While the introduction of greater protection for temps isbeing hailed as good news for workers, it will make the market tougher foremployer and contractor alike. Nic paton examines the likely impact on onehigh-tech playerSharp-eyed football fans watching June’s World Cup would have noticed onename kept cropping up on the pitch-side billboards in Japan and South Korea –Avaya. The New Jersey, US-based company provided telecom and data systems forthe tournament, built the official website and will do the same for the 2006championships in Germany. Although not yet a household name, Avaya employs some 23,000 people aroundthe world, operates in 90 countries and last year generated revenues in theregion of $6.8bn (£4.3bn). Formerly part of US technology giant Lucent Technologies, Avaya was spun offas an independent company in 2000, but can trace its roots back to the middleof the 19th century and the development of telephony services in the US. The company manages more than 100 million voicemail boxes worldwide and is aspecialist in developing call-handling technologies. In Europe alone, itstechnology can be found in more than 3,000 call centres. In the UK, theoperation is considerably smaller, with about 1,000 permanent staff splitbetween its headquarters in Guildford and offices in Welwyn Garden City. On topof this, at any one time the company will employ about 40 to 50 freelancecontractors, normally working on specialist IT contracts. Projects, which normally last up to a year but sometimes beyond that, willoften revolve around developing and maintaining the non-core IT infrastructureor doing things such as working on the corporate intranet or website, says MikeYoung, UK HR director for Avaya. Agency and contract staff are also sometimesused to plug short-term gaps among permanent staff. This modus operandi is now under threat from European employment legislationset to make the market tougher for employer and contractor alike, fears Young.Two key sets of regulations are focusing the minds of HR and employmentprofessionals in the IT contract market. The first is the Fixed-Term Employees (Prevention of Less FavourableTreatment) Regulations 2002, which are due to come into force on 1 October thisyear. These will transpose the European Commission’s Directive on Fixed-TermWork into UK legislation. The regulations will prevent fixed-term employees from being treated lessfavourably than similar permanent employees, and limit the use of successivefixed-term contracts. Fixed-term employees will have the right to be treated inthe same way as permanent staff on comparable contracts in areas such as pay,pensions and other benefits, unless the employer can justify it otherwise. The regulations will cover those working under a contract of employment fora specified term or those working on a contract that terminates automaticallyon completion of the project or at a particular event. Battle lines This will mean where a comparable permanent employee receives, or isentitled to, pay or another benefit, a fixed-term employee should be entitledto something similar, bearing in mind the length of contract and the basis onwhich that pay or benefit is offered. Fixed-termers will also have the right tobe informed by their employer of any available vacancies. The other area of concern is the European Parliament and European Council’sdraft directive on working conditions for temporary and agency workers. Battlelines are still being drawn up over this, with employers’ bodies and some inGovernment expressing deep concerns about the effect this directive could haveon the UK. It would mean employers and agencies having to ensure temporary workers –employed by an organisation for six weeks or longer – have the sameremuneration rights in areas such as pay, pensions, paid holidays and healthinsurance as permanent workers doing comparable jobs. The directive is designed to protect low-paid agency staff. But contractorsin the IT and technology sectors claim, with some justification, that they area completely different breed from, say, contract cleaning or catering staff. IT contractors are normally highly-skilled workers who have gone intocontract work because it is their preferred mode of employment. They relish itsflexibility and prefer cash upfront to a pension, paid holiday or any otherbenefit on the table, argues Young. “Rates of pay will be higher than for permanent staff,” he admits,an issue that, some contractors explain, can cause resentment among permanentstaff. But contractors, in return, are not covered by the rest of a company’sterms and conditions and have less job security. “You are employing people to do things that are specific and need to bedone, but are not necessarily seen as core to the business. When we are lookingat a core activity, we tend to look at the permanent option first. Contractworkers are useful to the business because it means you can exercise a degreeof flexibility. You have a high degree of flexibility because you havecontinuity through defined pay and time, but you do not want those skills on apermanent basis. You might, for instance, want to outsource that activity inthe future,” he adds. One of the main challenges for an organisation that uses contractors on aregular basis is dealing with the skills gap that can develop when anyone hasbeen working with permanent staff for a period of time has to be let go.”At a human level, when you have people around the office, they do get tobe valued as people. They understand the business and they are very importantto us. By its nature, the way the law and the rules drive us, you cannot employthose people beyond a certain time. After a year, you are starting to hit allsorts of requirements. So people say we are going to be losing those skills andknowledge after a year. “It is hard, but after that period, we tend to make the decision tomake the change. As a result, HR will often get accused of harming thebusiness, but in fact what we doing is protecting the business, looking out forit,” he explains. When the fixed-term regulations come into force, the most obvious likelychange is that employers will increasingly look to co-ordinate their contractrequirements through agencies rather than directly with individual contractors,Young predicts. “Individuals will not have so many opportunities to jointhe company directly. Rather, we will be working with suppliers exclusively,not individuals,” he forecasts. Relationship shift The main reason for this is that, if other benefits are going to have to beoffered, there will be more pressure to drive down rates. Pay will be morelikely to be set to take into account any other benefits that are on offer atthat organisation. It saves time, hassle and paperwork to negotiate rates through an agencyrather than individually with each contractor, so the primary relationship willshift towards the supplier. “People like us are going to take a much more cautious line about whatwe do,” Young says. “At end of the day, we are employing contractorsfor cost reasons and flexibility reasons,” he adds. Contractors generallywould prefer a higher rate to pension provision – they will normally have theirown pensions anyway and will not want to build up a stack of differentpensions, he suggests. The same goes for other ‘fringe’ benefits such as sickpay or holiday pay. The draft directive on agency and temporary workers, if it becomes law inits current form, will also be more of a burden than a boon, he expects. Employers will have to assess much more closely the skills they havein-house, what they need and what is available to them. Organisations may lookmore closely at simply outsourcing operations or even boosting their in-housetechnical operations. Although agencies have a key role to play in keeping rates low, conversely,if agencies become more prominent and, for instance, a standard rate is introduced,the flexibility that is a key selling point of contract staff could disappear.”With a standard rate, it would be harder to bargain,” says Young. Contractors, too, are likely to find less flexibility and opportunity in thenew arrangements. “There won’t be the opportunity for them to jump aroundso much. They will have to get into employment-type relations with theco-ordinating agencies, which may not suit them. And I do not see that thiswill encourage more permanent employment, because that is not why contractorsget into it,” he says. In the longer term the worry is that if contracting as a profession becomesless attractive and lucrative, fewer bright graduates will be attracted to it.This will mean a smaller pool of talent to draw on and employers may be forcedto take more activities in-house. What is clear, however, is the status quo clearly is set to give way.”It is going to change, of that I am certain,” says Young. Theprimary driver of the amount of contract work undertaken will remain,inevitably, the market. But under the fixed-term regulations organisations willhave to look much more closely at how they protect their costs before makingthe decision to employ contract labour. Organisations such as Avaya, which are committed to working within therules, recognise the need to have legislation in place to protect low-paid andexploited contract and agency workers. But while well-meaning, suchheavy-handed legislation could well have the opposite effect to that intended,at least in the IT contractor market. By not taking account of the pressuresand constraints of the markets such as Avaya’s, the regulations could end upmaking a valuable and flexible labour market less flexible, more insecure anddistinctly less inviting. “Quite often, for an employer, the decision to take on a contractor isnot as difficult as the decision to take on a permanent member of staff simplybecause you can turn it on and off,” explains Young. “But if it becomes more problematic, what you might find is peoplesimply putting projects off or finding some internal way of doing them.” Under threatOn 1 Sep 2002 in Personnel Today Comments are closed. Previous Article Next Article Related posts:No related photos.