Recent research by Ciett shows that countries that have adopted smart regulation of the employment and recruitment industry are also more competitive. They enjoy better functioning labour markets with job creation, higher participation and inclusion rates and lower levels of youth unemployment.

The latest data from the Ciett Smart Regulation Index shows a clear positive correlation between the World Economic Forum Competitiveness Index and those markets that score best in terms of smart regulation of the employment and recruitment sector. The balance that these markets achieve in delivering flexibility for employers and security for workers leads to higher levels of agency work penetration. This supports job creation and a greater range of employment forms and contracts.

The Smart Regulation Index was jointly developed by Ciett and the Boston Consulting Group back in 2011 as a benchmark to gauge the appropriateness of the regulation of the employment and recruitment sector in different countries around the world. Achieving a balance between flexibility and security is essential if the industry is to increase labour market efficiency and drive job creation and labour market participation.

Updated in 2015 to include 35 countries, the index assesses regulation by looking at four key dimensions within the regulatory framework: right to establishment – including ease of set-up and any limitations on services; right to provide services and contracts – with range and scope of operations; right to negotiation and social protection, such as meaningful social dialogue; and right to contribute to labour market policies including public private partnerships, access to training and commitment to fight illegal practices. So which are the markets that score most highly and what commonalities can be seen in their approach?

Strong performers fall primarily into two categories: Either they are markets with a high level of social dialogue such as the Netherlands and Scandinavian countries where employers and trade unions typically work together to set specific market legislation that can then be adjusted in line with labour market changes; or they are countries with Anglo Saxon, market-driven economies such as Canada, US, Australia and UK, which have lower levels of hard regulation, allowing for greater ease of hiring and firing and a better and faster matching of supply with demand in the labour market. Both of these models enable a good balance to be struck between the freedom for employment and recruitment agencies to provide services and for workers to be offered decent working conditions. This delivers flexibility and security for both companies and workers.

Mexico is the highest ranking Latin American market surveyed, scoring 68 on the index. Argentina, which has undergone a number of labour market reforms in recent years improved its ranking to 50, but still has areas to address. Countries around the world which have made significant labour market reforms over the past four years have also improved their ranking on the Smart Regulation Index. Italy, Greece, Spain and France for example made regulatory changes ranging from lifting restrictions on the employment and recruitment industry to giving greater freedom to agencies to find solutions for workers and clients, and this has resulted in their increased competitiveness.

By contrast, economies which are legislator driven, with relatively high levels of centrally-set regulation perform less well. Emerging market economies that have little or no specific legislation in place on the employment and recruitment industry, or are operating under outdated or rigid regulation, lie at the very bottom of the index. This is a missed opportunity for our industry, but also for the markets themselves. It limits their ability to create jobs and deliver inclusive labour markets that provide workers with decent and secure employment. It also damages social justice by limiting labour market access, and crucially it damages the competitiveness of their economy.

Ciett is calling for smart regulation on the employment and recruitment industry to be implemented in all countries around the world. This would mean upholding the principles included in the ILO Convention 181 and also in the EU Agency Work Directive which provides guidelines for adopting or updating smart regulation on our sector. Key to this should be the removal of any unjustified or disproportionate restrictions on the freedom to establish or provide services. We also urge countries to foster dialogue between the employment and recruitment industry and policymakers and trade unions to encourage the implementation of innovative forms of protection for workers in a changing world of work.

More efficient labour markets are an important factor in global competitiveness. As the world edges out of recession and looks to re-establish economic growth it is crucial that countries around the globe set in place labour market regulation that is fit for purpose and supports companies, workers and economies in achieving success.

About Denis Pennel

Managing Director of Ciett and Eurociett, Denis Pennel is a labour market expert with deep knowledge and years of experience relating to employment at global and EU levels. He recently published “Travailler pour soi”, a book about the new realities of work.

Follow Denis on Twitter @PennelDenis

About CIETT

As the International Confederation of Private Employment Services, Ciett is the authoritative voice representing the interests of agency work businesses. Founded in 1967, Ciett consists of 51 national federations of private employment agencies and eight of the largest staffing companies worldwide. Its main objectives are twofold: to help its members conduct their businesses in a legal and regulatory environment that is positive and supportive; to gain recognition for the positive contribution the industry brings to better functioning labour markets.

Follow Ciett on Twitter @ciett_waytowork