January 15, 2013 / 1:37 PM / 5 years ago

French labour law overhaul a boon to Pagegroup

LONDON (Reuters) - British staffing firm Pagegroup MPI.L said a move by France to relax its stringent labour laws could help increase permanent recruitment in one of its biggest markets.

The company is a market leader in France, where President Francois Hollande is battling to restore the country's dwindling competitiveness. <ID:L5E8NA6W7>

France makes up 15 percent of the professional recruiter's profits and is down 12 percent in the fourth quarter on the same period last year.

The overhaul should help firms adjust to downturns in demand and limit costs in the event of layoffs, while offering more job security to workers on short-term contracts. Rules which previously prohibited companies recruiting temporary and permanent staff from the same agency have also been relaxed.

Permanent staffing accounts for three quarters of Pagegroup's business, so a preference towards contractors or temporary hires at the expense of its permanent staff had hindered its performance there.

"When markets are uncertain and difficult as they are at the moment, people are very reluctant to hire permanently if they can avoid it," the company's chief executive, Steve Ingham, said on Tuesday.

"Hollande is talking about trying to ease the market by creating some increased flexibility, which I think is a sensible thing if you want to compete in the world economy," he said.

Pagegroup, which changed its name from Michael Page in October, expects to report a 24 percent drop in operating profit for 2012 to around 65 million pounds ($104.4 million), in line with analyst expectations.

Profit from its Europe, Middle East and Africa region, which accounts for approximately 40 percent of its business, fell 11 percent at constant exchange rates.

The group lowered its headcount by 3 percent in the quarter to 5,099 people in response to the difficult market conditions.

Ingham said that it had been a tough year, adding that he expects the first quarter of 2013 to be challenging.

Paul Jones, an analyst from Panmure Gordon, said that although this update does little to change current forecasts, it points to the possibility of further contraction across the sector in 2013.

"We remain sellers from a valuation point of view, albeit that Michael Page remains the best of a difficult sector," he said.

Ingham says he is relaxed about the group's increased reliance on temporary recruitment, where fees earned are based on a percentage of an hourly wage rather than annual salary.

Rival recruiter Hays has seen a sharp rise in its temporary recruitment business in Germany thanks to the country's liberal employment laws. <ID:L6E8L92DT>

Both in Asia, where fourth quarter gross profit surged 19 percent thanks to a strong performance in Japan and China, and in Latin America, the professional labour markets rely almost entirely on permanent recruitment.

Ingham says that this is partly cultural, but also that as economies in those regions mature, temporary placements will rise too, something that he is confident that his firm is well placed for.

"Would a qualified accountant want to be a temp in China? No, not yet but in 10-20 years it will and the market will level out," he said.

Reporting By Christine Murray; Editing by Lorraine Turner and Louise Heavens

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