In some cases, companies choose to hire labor instead of hiring internal staff, and it is becoming increasingly common for companies to provide labor for rental. The changes to the Employment Protection Act this autumn also had consequences for the Act on the Hiring of Employees. Below is an overview of this change.
The Hiring Act is an implementation of the EU's staffing directive. An employee is subject to the Hiring Act if they are employed by a staffing company for the purpose of being hired out to another business (hereinafter the 'client company') for work under the client company's control and management. Whether an employee is subject to the law is determined on a case-by-case basis. Factors of relevance include who exercises work management and monitors work results, whether there is a pre-determined and defined task, and who provides work equipment, tools, and clothing.
An employment contract is formally entered into when two parties agree to an employment. This contract is of an individual nature as only the parties directly involved can decide on its entry. A general rule is that an employment contract is valid until further notice, unless otherwise agreed upon.
According to section 12 a, paragraph 1 of the Rental Act, the client company is obligated to offer a permanent employment to a hired employee when the employee has been placed with the client company on the same operating unit for a total of more than 24 months during a framework period of 36 months. The placement can have been divided into different periods during the framework period. However, only the time in the staffing company from 1 October 2022 counts, not the time before that.
The client company is obligated to make the offer of permanent employment no later than one month after the employee has been hired for a total of more than 24 months, and the employee is entitled to a reasonable period to consider the offer. By making the offer, the client company has fulfilled its obligation under the law. The offer must be fair.
If the employee declines the offer, the existing employment with the staffing company remains. If the employee accepts the offer, an employment agreement is considered to have been entered into between the employee and the client company. The employee's employment with the staffing company ceases when the employment with the client company begins. No specific measures need to be taken for this to occur.
The client company has the option to instead pay compensation to the employee equivalent to two current monthly salaries, instead of making the offer of employment. This compensation must be provided no later than one month after the employee qualifies to receive an offer of employment, that is, within the same time frame as the offer of employment would have been made.
If the client company neither offers employment nor compensation, it is in violation of its obligations. The reason for the client company's stance is irrelevant in this context.
Deviation from the provisions on the obligation to offer employment and/or financial compensation can be made through a collective agreement concluded by a central employee organization.
In accordance with the law on public employment, state employment must be filled in accordance with the rules on merit and skills. A government agency is also required by the constitution to observe objectivity and impartiality. Therefore, the ability of government agencies to offer hired employees permanent employment is limited.
When it becomes relevant to offer hired employees employment, the agency must comply with sections 6 and 7 of the Employment Ordinance. The decision can also be appealed in accordance with section 21 of the Employment Ordinance. If, according to these rules, it is not possible to offer employment, the agency is obligated to offer compensation instead. Therefore, a government agency that does not wish to pay any compensation in the event that the requirements for employment are not met should carefully observe the hiring period and terminate the hiring before any obligation arises.
A client company that fails to fulfill its obligations by not offering employment or compensation when the hiring has lasted for a total of more than 24 months during a framework period of 36 months may be liable for damages to the hired employee. The liability for damages applies to both the loss incurred and the violation that has taken place.
