This content is from: Local Insights

Tightening up Personnel leasing in the Slovak Republic

Personnel leasing, which allows for the hire of employees from another employer or temporary employment agency, has become established in Slovakia.

A temporary employment agency enters into an employment contract with an employee, and with an employer seeking temporary workers; it then sends the requested type of worker to the temporary employer. The agency handles payroll and any legal issues concerning the temporary employee (dismissal, for example). The temporary employers save money on payroll administration, severance pay when production is down, and they are also saved the hassle of the hiring process. Of course, the temporary employer must guarantee non-discrimination, and the working conditions (including wages) must be at least as good as with a comparable permanent employee working for the temporary employer. Such is personnel leasing.

Daniel FutejRadka Sláviková-Gerzová Zuzana Steklácová
However, legislation governing personnel leasing has recently undergone some changes, mainly in an effort to prevent the illegal provision of personnel-leasing services. Effective from May 1 2013, the amendment to the Act on employment services has put limits on the chaining of contracts between the temporary employer and the agency. Under the new legislation, the maximum number of times an agency can extend a contract or conclude a new contract with a specific worker for the same temporary employer is five times over the course of two years. If that employee stays with the same company more than two years, they will automatically become a regular employee of that temporary employer (with a contract for an indefinite period), and his employment contract with the agency will expire. The temporary employer can avoid this situation if there are breaks of at least six months between the periods the agency sends the same worker on assignment. Usually, this is solved by entering into temporary employment contracts for longer terms. That way, the parties can agree on very flexible forms of terminating the temporary employee, which in a standard employment contract would not be possible. The parties can also agree that the temporary assignment will only last until the completion of some order at the company, so the temporary employer can legally avoid the need to conclude several amendments to the temporary employment contract.

The definition of temporary assignment has been broadened to include the activities of the agency's own employees, if the agency uses other than standard temporary employment contracts. Agencies have commonly entered into other types of contracts with temporary employers, such as an innominate contract on provision of services (as per the Commercial Code), bypassing the use of an actual employment contract. That type of contract provides that the agency ensures a certain outcome, not that it sends out employees. Until recently, employers took advantage of this to optimise their costs, as under that type of contract the temporary employer did not have to guarantee the agency's workers wage and working conditions equal to those of their own permanent employees. Under the new legislation, any other form of contract will automatically be deemed a temporary employment contract, even if the contract was entered into prior to the effective date of the amendment to the Act on employment services. Regardless of the legal form of the contract between the temporary employer and the agency, the temporary employer will have to guarantee the agency's employees wage and working conditions equal to those of its permanent employees.

Prior to January 1 2013, temporary employment agencies also sent employees working under agreements outside an employment contract (contractors) to temporary employers on the basis of temporary employment contracts and other types of contracts. It is no longer possible for contractors to be sent out as temporary workers. As of January 1 2013, the amendment to the Labour Code completely eliminated the possibility of contractors working as temporary employees for temporary employers, whether assigned by another employer or by an agency.

As of May 1 2013, the conditions for operating a temporary employment agency have also been tightened up. Under the new legislation, applicants for a temporary employment agency licence must submit proof of their financial reliability, such as confirmation they have no outstanding debts to the tax office, customs office, health insurance company and social security agency. They must also submit their financial statements for the previous calendar year showing they have equity of at least €30,000/$40,380 (legal person) or a bank guarantee of at least €15,000 (natural person). If they do not begin their activity within one year, or if they employ persons illegally, the Office of Labour, Social Affairs and Family will automatically cancel their licence. There is no moderate form of penalty available and automatic cancellation is the only option.

Daniel Futej, Radka Sláviková-Gerzová and Zuzana Steklácová

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