Leasing of employees – a situation in which employment agencies hire employees and act as their formal employers and then lease them to perform actual work for their client companies – has become a frequent phenomenon in Serbia the past few years.
For employers, leasing employees instead of employing them seems like a win-win situation, providing them with the workforce they need without the hassle of dealing with administrative responsibilities associated with workforce management. Usually, a company’s obligation under this arrangement is to pay a monthly invoice to the employment agency and the agency will do the rest - register the employee with the competent social security authority, pay the salaries and contributions, and deal with other work-related issues prescribed by law.
Employee leasing was not invented in Serbia – it has been around for a couple of decades now. However, the legal framework regulating this practice does not exist in Serbia yet, leaving employees vulnerable to various types of abuse. Employers in Serbia turn to leasing agencies not only for administrative and financial reasons but primarily to avoid the strict legal requirements imposed by the Serbian Labor Act – especially those relating to temporary employment and dismissal.
The current Serbian Labor Act does not regulate the hiring of employees by employment agencies for the purpose of leasing them to the agencies’ clients. However, employment agencies are registered and operate in accordance with Serbian Employment and Unemployment Insurance Act, with the precondition of acquiring a permit from the Serbian Ministry of Labor. Services which the agencies are allowed to provide in accordance with the Employment and Unemployment Insurance Act are: providing information on possibilities and conditions of employment; searching jobs in the country and abroad; professional orientation and advising on career planning; and enforcing some of the measures of active employment policies based on a contract with National Employment Service. None of these services include hiring and leasing employees to the agency’s client companies to perform those companies’ actual work. Nonetheless, there are more than 90 employment agencies in Serbia which provide this service without proper legal regulation.
Directive 2008/104/EC of the European Parliament and the Council of the EU on temporary agency work prescribes the framework of working conditions for the employees hired via employment agencies in the EU, granting such employees basic protections and warranties in order to cater both to the employers and the employees. Although the Directive is not directly applicable in EU member states, these states must incorporate the Directive’s basic principles into their own local legislation – a requirement which also applies to Serbia on its EU integration path. In addition, the International Labour Organization’s (ILO) Private Employment Agency Convention no. 181 regulates this issue by granting guarantees to employees engaged via employment agencies which include, among other things, the freedom of association and collective bargaining, minimum wages, limitations for working hours, paternal protection, and so on.
In October 2016, the Serbian Ministry of Labor announced the draft of a law which would regulate the labor provided via employment agencies and which would harmonize Serbian legislation with the EU Directive. This draft law has yet to be presented to the public, and until that happens employees hired via employment agencies face discrimination and legal uncertainty, with no right to sick leave or vacation days, the potential for overwork, and, most importantly, no ability to seek damages or compensation from the company they actually work for, because they are formally employed with the agency. The practice of Serbian courts in cases of law suits filed by leased employees against both agencies and their actual employers is not unified; in some cases, the courts recognize the client company as the actual employer, while in other cases the courts deny the leased employee the legal protection against the actual employer and recognize only the agency as the employer.
It is imperative to pass a law regulating the hiring and leasing of employees by employment agencies in accordance with the EU Directive and ILO’s Convention as soon as possible. It is less relevant whether a new law is passed or the existing Labor Act or Employment and Unemployment Insurance Act is amended, as long as protection is provided for the employees and responsibilities are prescribed for the agencies and the actual employers in a way that is suitable for all parties involved.
By Marija Oreski Tomasevic, Partner, and Dunja Tasic, Senior Associate, Samardzic, Oreski, & Grbovic
This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.