Considerations when applying for the A1 Certificate
Occasionally, TWAs and clients (user undertakings) across the EU and EEA attempt to circumvent the rules and regulations is by “selling” labour leasing as a contract for work and services. This is a practice in which both parties are complicit – the TWA established in one EU or EEA member state and the client (user undertaking) established in another. It takes two to play this game.
In a nutshell, the parties adopt this strategy when, for a number of reasons, labour leasing is not possible (for example, because it is not permissible or because the TWA is not licensed). However, quite often this scheme is imposed on the TWA by the client because it better serves the business interests of the latter.
Probably the best way for this topic to be understood is through exemplification.
1) Let´s imagine that a client, a large slaughterhouse in Denmark is in desperate need of deboners and meat trimmers. It managed to identify a temporary work agency (TWA) in Portugal that is able to recruit and provide these professionals which they are in desperate need of. However, the Portuguese TWA has had its license revoked. To overcome this obstacle, both parties decide to move ahead with labour leasing disguised a “service agreement” that it is only “real” on paper. In the service agreement it is stated that the client will pay, for example, 1€ per every 5kg of meat that is deboned and that the service provider works independently and is responsible for the service delivered. Obviously, this is not a genuine contract for work and services.
Before we examine why, let´s look at 2 more examples.
2) A construction general commercial contractor in Norway needs about 50 drywall professionals to perform work at a large shopping centre that is being built in Oslo. He has purchased all the materials needed and possesses all the tools and equipment needed to get the job done. However, in Norway, not enough manpower with the required skills is available and the few subcontractor companies specialized in this field are engaged in other projects. The organization has never worked with temporary staff or TWAs and does not feel comfortable with these types of arrangements. However, a Portuguese TWA has offered to provide them with the skilled drywallers they so desperately need. The Norwegian construction contractor and the Portuguese TWA decide on moving forward with labour leasing under the cover of a “subcontracting” agreement – which is really nothing more than a contract for the provision of service. In order to make the simulation appear as genuine as possible, the subcontracting agreement states that the cost of the service is 1,50€ per m2. However, in reality the general contractor will pay the TWA (disguised as a “subcontractor”) 35€ per hour. The number of m2 that will appear on the invoice will be the result of the conversion of the number of hours worked by the leased personnel into the corresponding number of m2 needed to achieve the amount due by the general contractor for the number of hours that were effectively worked.
3) A strawberry grower in southern Spain is in need of 200 pickers for the peak season. Unfortunately, the Spanish government has imposed restrictions of the number of migrant seasonal workers from Morocco allowed to enter Spain. The country turns to Portugal and reaches an agreement with a licensed TWA that will allow it to address its manpower needs. However, the strawberry grower client does not to pay the TWA according to the number of hours worked by the leased workers, but rather according to the average number of kgs picked per worker. The proposal is for the Portuguese TWA to be paid 0,80€ per kilo of strawberries picked. From the strawberry grower´s perspective this payment arrangement is unquestionably advantageous in economic terms since what they pay for is the leased worker´s effective output, not for the input in in terms of the number of hours spent working by the leased workers. However, if the TWA from Portugal were to only to supply workers and nothing else, such an arrangement, as it is presented, would constitute a contract for service and work, certainly not labour leasing.
The following list of major criteria may greatly assist in differentiating between a contract for the supply of temporary workers and a contract for work and services:
- Labour Leasing: Employees are made available to a third party for the purpose of (“unspecified”) work performance
- Contract for work and services | Service contract: Owed is concrete performance success and specifically agreed services
- Labour Leasing: Number of hours worked
- Contract for work and services | Service contract: Anything BUT the number of hours worked
- Labour Leasing: NO Instruction – provided exclusively by the User or Client
- Contract for work and services | Service contract: NO Instruction – provided exclusively by the User or Client
- Labour Leasing: NO supervision – provided exclusively by the User or Client
- Contract for work and services | Service contract: NO supervision by the client – provided exclusively by the supplier
- Labour Leasing: Remuneration independent of success dependent only on the time spent working
- Contract for work and services | Service contract: Remuneration entirely or largely dependent on occurrence of success
- Labour Leasing: Client or user may play a part in the selection process
- Contract for work and services | Service contract: Client has NO say in the selection of workers
- Labour Leasing: ONLY the user or client
- Contract for work and services | Service contract: ONLY the service provider
- Labour Leasing: ONLY the user or client
- Contract for work and services | Service contract: ONLY the service provider
- Labour Leasing: ONLY the user or client
- Contract for work and services | Service contract: ONLY the service provider
- Labour Leasing: ONLY the user or client
- Contract for work and services | Service contract: ONLY the service provider
- Labour Leasing: User or client needs are decisive and take precedence
- Contract for work and services | Service contract: ONLY the service provider
- Labour Leasing: No, never.
- Contract for work and services | Service contract: Yes, always. Provided by the service provider
As we have sought to demonstrate labour leasing and the provision of services are very distinct realities – with regard to their nature, defining characteristics, as well as the way they are implemented, organized, operate and, importantly, their very finalities.
The differences between the two arrangements are easy for anyone to distinguish, even more so for a minimally experienced labour inspector. If a provision of services or subcontracting agreement is adopted for activities where it is peculiar or not commonplace it immediately arises the suspicion of labour inspection authorities. Manpower providers and their clients should be aware that in situations that arouse suspicion the mindset of inspectors will be of the type “guilty until proven innocent” and not the other way around. This is understandable. If given situation not the norm, it naturally gives rise to questions and concerns and is reason for a closer examination.
Attempts to disguise labour leasing as provision for services and work are not looked upon favourably by labour inspectors and will generally not escape tight scrutiny.
Implications
The implications for companies that choose to go down this road can be devastating – ranging from fines, to suspension of activities also to becoming entangled in criminal investigation proceeding.
It is our belief that TWAs and their clients that, for a number of reasons, attempt to mask labour leasing as a provision of service and work are not fully aware of just how difficult it is to achieve and that, in all likelihood, the motives and benefits of engaging in this practice do not justify the significant risks.
In theory, if one doesn´t seriously reflect on the matter, it may appear that “selling” simulated service provision as labour leasing is simple and straightforward (which makes it so tempting to go down this route). However, this is far from being the case ever, which is will it is ill-advised to believe this is an effective solution when it is not possible or not desired to practice labour leasing.
Marcelo Araújo
Director of Operations
