
today, competition and ‘level playing field’ arguments
are going to push towards some harmonisation. Are
we going to adjust to the ‘short side’ of regulation,
that is, to the least regulated labour market I do not
think so. We will come to some European ‘average’,
like in other matters. Europeans rightly believe that
labour is not and will never be a plain commodity.

Mr. Innocenzo Cipolletta
Director General of Confindustria Italian Employers
Association
One of the key drivers of industrial success since 1945
has been innovation. Innovation requires flexibility and
private employment agencies provide an excellent
solution to the problem of how to reconcile worker rights
with the flexibility required for successful innovation.
Temporary labour, when organised properly by private
employment agencies with solid credentials, allows
workers to be protected through an explicit and time-
tested working contract. It also provides enterprises with
specialised personnel as and when they are needed.
In this sense, temporary employment does not
necessarily compete with permanent employment.
Companies will always need permanent workers, in
whom they invest knowledge, and who become assets to
the company. Temporary work, on the other hand, fulfils
a temporary need and, in particular, allows companies to
launch new initiatives that are not necessarily
guaranteed of success.
In the latter case, should the initiative succeed, then the
temporary work position could become a permanent one.
The freer companies are to experiment with new
initiatives, the more likely it is that those initiatives are
successful and that temporary jobs are converted into
permanent jobs. Thus, particularly during periods of
technological innovation - such as today - the
availability of temporary work is key to company growth
and, consequently, to economic development and the
expansion of permanent work.
On the other hand, temporary work is also
the appropriate answer both for people who need to gain
work experience and for people who do not wish to have
a permanent job. Often, the youngest and oldest people
in the workforce seek temporary employment. These
sub-groups of the workforce are significant, particularly
in countries such as Italy, where employment is low
because of high participation in tertiary education and
the high level of early retirement. Thus, the Italian
employment rate for males aged 30 to 50 is equal, or
slightly above, the average for industrialised countries;
however, the employment rate for younger and older
workers is significantly lower.
Of course, temporary employment is not the answer to
all economic problems. Nonetheless, it does offer a valid
contribution both to increasing employment and to
offering companies the flexibility that they need in
todayís economic environment, where the ability to
change rapidly is critical for success.
Mr. John Martin Evans
Expert on Employment Analysis & Policy, OECD
Personally, I welcome this report, which makes the case
for an extension of private employment agencies in
Europe in an informed and helpful way. Private
employment agencies (in the sense in which the term is
used in this report - private temporary employment
51

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
agencies) have an important contribution to play in
labour making markets more flexible. They can provide a
valuable service to many workers making transitions in
the labour market. Traditionally, their main ëtransitionalí
clients have been young people, who have little or no
employment record to recommend them to employers,
and who are often happy to ëshop aroundí and see what
suits them best. However, the report is quite right to
point to other cases of transition ó particularly women
re-entering the labour market or looking for a change in
career after giving time to child-rearing, and older
people. This latter group perhaps needs particular
emphasis. Birth rates in many European countries have
collapsed, making the contribution of older people vital
for the future (when, in addition, many current pension
plans run the risk of proving unviable). If private
employment agencies can help to bring on stream the
enormous potential of older, experienced workers, often
seeking new types of employment, they will fulfil a
crucial role.
The report also points, constructively, to ways in which
private employment agencies themselves can be
developed. I would agree on the need to develop the
range of their services, and extend the type of personnel
supplied in those countries where they are already wellestablished.
In addition, they surely have a major
contribution to play in the Southern European countries.
This applies especially in areas where rigid labour
markets have led to the emergence of a large
underground economy - which both represents an
important tax loss, and is associated with low-efficiency
production because of under-capitalisation.
However, as the report acknowledges, there is a need for
safeguards and continual efforts to improve the quality of
jobs provided through private employment agencies. As
evident from the figures in the report, one of the weak
points of private employment agencies is the low level of
training that their employees receive ó lower even than
people on fixed term contracts. It is of great importance
to raise that level although this will not be easy.
Temporary employment agencies have an incentive to
train their personnel up to the point where they can
offer their clients workers who are operational almost
immediately. However, it is difficult for them to move
beyond that into career development, simply because
private employment agencies risk losing the results of
some of their training efforts when their personnel are
hired by the firms in which they are working. Selfregulation
should be able to help here. Private
employment agencies could be required to make public
the volume and type of training that they provide, under
industry supervision. This would allow those putting
more effort into training to advertise that fact and help
them gain market share as a result.
Dr. Peter Hartz
Director of Human Resources, Volkswagen, Germany
Like other large companies in todayís economy,
Volkswagen has to be a breathing company: by this we

time is an enormous challenge; yet this is exactly what has businesses are having to reinvent themselves. In
to be done.
this process of reinvention, flexibility is critical.
This report discusses the role of external flexibility, which For workers, the traditional career model of
is of course just one of the ways of trying to realise income education followed by a job-for-life is being
security and flexibility of the workforce. Many forms of replaced by life-long learning, multi-skilling and
flexibility can be realised internally, like the ëVolkswagen a working life compassing multiple careers. For
weekí in which our employees have started to work part- businesses, product life-cycles are shortening and
time; or the new life-curve, in which Volkswagen tries to time-to-market is falling, while customers are
rethink life-time employment and income.
becoming more demanding. As a result,
businesses are having to re-invent their strategies
We believe companies have a moral obligation towards and processes, while ensuring that their key
society to ensure employment for as many people as asset ñ human resources- delivers the necessary
possible. At Volkswagen, we started a private employment skills for success.
agency of our own to ensure employment to people who
In the large economies of Continental Europe,
have worked with us. We cannot thank our employees despite the recent economic up-turn,
Christmas, only to fire them in Spring. Our employment unemployment levels remain high, especially in
agency has been instrumental in finding new jobs for rison to the United States. Private
people who otherwise have lost their jobs.
employment agencies offer part of the solution
to this problem, as the example of the United
States - which has a deregulated agency
The private employment agency industry in
sector - demonstrates. Private employment
Germany has a strong growth potential, provided agencies in the United States have catered for
that this growth is realised in a socially acceptable the flexibility needs of workers and companies
way. The most important step in this process is for and, in the process, have created jobs, increased
large companies to strike separate collective
economy-wide productivity and raised living
agreements with agency workers. Volkswagen has standards. In the future, private employment
already done so, and I believe other German
agencies will go further to provide full human
companies will soon follow out example.
resource related services to workers and
companies.
Mr. Bill Lewis
Director of the McKinsey Global Institute
In several European countries, the activities of
private employment agencies remain strictly
As globalisation reshapes society, workers and
controlled. This is because it is widely held that
companies use low-wage temporary agency **

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
labour force and changes in the demand for their
products or services. Companies also use agency workers
when certain skills are not available in-house. In all
these ways, private employment agencies raise the
competitiveness of businesses. And, as we have found in
all McKinsey Global Institute studies in the last decade,
raising the competitiveness of businesses is, in the long
run, the only way to ensure the creation of jobs and
rising living standards.
Prof. Karel van Miert
University of Nijenrode, former European Commissioner
Before commenting on the report 'Orchestrating the
evolution of Private Employment Agencies towards a
Stronger Societyí, I want to underscore the fact that the
topic of the proper functioning of the employment
market does not form part of my particular area of
expertise. Therefore I have read the report through the
eyes of a relative outsider who, like everybody, is
interested in a topic that is so critical to all our
economies and societies, that is, approaching full
employment to the satisfaction of both employer and
employee.
The report in my view offers an interesting perspective
on the various factors that are at play, and offers a
seductive argument that the notion of temporary
employment could further evolve into a significant and
productive factor for organising the supply and demand
for labour in a form that is attractive to both buyers of
human resource capacity - such as employers - and
suppliers of that capacity ó for example, employees.
54
I agree with the notion that we see an emerging need for
flexibility in all dimensions, both from the perspective of
the employer and that of the employee. The temporary
employment agency of the future offers the potential to
strike the right balance between these needs for
flexibility and the ever-present desire for continuity and
security. Thus, I believe, without being able to pass
judgement on the individual aspects of the report, that a
case is made to enter into a constructive dialogue
between representatives of employers and employee
organisations on how to shape the evolution of the
industry.
At the same time, I recognise from my experience as
European Comissioner that there is a wide range of
practices among the various Member States of the
European Union as regards their labour practices. In
seeking an evolution, this diversity should be respected
and a process in which countires can learn from each
other in a a peer-type view appears to be one of the
instruments for beneficial change. The experience of the
European Union is taht not every issue should be
addressed with regualktion from the European centre. The
practices of joint learning can be very promising.
Mr. Bill Morris
Secretary General of the T&G Union, United Kingdom
This document makes a welcome contribution to the
unfolding debate on the future of private employment
agencies. In an age of globalisation, where the demands
of the economy and of society change rapidly, we must
recognise that private employment agencies are no

longer an optional extra when we come to planning the
labour force of tomorrow.
Private employment agencies can provide choice and
opportunity for the employee and employer alike. But
workers who choose employment through an agency
must not be treated like second-class citizens. Success for
private employment agencies must be built on a
partnership approach so that flexibility on the one hand
is coupled with security on the other. This way, private
employment agencies can increasingly help society to
manage a better balance between the competing
demands of work and family life.
Mr. Manuel Pimentel
Former Minister of Labour, Spain
In Southern Europe, the private employment agency
business is frequently misunderstood and, in this context,
the CIETT report makes a welcome contribution to the
social dialogue on private employment agencies.
In Southern European countries - such as Spain - public
opinion has traditionally viewed private employment
agencies as organisations that simply help companies to
substitute permanent, well-paid workers, with temporary,
low-paid agency workers. Fortunately, first of all due to
social dialogue and then due to a new law, there was a
convergence of salaries betweenpermanent and agency
workers.
Looking to the future, private employment agencies
could have a significant role to play in facilitating the
movement of workers across the Single Market, from
areas where their skills are not needed to areas where
their skills are in short supply. Additionally, more cooperation
between public and private employment
agencies offers an excellent means of improving the
functioning of the European labour market.
To orchestrate the evolution of this industry towards a
stronger society, there is only one formula for success:
participation and social dialogue.
Mr. Zygmunt Tyszkiewicz
Former Secretary General of UNICE
In the European Union, unemployment remains
unacceptably high, the employment rate disgracefully
low, while rigid, over-regulated labour market
mechanisms respond too slowly, if at all. In addition, the
European Union still lags behind its main industrialised
trading partner, the USA, when it comes to
competitiveness, on which economic growth and jobcreation
depend.
For these reasons it is encouraging to learn, from the
report commissioned by CIETT, about current and future
developments in the private employment agency
industry. This industry, whose core business is the
provision of temporary workers to companies as and
when needed, contributes significantly to the
improvement of European competitiveness by bringing a
welcome element of flexibility to the labour market. I also meets the spec
55

Orchestrating the evolution of
Private Employment Agencies towards a stronger society
Private employment agencies provide an essential service agency industry plus respect of existing employment
to all companies and are especially valuable for Small legislation, in most cases, will guarantee the correct level
and Medium-sized Enterprises, which obviously cannot of protection.n
afford to keep spare people on their payrolls to meet
unexpected absences of permanent staff or fluctuations
in the workload. As shown in the report, private
Mr.Lodewijk de Waal **
employment agencies in fact create jobs, because the The FNV welcomes the report as an interesting
great majority of companies employing temporary agency contribution to the debate on the possible merits and
workers would have employed nobody at all, if the demerits of private employment agencies. By outlining
agency service had not been available.
the key facts relating to private employment agencies,
the report encourages all stakeholders in the industry to
Yet this necessary activity remains poorly understood develop strategies based on facts rather than mere
and is still subject to unwarranted handicaps imposed by ideological prejudices
government regulations. Eight years since the creation of
the European Single Market, with its guarantees of The report'ís recognition of the need for re-regulation
freedom of movement of people, capital, goods and (instead of a pleas for mere de-reglation), the
services across the entire Union, private employment importance associated with 'how to balance the need
agencies still cannot freely trade their services across and desire for flexibility with the basic need for
frontiers. This report aims to improve public knowledge continuity and certainity of the workers concerned', and
about private employment agencies and thereby remove the importance attributed to the dialogue among all
some of the misconceptions that have given rise to parties are major steps towards a situation in which
unduly restrictive legislation that inhibits their
private employment agencies and trade unions can be on
development.
speaking terms about these future developments.
To exploit to the full the employment creating potential
of private employment agencies, there is a need to However, in my view, there are still some areas in which
remove all unnecessary constraints on their activities the report needs further elaboration and clarification, or
and to ensure that they are allowed to trade freely simply a more daring approach
throughout the Single Market. Workers employed through
through temporary employment agencies must of course For trade unions, the quest for appropriate working
be treated fairly and correctly both by their agency and conditions centres on the issue of social protection
by the companies to which they are temporarily for workers. This issue should not be ideologically
assigned. Self-regulation of the private employment taboo but should be key to any mature dialogue on
56

the social value of private employment agencies.
Flexibility needs are becoming a permanent feature of
economic activity and private life. Private employment
agencies cannot and should not fulfil all these
needs; agency workers complement, rather than
replace, firmsí internal labour flexibility solutions.
They should not substitute permanent employment,
nor release firms from the obligation of investing in
internal forms of labour flexibility.
private employment industry could act as a catalyst in
shaping new forms of employment relations that help
create a better work environment where both flexibility
and the
continuity and safety of employment are enhanced.
The reportís claim that private employment agencies
provide employment opportunities for ëoutsidersí is
interesting, but needs to be substantiated and
elaborated by further research.
It depicts a future in which the private
employment industry is managing socially
acceptable forms of flexibility in a system of
constructive dialogue with the social partners.
The issue of lifting constraints on private employment
agencies has to be dealt with in the context of
an issue of major concern to the trade unions,
namely how to prevent precariousness from
proliferating. The private employment industry will
have to offer more than just the tenuous promise of
new jobs and less precarious working conditions.
One possibility is to offer partnerships with trade
unions and governments in the struggle against grey
market labour and other forms of exploitative labour
practices. Another is to recognise workers' needs for
social protection and to ensure these through
collective agreements.
I see this dialogue as an offer that we, the trade
unions, cannot refuse.
Nevertheless, the report offers a quite optimistic but
challenging perspective: if developed correctly, the
57

Glossary
CIETT
International Confederation of Private Employment Agencies
CEEP
European Centre of Enterprises with Public Participation and of Enterprises of General Economic
Interest
DAAW
Daily Average Agency Worker. Average number of agency workers assigned through PrEAs on any
given day
EPL
Employment Protection Legislation. Regulations protecting the rights of workers
ETUC
European Trade Union Confederation
EU
European Union
FNV
Federatie Nederlandse Vakbeweging
FTE
Full-time equivalent. A full-time equivalent is defined as 1,760 hours per year (44 weeks of 40 hours)
ILO
International Labour Organisation
OECD
Organisation for Economic Co-operation and Development
Participation rate
The proportion of the total population that is either working or seeking work
Penetration rate
Number of agency workers assigned through PrEAs on any given day, as a percentage of total
employment
PrEA
Private Employment Agency
SME
Small and medium enterprise
Start-up
A small, newly-founded company, often in the information technology sector
58

Synchronisation ban A German requirement that the duration of the contract between the agency and the worker is
established independently of the duration of the workerís specific assignment
UNICE
Union of Industrial and Employersí Confederations of Europe
59

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