ManpowerGroup 2013 Annual Report Download - page 49

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Management’s Discussion & Analysis ManpowerGroup 2013 Annual Report
IMPACT OF ECONOMIC CONDITIONS
One of the principal attractions of using workforce solutions and service providers is to maintain a flexible supply of labor to
meet changing economic conditions. Therefore, the industry has been and remains sensitive to economic cycles. To help
minimize the effects of these economic cycles, we offer clients a continuum of services to meet their needs throughout the
business cycle. We believe that the breadth of our operations and the diversity of our service mix cushion us against the
impact of an adverse economic cycle in any single country or industry. However, adverse economic conditions in any of our
largest markets, or in several markets simultaneously, would have a material impact on our consolidated financial results.
LEGAL REGULATIONS
The workforce solutions and services industry is closely regulated in all of the major markets in which we operate except
the United States and Canada. Many countries and territories impose licensing or registration requirements and substantive
restrictions on employment services, either on the provider of recruitment services or the ultimate client company, or
minimum benefits to be paid to the temporary employee either during or following the temporary assignment. Regulations
also may restrict the length of assignments, the type of work permitted or the occasions on which contingent workers may
be used. Changes in applicable laws or regulations have occurred in the past and are expected in the future to affect the
extent to which workforce solutions and services firms may operate. These changes could impose additional costs, taxes,
record keeping or reporting requirements; restrict the tasks to which contingent workers may be assigned; limit the duration
of or otherwise impose restrictions on the nature of the relationship (with us or the client); or otherwise adversely affect the
industry. All of our other service lines are currently not regulated.
In many markets, the existence or absence of collective bargaining agreements with labor organizations has a significant
impact on our operations and the ability of clients to utilize our services. In some markets, labor agreements are structured
on a national or industry-wide (rather than a company-by-company) basis. Changes in these collective bargaining
agreements have occurred in the past, are expected to occur in the future, and may have a material impact on the
operations of workforce solutions and services firms, including us.
In Germany, the Confederation of German Trade Unions (representing eight German trade unions and over six million
people) and the Employer’s Association of the Temporary Staffing Industry (representing two major temporary worker
employers’ associations) entered into a new Collective Labor Agreement effective November 2013. The agreement required
higher wages to temporary employees and higher cost for vacation, sick pay and temporary staff time accounts, and took
effect between November 2013 and January 2014. This agreement is similar to nine other Collective Labor Agreements
which became effective between November 2012 and July 2013. These changes will all have an unfavorable impact on our
gross profit margin in Germany, as we pass on many of these additional costs to the client without a mark-up. However, we
currently do not expect a significant impact on our consolidated or Northern Europe financial results.
The Agency Workers Directive (“AWD”) impacts all EU member states and was passed to ensure “equal treatment” for
agency (temporary) workers. It also requires all member states to review and address unnecessary prohibitions and
restrictions on the use of agency workers. Equal treatment had been in place by law in many countries; therefore, we have
not seen any significant changes. We have seen a decline in gross profit margin in some countries, as any cost increases
could not always be passed on with a normal mark-up, but no other significant impact on our business from these changes.
In June 2013, the employer mandate provisions of the new U.S. healthcare legislation, Patient Protection and Affordable
Care Act (PPACA), were delayed until 2015 from the original effective date of 2014. The employer mandate provisions of
PPACA are expected to have the greatest financial impact on us and our clients with U.S.-based employees. We expect this
legislation will increase the employment costs of our permanent employees and our associates, but we continue to assess
the potential impact. Our intention is to pass on to our U.S. clients any cost increases related to our associates, however
there is no assurance that we will be fully successful.