New legislation proposed on temporary agency work
In September 2005, the Hungarian government submitted a draft amendment of the Labour Code to the tripartite National Interest Reconciliation Council (OÉT). The proposal would change the law on temporary agency work, with the aim of curbing undeclared work and defining explicit rules on equal pay for agency workers.
In early 2005, four sectoral social dialogue committees (in metalworking, engineering, chemicals and hotels/catering) (HU0212106F) jointly proposed examining the practices of companies that do not adhere to the legal regulations on temporary agency work (HU0412102F), and then to amend these regulations via either legislation or collective agreements. The social partners involved were particularly critical of temporary work agencies that use undeclared labour, and of abuses by user companies, especially using agency workers on a permanent basis and setting up subsidiary companies specialised in providing the parent company with agency workers. Sectoral trade unions envisaged: certain restrictions on the use of temporary agency work, for instance on the length or number of contracts between the same agencies and user companies; the establishment of criteria for the cases in which temporary agency workers may be used; or a complete ban on using temporary agency work in the core activities of certain industries. Legal experts working for the sectoral social dialogue committees proposed legislative changes in the following fields: equal treatment of agency workers and regular employees; ways to prevent abuses; the relationship between collective agreements and temporary work agencies; and possibilities to enhance the enforcement of the law on the collective representation of workers
Furthermore, the Hungarian Federation of Personnel Management Advisors (Személyzeti Tanácsadók Magyarországi Szövetsége, SZTMSZ), a newly established professional organisation not yet qualifying as employers’ association, demanded in a letter addressed to the Minister of Employment and Labour consultations on issues including cracking down on illegal (unregistered) temporary work agencies.
These various proposals received a new impetus from the government’s April 2005 '100 Steps' reform programme, which includes the objective of 'amending the rules of temporary agency work so that there remain no loopholes to evade paying public levies' (HU0506101N) When drafting new legislation on the issue, the government made use of the expertise and proposals of Labour Inspectorate (Országos Munkabiztonsági és Munkaügyi Felügyelet, OMMF). A draft amendment of the Labour Code was submitted to the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) (HU0209101N) in early September, in tandem with a new law on increased powers for labour inspectors, with special provisions on temporary agency work (HU0510102F).
Main points of the amendment
The most important provisions of the draft Labour Code amendment are designed to crack down on undeclared work. According to the proposed law, a temporary work agency will be 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 Unified Labour Database (Egységes Magyar Munkaügyi Adatbázis, EMMA) (HU0406101N) or registration of the agency. The draft law stipulates that 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 is imported from the German and Austrian legal systems and aims to make the user enterprise responsible for the lawful employment of agency workers: potentially backed by fines imposed by labour inspectors, it should act as an incentive for user enterprises to force agencies to adhere to the law.
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 draft legislation 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 draft includes several minor changes in order to remedy perceived shortcomings of the current regulation. It will introduce a probation period for agency workers, who have been excluded from this provision so far. The draft also changes 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 current requirement of paying full wages until the expiry of the contract.
Debates at tripartite forum
Together with the new legislation on labour inspection (HU0510102F), several rounds of consultation on temporary agency work were held at OÉT, both at the plenary session and in its Labour Law Committee (Munkajogi Bizottság). Employers’ associations basically view TAW as an important flexibility tool, and therefore opposed the planned changes. to the law. They argue that the government proposal simply presumes temporary agency work to be a source of abuses. The new regulations would impose an unbearable administrative burden on user enterprises and would be an obstacle to flexible work organisation. employers argue.
Although trade unions initially wanted to introduce more radical measures, they are content with the draft legislation and proposed only minor changes, for instance a shorter waiting period for application of the equal pay rules.
At the plenary session of OÉT, the employers’ representatives quoted an earlier promise by the government that it would initiate legislative changes only on the basis of tripartite consensus (paradoxically, the preamble of the bill included a statement that the proposed amendment is endorsed by OÉT). Nonetheless, the Minister of Employment and Labour made it clear that he is determined to pursue this direction of legislation even without the consent of the employers. As he explained, the government insists on achieving the four following objectives of the new legislation even without consensus in OÉT: strengthening labour inspection; cracking down on undeclared work; eliminating abuses of temporary agency work; and introducing a new national minimum wage system.
Although equal pay is a constitutional right in Hungary, the law has so far not stipulated explicitly that temporary agency workers must be paid the same wages as employees in comparable jobs at the user enterprise. In this respect, the proposed new law is less radical than the trade unions’ demands as it allows employers to waive applying equal pay regulations for the initial six months of employment. Given the fact that the average spell of such temporary agency work contracts was 84 days in 2004, the new law will not affect the vast majority of agency workers. The new stipulations aiming to improve adherence to employment law seem more effective, provided that labour inspectors make use of their powers.
On the procedural side, unlike the usual role of the social partners - which is to be consulted on draft laws prepared by the ministries in charge - this is the first case in which sectoral social partners sought an amendment of the Labour Code, before the government’s '100 Steps' programme triggered off the actual preparatory work. Furthermore, it has to be remembered that the regulation of temporary agency work through collective agreements practically does not exist in Hungary. Trade unions have a say neither on the extent of the use of agencies nor on the working conditions of agency workers. Given the lack of a strong bargaining position, trade unions’ only possibility was undoubtedly to seek legislative changes, and in order to achieve meaningful changes they had to form an alliance with the government, interested in diminishing the loss in tax revenues due to undeclared work. (László Neumann, Institute of Political Science, Hungarian Academy of Sciences)