Increasing numbers employed through fraudulent temporary work agencies

The number of employees working through ‘mala fide’ or fraudulent temporary work agencies has risen over a two-year period: from 80,000 workers in 2006 to about 150,000 people in 2008. More than half of temporary agency workers from eastern Europe who work in the Netherlands do so through mala fide work agencies. Investigations into these agencies, carried out by a supervisory body and the Labour Inspectorate, have led so far to fines totalling €2.6 million.

Low pay and wage tax fraud

In two years, the number of employees working through ‘mala fide’ or fraudulent temporary work agencies has almost doubled. While, in 2006, the figure was 80,000 workers, this irregular practice now involves some 150,000 people a year. More than half of the temporary agency workers from eastern Europe who are working in the Netherlands do so through irregular employment agencies. As a result, they face problems such as underpayment and poor living conditions, while their employers often commit wage tax fraud. This situation largely concerns Polish employees, who have been allowed to work in the Netherlands without a work permit since May 2007 (NL0711019I).

Monitoring compliance with collective agreement

An extended collective agreement is in force for temporary workers in the Netherlands, and all of the companies involved are obliged to comply with this agreement. The Foundation for compliance with the collective agreement for temporary agency workers (Stichting Naleving CAO voor Uitzendkrachten, SNCU) was established to monitor compliance in this regard. SNCU was set up by the social partners, including legitimate temporary work agencies and trade unions, which work together to monitor compliance with the collective agreement. Bona fide or legitimate temporary work agencies are undermined by illegal intermediaries that provide temporary workers at below cost price. This costs the temporary agency work industry 10% of its turnover, totalling about €1 billion a year.

Heavy fines imposed

Ultimately, SNCU is concerned with the interests and position of temporary workers who are more vulnerable than their counterparts in permanent positions. The foundation has already imposed fines totalling €2.6 million since 2006 and 12 court cases have been won. SNCU also serves as a reporting desk for irregularities: employees can submit a report if they believe that the collective agreement is being breached. The foundation examines all cases reported – currently 500 incidents – and searches for actual proof.

All of the temporary work agencies are required to cooperate with such investigations since the collective agreement’s applicability extends across the industry. In cooperation with the Labour Inspectorate, which is under the authority of the Ministry of Social Affairs and Employment (Ministerie van Sociale Zaken en Werkgelegenheid, SZW), investigations are carried out, court cases prepared and fines imposed. Mistakes are mainly made by small and medium-sized temporary work agencies.

Voluntary certification at national level

In recent years, temporary work agencies in the Netherlands have developed a quality label, designed to distinguish trustworthy agencies from their unreliable colleagues. It enables user companies to choose a qualified agency that adheres to the rules. Since 1 January 2007, temporary work agencies established in the Netherlands can acquire this quality label – known as NEN-norm 4400 Part 1 – from the National Standardisation Institute (Nederlands centrum van normalisatie, NEN). The agencies can obtain the label when they have been shown to fulfil requirements concerning the payment of taxes and social insurance and the legitimacy of employment in the Netherlands; the assessment is made by private certifying companies. After certification, the temporary work agency is registered by the Foundation for Employment Standards (Stichting Normering Arbeid, SNA).

Stricter legislation necessary

Despite these standards, the temporary agency work industry is now calling for tougher regulations concerning employment agencies. The social partners are seeking heavier fines and compulsory employment agency certification, partly with a view to the arrival of new employees and workers from Bulgaria and Romania, for whom – in principle – the labour market will open from 2009. In the summer of 2008, the Minister of Social Affairs and Employment, Piet Han Donner, announced that he is clear about the date on which the borders will open. However, the Dutch House of Representatives (Tweede Kamer der Staten-Generaal) has its doubts, based on stories of non-Dutch employees being exploited. The four largest cities in the Netherlands have also objected because some of these cities are now facing problems due to the arrival of large numbers of Polish people.

Liability of user company

The Dutch cabinet has taken a further step in the battle against mala fide work agencies. New legislation was proposed in the summer of 2008, placing responsibility on companies that hire employees through non-certified agencies regarding the workers’ statutory minimum wage and holiday allowance. Consequently, temporary agency workers can demand their wages – up to the value of the minimum wage and holiday allowance – from the employment agency or from the company that hired them.

Companies that do business with irregular temporary work agencies are currently not liable. By assigning liability, enterprises will have more incentive to work with certified employment agencies. Furthermore, temporary work agencies will have greater interest in gaining certification, as it will become more attractive to do business with them than with non-certified agencies.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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