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Labor leasing: economic theory, EU and Russia experience

Smirnykh, Larisa (2005): Labor leasing: economic theory, EU and Russia experience.

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Abstract

With the need in flexible business management getting acute, contingent employment comes into focus. While being widely spread all over the globe it has not been recognized in Russia for quite a long time. Today, analysts of the Russian labor market predict that this employment scheme awaits grand future. Indicative of a high demand for contingent labor in Russia is its dynamic year-on-year growth. At the same time, the use and development of contingent employment (or labor leasing) is hampered by a number of factors. Still unclear are the mechanisms of the contingent employment's parties' interaction, their rights and obligations, etc. There are also problems with regulation of employment agencies' activities, and how these can be better capitalized on in pursuing the recruitment policy. As it stands now, the Russian labor code does not provide for the use of contingent labor, nor does it ban such a practice. All this significantly reduces the efficiency of labor leasing in Russia. In 2004, at the parliamentary hearings on the prospects of ratification of ILO Convention No. 181 and regulatory matters pertaining to labor leasing the need in the development of the Federal Law "Protection of the Rights of Employees Hired by Private Employment Agencies for Leasing Labor to Third Parties" was spelled out. This said, it should be emphasized that the development of the labor leasing legislation is impossible without an in-depth and comprehensive economic analysis of this phenomenon. Presently, nothing is being done to this end at the Russian market whilst the information on labor leasing is mostly fragmentary and noncomparable. Besides, prerequisites to start working in this direction are yet to be defined. There are still gaps in the understanding of theoretical, methodological, economical, statistical and econometric aspects of labor leasing. The need to bridge those gaps along with the laying of theoretical and methodological basis for such an analysis and review of the local experience and international best practices in contingent employment have made the subject of this paper. Here, we will discuss reasons for and milestones in the development of contingent employment and what actually stands for this definition. Demand for the recruitment agencies' services will be analyzed from the economic theory's perspective. Considering the relative novelty of this phenomenon for Russia, much attention will be given to the review, critical analysis and adaptation of the European best practices on the subject matter. This problem attracts intense interest in the EU countries which have already accumulated significant experience in the regulation of the employment agencies' activities. On this basis, we will define the scale and major constituent elements of the labor leasing institutional regulation in the EU. Significant attention is attached to the evaluation of employment agencies' activities in the Russian market and the key trends taking shape in this field. Both open publications and results of the author's own research have been used for these purposes. Proceeding from systematization and adaptation of the international best practices and based on press publications and results of the proprietary pilot study, recommendations to regulate labor leasing matters have been developed and presented in this paper. As this study is the first in a serious of reports dedicated to the issues of contingent employment it covers a relatively large range of problems pertaining to this phenomenon. At the same time, theoretical and methodological issues require a more in-depth and detailed analysis which will be performed in the course of our further research.

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