IT Staff Leasing: The Basics
Different recruitment models are used in the IT sector depending on the skills required. In addition to employment agencies, companies can also find specialists at IT companies and through informal networks.
(Article from Swiss IT Magazine, September 2022)
In response to the ongoing shortage of skilled workers in IT professions, companies are increasingly turning to external specialists. With its business model of finding skilled workers, the temporary staffing industry alone makes a significant contribution to the gross domestic product (GDP). In its annual statistics, Swissstaffing, the industry association of Swiss recruitment agencies, adds its own estimates to surveys conducted by the State Secretariat for Economic Affairs (Seco) and the insurer Suva. According to this, the industry has grown disproportionately to GDP for most of the past ten years (except for the 2020 pandemic). In 2021, recruitment agencies reported turnover of 10.3 billion Swiss francs, with year-on-year growth of 14.1 percent. GDP, meanwhile, increased by 5.2 percent. According to the association, 428,613 individuals worked temporarily in Switzerland in 2020. That is 19 percent more than in the previous year and translates to 101,474 full-time employees. However, finding IT professionals through temporary recruiters is only one of many ways used by companies. That's because the situation is different in IT than it is in the hospitality or construction industries, for example. Typically, highly qualified IT employees or those who specialize in specific technologies are not primarily found via temporary agencies. For this reason, cross-industry figures from Swissstaffing do not allow direct comparisons with the situation in IT occupations. However, they do show a fundamental trend: flexible working models are more popular than ever and account for an increasingly large share of the overall labor market - for a wide variety of reasons. Companies can use them to cover temporary assignments and have access to qualified personnel without having to employ them full-time and integrate them completely into the company. At the same time, temporary workers make an important contribution to the competitiveness of companies and entire industries. In return, qualified IT staff can live out their desire for more private and professional freedom. The models that come into play here are many and varied, and some are interpreted in different ways. However, the Federal Law on Employment Agencies and the Ordinance on Personnel Leasing (AVG and AVV) define these activities precisely: Personnel leasing means that an employer transfers the services of an employee to a leasing company by ceding part of his authority to give instructions to such a company. The AVG distinguishes between three forms: Temporary work, loaned work, and the occasional ceding of labor to third parties. In order to protect the employee, the AVG stipulates that a placement permit is required for anyone who regularly brokers work in exchange for remuneration. Anyone who hires employees and makes them available on a commercial basis requires a labor leasing permit. The occasional supply of labor, however, for example if a company cannot utilize its employees to full capacity due to a lack of orders, is not subject to approval.
Temporary employment means that the temporary employment agency, as the formal employer, usually enters into a general framework agreement with the employee in order to make him or her available for potential assignments at the company where he or she will be working. It is then up to the temporary employee to decide whether or not to accept an assignment. Only if the individual decides to do so, he or she will enter into a concrete, individual contract with the temporary employment agency, usually for a limited period of time. Thus, the employing company does not enter into a direct employment contract. It enters into an employment contract with the intermediary, which can be terminated at short notice. Temporary employment agencies often have an extensive database at their disposal and can place employees at short notice, depending on the skills required. However, for some assignments, this classic temporary business is often not suitable. This is because professionals with very specific skills tend to be less dependent on an employment agency than personnel for recurring tasks for which fewer specific qualifications are required. The temporary mode is therefore typically used for helpdesk staff or system engineers.
In temporary work, sometimes referred to as body leasing or body shopping, the employee is employed in order to lend him or her out to companies. The employer may or may not be an intermediary company. As a rule, however, employers tend to be IT companies that can also use their employees on their own premises. Accordingly, the employment contract is not limited to individual assignments as is the case with temporary employment. In this model, the IT service provider can enter into a contract with the customer for the desired period of time, in which the scope of services is described, and charge for the work as a consulting service according to hourly or daily rates. Here we find a special feature that applies to certain industries such as IT: While in general, there is an obligation to invoice the working hours for personnel leasing according to the directives of Seco, in the IT industry invoicing of the effective working time without a cost ceiling is common. The difference to the recruitment agency is therefore that the IT company does not require a personnel leasing license. The employee acts on behalf of the IT service provider and is only integrated into the customer's structures where it is technically necessary. This is usually the case when it is clear from the outset how long someone will be needed for the task. Most of the time, the customer itself does not have the necessary resources to do the job.
Recruiters vs. IT companies
As in the case of temporary work, in the case of body leasing or body shopping via an IT company, the service is not linked to a single person, but to their qualifications. However, unlike a temporary employment agency, it bears the responsibility for the fulfillment of the contract. The latter, on the other hand, is only responsible for selecting and instructing the employee with due care. The right of instruction and control, and thus the responsibility for the risk of poor performance, lies with the recipient of the service, i.e., the company receiving the assignment. Beyond these regulatory differences, however, there are other criteria that distinguish the use of external staff employed by an IT company from that of personnel leasing. The recruitment of specialists from IT companies is characterized by the fact that, wherever possible, people who are already known to the client are placed. The desire for known individuals who not only have the desired skills, but who are also already familiar with the company and have proven themselves in working with its teams, is met wherever possible. Furthermore, IT companies can draw on a larger pool of additional skills and experience. The loaned employees have direct access to their colleagues in the employing company and thus, if necessary, to quick access to skills and experience from the existing service relationship with the IT company. On the other hand, in this situation there are also certain legal challenges in terms of personnel. If an assignment company fully integrates the specialist into the organization, for example with a badge and nameplate on the office door, then the specialist can be considered an employee of the end customer in case of a dispute. In the case of temporary employment, this applies not only to the transfer of the right to issue instructions but also to the duty of care that the right to issue instructions entails. Protection against accidents, fair treatment or a well-equipped workplace must be guaranteed. However, duties of care, such as continued payment of wages or contributions to the employee pension plan, are not associated with this. These are the sole responsibility of the hiring company - or the IT company that provides the specialist as a consulting service.
Contracting, ad-interim contractors, payrolling
The market for executives such as a Chief Information Officer or Chief Security Officer but also for individuals with very specific know-how functions similarly in terms of content, but partly through other channels. For example, there are a large number of independent contractors who sell their services as individuals. This contracting is common, for example, for software developers with certain skills, such as the parameterization of industry software in order to be able to continue operating it. Such experts can be found via informal networks such as LinkedIn or via ad-interim agencies, rather than via traditional recruiters. However, to avoid the danger of unnoticed bogus self-employment and to bear the consequences for this as an assignment company, many companies now only work with self-employed persons who have at least their own limited company (GmbH). By doing so, they can be sure that the employee pays their own social security contributions. There are also companies that specialize in payrolling. Like leasing or IT companies, these take care of the payroll, including social security and retirement benefits, but are solely specialized in this area. In this case, the customer benefits from economies of scale for a job that is not his core competence. One disadvantage of hiring independent specialists can be that they often do not receive enough ongoing training. Specialists who are completely focused on one topic can suddenly be left out in the cold if their skills are no longer sought after in a particular industry.
Specialists who work for IT companies are usually very well trained and sustainably integrated into the corporate structure. This is because the employer wants to retain its employees and is committed to their constant training. As suppliers, these companies are responsible for the dutiful fulfillment of orders. Recruiters must ensure that the employee is well selected, but cede the authority to issue instructions to the corporate client and thus do not guarantee success (Seco, Weisungen 2003, p. 66 f.). On the other hand, they have a large selection of quickly available skill resources with a wide range of specializations. Whether staff leasing or contracting out to an IT company (regardless of size) is the appropriate choice depends on the situation and the different needs of the customer.