Hungary: Temporary agency work and collective bargaining in the EU

  • Observatory: EurWORK
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  • Published on: 18 Diciembre 2008



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The volume of temporary agency work in Hungary is about 2.4% of the labour force, however, in terms of full-time equivalent it makes up only 0.9% of the working hours of the employed. Although recent amendments of the Labour Code have introduced the equal remuneration principle and eliminated the possibility of some other abuses, there is no other serious constraint as to the usage of agencies. Collective agreements do not regulate temporary agency work, neither at sectoral level, nor at user/agency company level, trade unions are not able to organise agency workers.

Section 1. Definitions

1) In your country, is there a statutory definition of:

a) temporary agency work? Yesb) agency worker? Noc) user enterprise? Yes

The 2001 amendment of the Labour Code provides the essential definitions as part of the regulatory framework. The new Title of the Labour Code inserted in 2001 reads in Hungarian “Munkaerőkölcsönzés” – which translates literally as Labour Force Leasing. Thus the law appears to focus on the commercial relationship between the agency and the user enterprise while it fails to provide an explicit definition of the agency worker. In this language the definitions of Article 193/C are as follows:

employee lease: an activity in the frameworks of which lessor leases the employee, who is in employment relationship with the lessor for the specific purpose of lease, to the lessee to perform work for compensation;

lessor: the employer who transfers the employee, who is in employment relationship with lessor for the specific purpose of lease, to the lessee to perform work, and shares employer rights and obligations with the lessee;

lessee: the employer who employs the employee transferred in the framework of the lease contract, and shares the rights and obligations of the employer with lessor.

2) Is there a collectively agreed definition of:

a) temporary agency work? Nob) agency worker? Noc) user enterprise? No

If yes, please give details (e.g. how and where defined).

3) In your country, would you describe TAW as a sector in its own right?

No. In statistical terms it is a part of services. In the newly developed system of Sectoral Social Dialogue Committees no committee or subcommittee for temporary agency work has been established yet either.

Section 2. Regulatory framework

1) Have there been any changes in the law concerning TAW since 2004?

a) Yes b) No

In 2006 the most important provisions of the Labour Code’s amendment were designed with the aim of cracking down on undeclared work. The temporary work agency is required to provide a user company with proof of the agency worker's lawful employment - such as employment contracts (including the agreed wages), the relevant enquiry to the social security system and registration of the agency. If an agency fails to meet the legal criteria or there is no appropriate employment contract, it will be assumed that an employment relationship with the user enterprise is established from the date the agency worker starts work for the period specified in the contract between the agency and the user enterprise. This rule aims to make the user enterprise responsible for the lawful employment of agency workers.

As far as the remuneration of agency workers and 'permanent' employees at the user enterprise is concerned, the amendment stipulates that equal wages and pecuniary bonuses should be paid if the duration of employment at the user enterprise is longer than six months. For equal benefits in kind to apply, at least two years' continuous employment at the user enterprise is required in the case of fixed-term employment, while only one year is required for workers with an indefinite (open-ended) contract. In order to ensure that wages and bonuses are in line with collective agreements or company rules on wage tariff systems, the agency should inform the user enterprise about the qualification and work experience of agency workers.

The amended law prohibits any kind of ownership ties between the agency and the user enterprise - thus companies will be banned from setting up their own in-house agencies, which has been a common source of wage inequalities within workplaces. It is also prohibited to deploy someone as an agency worker who was dismissed from the user enterprise in the previous six-month period.

The amendment introduced a probation period for agency workers, who have been excluded from this provision earlier. The law also changed the terms of termination of fixed-term contracts: as a rule, the notice period for termination will be two-thirds of the remaining contract period, instead of the previous requirement of paying full wages until the expiry of the contract. (HU0511102F)

In 2007 another amendment of the Labour Code included several minor changes in order to remedy perceived shortcomings of the regulation. For instance, it ruled out that temporary work agencies make use of employment through Casual Employment Booklet (Alkalmi Munkavállalói Könyv, AMK), a special subsidized employment scheme providing the employer with simplified administrative procedure of paying wage levies.

2) How is TAW regulated in your country?

a) Is there a legal framework specifically for TAW; and/or is it covered by general labour law (including case law/ jurisprudence)?

There is a special section (Title) in the Labour Code. (See: Section 1.)

b) What is the role, if any, of collective labour agreements and self-regulation?

Nothing at all.

3) What is regulated in these provisions? In particular, does it cover:

a) use of agency work (e.g. length of assignment, sectoral bans, permitted reasons of use, number of agency workers per company, other)

No limitation. The only obligation of the user enterprise is to inform its works council and trade unions regularly, at least twice in a year, on the number of temporary workers used.

b) the form of the contract (e.g.project, fixed-term, special contract, open ended, etc.)

It may be fixed-term or open ended. However, the Labour Code defines both cases as a special type of employment contract (concluded with a special purpose of temporary agency work) with shorter notice period and other limitations.

c) social security and social benefits

The same as for other employees.

d) conditions to open a TAW agency (e.g. license or authorisation schemes, supervision by public authorities, financial requirements, or others - please specify)

The 2001 legislation introduced compulsory registration/licensing of temporary work agencies, the details of which are regulated by a government decree (118/2001. [VI. 30.]). The application for registration is to be submitted to the competent labour centre – in practice to the regional office of the Public Employment Service (Állami Foglalkoztatási Szolgálat, ÁFSZ). Apart from professional requirements (at least one employee with the necessary competencies, appropriate permanent office), applicants must have a modest collateral (approximately €4,000). The labour centres are also authorised to monitor compliance with the above criteria. The Hungarian Labour Inspectorate (Országos Munkabiztonsági és Munkaügyi Felügyelet, OMMF) is authorised to control the employment practice of both temporary work agencies and user enterprises.

e) business activities/services delivered by TW agencies (e.g. prohibition to provide other services than TAW)?

No.

f) third-national companies or temporary agency workers (e.g. activities of foreign agencies)?

Although the Labour Code prescribes domestic registration of the Temporary Work Agency, this does not rule out foreign companies’ entry to the market through their subsidiaries registered in Hungary.

4) Do any regulations (by law and/or collective bargaining in the TAW sector) specify equal treatment rights for agency workers with permanent workers in the user enterprise concerning:

a) pay

Yes. (See Section 2.)

b) training

No.

c) other terms or conditions of employment?

Yes.

For in-kind benefits only. (See Section 2.)

5) Do TAW workers have the right to information, consultation and representation?

Yes and no. The law does not rule out the application of the relevant paragraphs of the Labour Code at the Temporary Work Agencies. However, in practice trade unions do not operate at agencies. As far as works councils are concerned, they have been elected at many firms, but counsellors are mainly coming from the agency’s own staff, and perhaps from among the ‘most stable’ temporary workers, i.e. those who have been staying at the firm for long. However, no information is available about the actual functioning of such works councils.

6) Is there a control/enforcement mechanism regarding any TAW regulation?

If yes,

a) is there a special labour inspectorate or a bi-partite body governing TAW?

No special agency or bi-partite body exists.

b) are there any sanctions/penalties for not respecting the regulations (whether stemming from law and/or collective agreements)?

The general penalties imposed by OMMF apply in the case of agency work too.

7) Are there any procedures governing use of TAW and strike breaking?

In particular, can workers on strike be replaced by agency workers?

Yes, the Labour Code effectively prohibits the use of temporary agency workers during strikes. However, according to the rulings of the labour courts, this does not mean a ban on using agency workers hired by the user company earlier. Thus, with appropriate organisation of work, the user enterprise may substitute workers on strike by agency workers already available at the firm.

Section 3. Social dialogue and collective bargaining

1) Is there any employers’ association(s) for TAW firms in your country?

Yes and no. The Hungarian Federation of Personnel Management Advisors (Személyzeti Tanácsadók Magyarországi Szövetsége, SZTMSZ) includes a special section on the representation of the temporary work agencies. The Ministry of Social Affairs and Labour (Szociális és Munkaügyi Minisztérium, SZMM) has recently consulted separately with SZTMSZ on forming the Hungarian government’s position concerning the new EU Directive on TAW. Although SZTMSZ elaborated codes of conduct for its member organisations, including temporary work agencies, in the strict sense, SZTMSZ does not qualify as an employers’ association, as its by-law does not include endorsement for concluding collective agreement. SZTMSZ has about 25 member companies, including almost all the biggest players of the TAW industry.

2) Is there any union(s) specifically for agency workers?

If no, have any unions or confederations targeted the recruitment of agency workers? launched any campaigns around agency workers’ rights?

No campaigns are known of. We are aware of only sporadic experiments, as well as cases of grass-roots unionisation and industry federations’ attempts to set up sections for temporary workers. Basically unions present at user enterprises raise problems concerning temporary work agencies, these company unions are not willing or able to organise temporary workers.

3) Collective bargaining levels

Is TAW governed by collective bargaining at:

a) intersectoral/ national level?

No.

b) the sectoral level for TAW?

No.

c) company (ie. temporary agency firm) level?

No.

If yes, please provide details of the parties concerned.

N.a.

4) Collective bargaining outcomes

Please provide examples and details of any recent/ significant collective agreements governing TAW at the levels referred to in question 3.

Not applicable.

5) Are there any examples of sector- or company-level collective agreements in other sectors that restrict, permit or otherwise regulate the use of TAW within their domain?

No. (at least not to our knowledge)

6) Please provide any data concerning:

a) trade union density for agency workers

N.a. However, according to empirical evidence, practically there are no trade union members among temporary agency workers.

b) the coverage of collective bargaining within the sector.

Practically nil. According to the statistics 0.2% for NACE 7450 (Labour recruitment and provision of personnel), the NACE Rev. 2 classification including a separate code for temporary work agencies has not yet implemented in the registry. (Source: Registry of Collective Agreements run by Ministry of Social Affairs and Labour (Szociális és Munkaügyi Minisztérium, SZMM)

Section 4. Employment and working conditions of TA workers

1) Please provide the most recent data (averages) on TAW employment

a) longevity of TAW employment, i.e. how long workers remain employed

- in the sector?

N. a.

- with a particular agency?

125 days (118 for unskilled workers, 151 for skilled workers, 155 for white collars)

b) duration of TAW placements, i.e. i.e. the length of assignment in a user company.

96 days (79 for unskilled workers, 104 for skilled workers, 129 for white collars)

Source: Temporary Work Agencies’ compulsory data provision, collected and processed by the National Employment and Social Office (Foglalkoztatási és Szociális Hivatal, FSZH); Data of 2007.

2) Please provide any evidence from official, academic and social partner sources concerning:

a) the reasons for user companies’ usage of TAW, including any differences by sector, occupation, firm size etc.

• fluctuation in market demand, seasonal peaks in need for employees, pure numerical flexibility

• Transactional cost consideration by outsourcing HRM functions including recruitment, screening, disciplining and administrative jobs

• as a disciplinary tool, i.e. easy replacement of workers who do not meet any kind of company requirement

• temporary substitution of key personnel on leave

• “project” organisation of work, i.e. temporary team for a definite task/period

• At multinational companies the headquarters’ control on the number of direct employees (either through direct instructions on headcount or productivity measures – ‘Key Process Indicators’– calculated by the number of direct employees.)

b) reasons for workers participation in the sector and levels of satisfaction, including any differences by age, sex, education etc.

• high unemployment and lack of local jobs (in remote villages, where temporary agencies provide jobs and opportunity for commuting);

• sometimes better working conditions (for instance in the commerce sector direct employees have to do unpaid overtime, while temporary workers’ hours are better controlled by the agencies.)

• meets with individual preferences, lifestyle, for highly educated professionals only

In the lack of relevant academic research, the above is based on interviews with social partners.

3) In practice, which rules and procedures may apply to temporary-agency workers in contrast to other workers in the user company?

N.a.

Section 5. The extent and composition of TAW.

1) For 2004 and 2007, please state

a) the number of agency workers

2004: 52,684

2007: 99,910

b) total reventues of the TAW sector

N.a.

2) What proportion of the TAW workforce is currently

a) male/ female? 55-45%b) full/part time? N.a.c) young (<c. 25) or older (>c. 50) workers? 31.4%; cca. 13%

3) Has there been any changes to the TAW sector in terms of

a) concentration, i.e. proportion of employees or turnover accounted for by the largest firms?

There is a definite trend of concentration; in 2006 the top 10 companies provided 28 % of the total output of the sector in terms of ‘hours billed’.

b) internationalisation, i.e. number/significance of multinational TAW firms?

There is a definite trend in this respect as well through fully owned subsidiaries and takeovers. In 2007 among the top-10 there were 4 companies with foreign equity, including Trenkwalder, Adecco, and Manpower.

Source: Book of Lists 2007-2008, published by Budapest Business Journal and FSZH.

4) What is your evaluation of the availability and quality of statistical data concerning TAW in your country?

The annual data collection of FSZH provides a good overview on the employment dynamics of the sector. However, it has its own methodological constraints. As it collects only aggregated data provided by the agencies and summarised at regional and national level, there is no access to microdata and no data about working hours (part-time/full time) and the same persons’ employment at different agencies. The FSZH data collection method completely neglects business data of agencies and the published data also makes impossible to access figures on concentration of businesses.

Commentary by the NC

Trade unions are very dissatisfied with the proliferation of TAW and especially the practice of large, mainly multinational firms, in manufacturing, commerce and in the hospitality industry. In these companies a large part of the workforce (in peak periods, their proportion exceeds half of the workforce) are temps. On the other hand, in the lack of limitation on duration, a part of the temporary workers have been working for the same user company for years, without having the chance to be employed directly by the user enterprise. Therefore trade unions keep calling for constraints in the field of activity, duration and proportion of employees in the given workplace. There is no specific trade union position concerning the new directive, however, as the valid Hungarian law already regulates the “equal pay” issue anyway.

Employers’ (agencies’) associations hold that the dynamic growth of the sector is due to the effort to meet business demands, moreover the sector provides entry to the labour market for many people who otherwise would remain inactive. As efforts are made to motivate temporary workers, the “try and hire” practices are getting more popular among the user companies, many of the temporary workers are given the chance to get a permanent job through TWAs. SZTMSZ share the view of its UK counterpart in relation to the new directive: “equal treatment is a vital issue, and it is essential this covers only basic pay”. According to SZTMSZ, it is impossible to ensure the same level with respect to other benefits, especially those provided in the so-called Cafeteria system on a yearly basis.

It is an obstacle to social partners’ involvement that the sector has not organised and is not recognised in its own right, the Hungarian social partners take part at the EU-level social dialogue committee, but so far they have failed to establish its domestic counterpart.

Given the fact that no trade union represents specifically agency workers legitimately, the government consulted informally with the social partners’ peak organisations partaking in the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) on the new EU Directive on 2 June 2008. The position of trade union confederations was that equal treatment regulations should be strengthened by shortening the transitory/exempt period and effective enforcement should be ensured through labour inspection. Trade unions basically want to limit the use of TWAs to cases of extraordinary peaks in labour demand only, in other words, to restrain the prevailing practice of long-term usage of agency work. Employer confederations, as representatives of the user enterprises, opposed any legal constraints on the use of agency work, as the more complicated the regulation is the less jobs are created, therefore the agencies would be less able to contribute to increasing the country’s very low employment rate. Moreover, further strengthening of the regulation might result in illegal employment practices and/or outsourcing instead of using lawful agency work, according to the employer associations.

László Neumann, Institute for Poltical Science, Hungarian Academy of Sciences

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