Personnel costs : - a study of how Swedish companies are affected by the Employment Protection Act and temporary agencies over the years 2007- 2009

Temporary agencies are commonly used by Swedish companies today, and according to Coe, Johns and Ward (2009), this is because Sweden has a strict labor market regulation which makes companies afraid to employ workers on a permanent basis. By using temporary agencies, companies can come around the Employment Protection Act (EPA) which makes us question which parts of the EPA that companies consider as a problem and if the use of temporary agencies actually can reduce this problem for Swedish companies. Focus in this thesis is companies´ personnel costs, which means that the EPA and the use of temporary agencies are investigated with these costs in mind. Therefore, the purpose with this thesis is to investigate how the EPA affects Swedish companies’ personnel costs over the years 2007-2009, and examine if the use of temporary agencies can reduce these costs. A descriptive investigation is conducted in order to examine the purpose of this thesis. The study is accomplished through an Internet based questionnaire which is send to 68 randomly chosen companies all over Sweden, with 51-150 workers from no specific branch or geographical area. 32 companies participate in the study. From the descriptive investigation it is evident that the EPA has increased personnel costs for Swedish companies over the years 2007-2009. However, this happens indirectly through decreased flexibility making it difficult for companies to quickly adjust to changes in demand. Also, a majority of the companies are critical towards the EPA and show direct consequences’ of negative impacts experienced. Consequently, we suggest that the EPA is updated to fit the conditions of today´s labor market. Furthermore, temporary agencies reduce companies’ personnel costs by enabling them to hire workers and avoid costs as employment benefits and costs for absenteeism. However, the direct costs of temporary workers are higher than the direct cost for permanent workers. Therefore, we suggest that the use of temporary agencies should not be used instead of permanent employments but mainly in situations of escalating demand when greater flexibility is needed. Finally, the costs for permanent workers are reported in account category 7 “personnel costs, depreciation etcetera” and the costs for temporary workers are reported in account categories 5-6 “other external operating expenses” in the income statement. However, both these account categories are included in the same main category of costs. This means that the only difference in the income statement is due to the higher cost of temporary workers. Besides this, companies´ accounting is not affected.