Despite ideological and legal differences between the social partners (employers’ and trade unions) that emerged in the course of its drafting, the Staff Leasing Act (“Act“) was finally adopted on 6 December 2019 and will become applicable on 1 March 2020 (except for the provisions on licensing of the staff leasing agencies, which will become applicable on 1 January 2020).
Prior to the adoption of the Act, there was no regulation of staff leasing in Serbia. Nevertheless, many companies use this hiring model. HR agencies currently mainly do not employ leased employees but engage them on the basis of agreement on temporary and occasional work, to which employment protections under the Labour Act do not extend.
The Act is a step towards aligning Serbian labour regulations with the Directive 2008/104/EC of the European Parliament and the Council of the EU on temporary agency work and International Labour Organization’s (ILO) Private Employment Agency Convention no. 181.
Overview of key provisions
Staff leasing licence
Staff leasing will as of 1 March 2020 require a special licence issued by the Ministry of Labour.
Forms of engaging staff by staff leasing agencies
Staff leasing agencies will be no longer able to hire people on the basis of temporary and occasional work but will have to employ the people to be leased. The staff can be employed by the staff leasing agency for indefinite term or for a fixed term that corresponds to the lease period under the agreement with the staff leasing beneficiary. The beneficiary of staff leasing with more than 50 employees cannot have more than 10% of its total workforce from among the agency’s staff employed by the agency on a fixed-term basis. If employing up to 50 employees, the beneficiary is entitled to hire one such additional agency employee on top of this 10% limit. In contrast, an employer can have unlimited amount of workforce on staff leasing basis if the leased employees are employed with the staff leasing agency on indefinite-term basis. Staff employed by the agency on a fixed-term basis can be leased to the beneficiary only for the positions at the beneficiary which qualify for fixed-term employment (e.g. when there is a temporary increase of work, when there is a need to replace an employee on temporary leave, etc). If the leased employee stays with the beneficiary of the lease more than five days longer than the period of his employment with the agency, his status will convert to the status of the beneficiary’s employee on indefinite term.
Indefinite-term employees of the staff leasing agency are entitled to a remuneration at the level of statutory minimum wage during the idle period between two beneficiaries.
Companies cannot lease staff to replace employees who are on strike (unless this is necessary in order to keep the minimum of vital processes) or were made redundant in the past three months, or for the jobs which carry increased health & safety risk, etc.
Guaranteed rights of leased staff
Leased employees are entitled to the same work conditions as the beneficiary’s “comparative employees”, as far as working hours, nightwork, overtime, vacations, leaves, base salary, salary in lieu and guaranteed reimbursement of expenses, occupational health & safety, special protection (pregnancy, minors, etc.) and protection from discrimination. The beneficiary of leasing is liable for the salaries of the leased staff jointly and severally with the staff leasing agency which is the formal employer. ‘Comparative employee’ is defined as the employee of the staff leasing beneficiary who performs the same work as the leased employee, whereas the ‘sameness’ is determined based on the required type and level of professional qualifications, special knowledge and abilities or competences, complexity of work, responsibility, work experience and other special work conditions. If there is no comparative employee at the beneficiary, the leased employee is entitled to a base salary which is at least equal to the base salary of the beneficiary’s employee with the same degree of professional qualification (e.g. VII level – Bachelor’s degree). This requirement is controversial for several reasons. Firstly, the agency employee’s base salary is only linked to the degree of professional qualification and not to the type of professional qualification (e.g. law school, computer sciences, mechanical engineering, etc). Secondly, this means that the leased employee is entitled to the same base salary as the beneficiary’s employee holding the same degree even though the leased employee is performing a job which does not require his degree. This approach is not rational as it requires payment for a degree rather than for the value of the actual work performed.
Impact on the Serbian labour market
The main reason for popularity of staff leasing in practice is that it obviates the need for recruitment and simplifies HR and accounting functions in a company. It also allows companies greater flexibility and easier management of termination procedures.
By regulating a widely existing practice, the Act brings certainty and improves the rights and protection of leased employees. At the same time, it imposes additional obligations on the staff leasing agencies and staff leasing beneficiaries, which will likely increase the overall cost of staff leasing. It remains to be seen whether the popularity of staff leasing will remain the same or drop in favour of alternative arrangements such as hiring on the basis of supplementary work or temporary and occasional work or engaging staff through youth cooperatives.