Possibilities for Developing Flexible Employment Forms in Lithuania

The article reviews the concept of flexible employment forms and their effects on the labour market. It analyses foreign experience in application of flexible employment forms, discusses possibilities for assessment of the economic effect of the application of flexible employment forms in Lithuania and results of an expert survey.


Introduction
Over the last two decades, the number of individuals enjoying flexible employment forms has increased in many developed countries. In all countries such employment means low wage, the lack of social privileges and few opportunities to find a permanent job. Therefore, an opinion is being formed that flexible employment forms are a "trap" likely to push a man out of the labour market. On the other hand, supporters of such employment hold that the mentioned forms of employment give important opportunities to work and be paid for the groups of population that are not able to work on a full-time basis (women who grow chil-132 dren, students, senior population and the disabled).
Today there isn't a single answer as to the effects of flexible employment forms on the labour market: are they positive or negative? Moreover, developmental perspectives of flexible employment forms also constitute a complicated problem. This article, therefore, aims to analyse the effect of flexible employment forms on the labour market and the developmental opportunities of such forms in Lithuania. The aim of the current work can be reflected by the following tasks: 1. To define the concept of flexible employment forms and to discus their influence over the labour market. 2. To carry out a study of developmental op-

Flexible employment forms in foreign countries
All flexible employment forms (FEF) in one or another way characterise two basic types of employment: 1) fixed-term employment; 2) underemployment.
It should be noted, however, that today there is no clear distinction between these two types of employment. For example, seasonal or temporary jobs are usually attributed to fixed-term employment, but under certain circumstances (e.g., if we assess the length of employment per year or in other cases) they can be regarded as underemployment. In different countries or in different statistical publications of the same country, the previously mentioned types of employment can be differently defmed. Therefore, in order to avoid methodological ambiguities in the analysis of the dynamics of the mentioned forms and to have a possibility to compare statistics of different countries, we usually speak about underemployment (i.e., shorter working hours than are set by law. E.g., in 2003, in Lithuania statutory working hours were 40 hours per week. When we have five working days per week, the average number of annual working hours per month is 168.8 and the average number of working days 21.2). However, as we have mentioned, underemployment is differently understood in dif-ferent countries and usually is identified with part-time employment. For example, in the USA, employment for less than 35 hours over a week is deemed underemployment; in France, at least 20 per cent less than the established number of working hours is deemed underemployment (today there are 39 statutory working hours per week), and in Great Britain less than 30 working hours per week shall be regarded as underemployment.
In Japan, published governmental reports use different defmitions of underemployment. They are not necessarily related to the number of working hours of an employee. Some Japanese studies consider employees underemployed if they are given such a status by their employer. According to the recent researches of the Japanese Ministry of Labour, one fifth of underemployed individuals work the same number of hours as the fully employed do. The first ones are considered the underemployed, as they are not obligated to work for the same employer all life long, they don't have wages rising subject to their work experience, they don't get support that would be afforded after a certain period of employment, they are not paid other different allowances either as in the case of those having obligated to work for the same employer all life long. Other reports published in Japan consider individuals to be underemployed, if they work fewer hours per day or fewer days per week compared to fulltime permanent employees.
In all countries, women account for the major share of the underemployed. As women usually assume the biggest responsibility for child bringing and house keeping, they seek for part-time employment in order to "have more time for children. In Germany and France, women account for about 90 per cent of all underemployed individuals, in Great Britain and Japan for over 80 per cent, in the USA for 65 per cent.
In all countries, the distribution of underemployed men by age is very different from the analogous distribution of women. A share of underemployed men has a insignificant dependence on their age. In many countries, young people tend to underemployment in order to study. This is particularly characteristic of Japan, where young population under 25 years of age accounts for about one half of the underemployed. Underemployment may be helpful for elder population to gradually reduce their workload to experience retirement less painfully. It is particularly characteristic of a large number of underemployed men aged 50 and over.
Speaking about the statistics of individuals exercising flexible employment forms, it should be noted that the number of such employees has been increasing throughout the recent decades. E.g., in 2001, 13.6 per cent of the employed population in the EU was employed on the basis of fixed-term employment contracts (in 1991 this number was 9.2 per cent). Individuals employed on a part-time basis accounted for 17.8 per cent in 2001 (versus 13.9 per cent in 1991).
It should be noted that men are more often employed on a fIxed-term basis, while women prefer part-time employment. In 2001, 32.9 per cent of women were employed on a part-time basis and 14.8 per cent on a fIxed-term basis An obvious and in many countries increasing scope of underemployment could be interpreted from different angles.
In Japan, the increase of underemployment was linked to the ageing of labour force. According to the Japanese "nenko" system, wages 134 and support to permanent employees in large and medium companies are related to the obligations of the employees to the company rather than to performed work. If the structure of population has the shape of a pyramid and the economy is growing, the system of such a type can function. However, as the Japanese population is ageing and the economic growth is not so rapid, a relatively large number of well-paid middle-aged and senior employees be~e a burden to the companies. Many analysts believe that Japanese companies tried to cut off employment costs in order to maintain the "nenko" system of wages and support and lifelong employment by hiring individuals on a part-time basis. Wages of such underemployed individuals are not related to their work experience, they are not afforded privileges and could be easier discharged if business conditions in the company become worse. Furthermore, employers don't have to pay social security contributions for underemployed individuals, as the latter do not claim for certain extras.
Underemployment increase in Europe, Japan and the USA could be also linked with pressure over companies to cut down labour costs and look for profit under conditions of international competition and less favourable local macroeconomics. As at the beginning of the 21 sI c. economy was growing quite vaguely and unemployment was prevailing on a high level, many experts were reasonably or not fully reasonably blaming high labour costs, including high social security contributions, and the strict laws regulating the dismissal of employees. For example, in Germany and Great Britain quite a number of underemployed individuals are not afforded social security covers; they do not share in unemployment and medical insurance schemes either.
Furthermore, increase of underemployment in the USA could be also related to struc-tural changes in American economy (in particular to production decline and the development of the service sector). Researches show that increased employment in the service sector (and in the sphere of underemployment simultaneously) both in European countries and the United States appeared on account of a decreased employment in industry.
Researches also show that in all countries individuals employed in the agricultural and service sectors account for the major share of the underemployed, while the fewest number of such employees is found in industry. In all countries, wages of underemployed individuals are often lower and jobs often require lower qualifications.
To conclude the analysis of flexible employment forms in foreign countries, we can state that policies followed by the governments of different countries may encourage or impede the diffusion of FEF, and governmental policy is a strong determinant for job-Iookers to select this type of employment and for employers to be willing to hire such labour force. Moreover, many analysts are prone to believe that the employment policy followed in some European countries and Japan, whereby individuals exercising flexible employment forms (underemployed in particular) are exempted from social security contributions and their employment relations (dismissal) are not governed, explains the reasons for the continuing growth of the aforementioned forms of employment in these countries.

Flexible employment forms in Lithuania
Analysis of the present situation in the country and in individual economic activities was carried out to reveal the spreading of flexible employment forms in Lithuania l .
As we can see from the analysis, in 1998-2001 the share of individuals employed on a part-time basis in the structure of the employed dropped down by 1.8 percentage points (from 11.6 to 9.8 per cent). The share of men and women employed on a part-time basis varied insignificantly over the analysed period and in 2001 amounted to 41.2 per cent and 58.8 per cent respectively (the share of men slightly dropped down from 46.0 (1998) to 41. 2 (2001) per cent, while the share of women relevantly grew from 54.0 to 58.8 per cent). The biggest growth in the number of part-time employees is noted in trade and real estate, leasing activities (2.1 and 6.5 times respectively). On the other hand, the number of part-time employed individuals in civil engineering and transport business relevantly dropped down over the analysed period (by 23.3 and 14.3 per cent respectively).
We find this decrease to be determined not by significant changes in the mentioned economic activities, but by employers' seeking to minimise labour costs and to transfer an actually working staff member from employees working on an employment-contract basis to individuals actually working under a business license. In the latter case, different contracts shall be signed. This is a way for employers "to save" social security contributions and individual income tax. It should be noted, however, that specific scientific researches have not addressed the issue lately.
To conclude the analysis of flexible employment fonns in Lithuania, we should emphasise a trend of a decreasing number of underemployed individuals in Lithuania, differently from the situation in foreign countries. In addition, underemployment is most popular in agriculture, trade, hotel and restaurant business in foreign countries, while in Lithuania underemployment mainly prevails in industry and trade.
In order to analyse the Lithuanian Government's policy applied with regard to FEF, we analysed the legal framework in Lithuania. We found legal definitions of the following basic flexible employment fonns in Lithuania: With regard to the development of the above-mentioned flexible employment fonns, the new Lithuanian Labour Code offers conditions for the optimal reconciling of the type of employment contract with the nature of employment. Therefore, the law provides for the possibilities to conclude different employment contracts: fixed-term, temporary, seasonal, homework, supply of services, authoring employment contracts. So far, not all flexible 136 employment fonns have been sufficiently developed in Lithuania. Fixed-term, seasonal employment and authoring are most popular. Besides, Lithuanian legislation does not regulate such fonns of employment, quite popular abroad, as telework 2 and agency employment (rent of personneP).
Employment using flexible employment forms depends on the specifics of the functions (unskilled work, consulting, training or design services, agricultural work and personal house-keeping or social services) rather than on the demographic or social characteristics of an employee. On the other hand, flexible employment forms are mainly offered/selected taking into consideration the following criteria: • Family duties (LC, Art. 146, paragraph 1, §3, and LC, Art. 146, paragraph 1, §6).
2 Employment of such a nature when by means of information technologies an employee can do the whole work or any part thereof out-of-work, i.e. at home or any other place he likes. In this case, employees can do their job at any time convenient for them, communicate whenever necessary with the employer or colleagues virtually. Telework is usually used to render different services: accounting, design work, conSUlting, mediation, training, ete.
J Here the point is that certain professionals are hired not by a particular employer, but an agency (employment agency), which finds particular employers and rents them agency's employees to perform certain functions. Particular employers pay the agencies and the agencies pay their employees. The agencies monitor work quality of their employees, take eare of their qualifications, organise a search for new employees and recruitment thereof, ete. Rent of personnel is most popular in rendering and organisation of personal house-keeping services, caring and fostering services, health eare services, construction work and public catering services.
Moreover, the Lithuanian Labour Code emphasises that underemployment does not create any limitations with regard to the duration of annual holiday, calculation of work experience, appointment to a higher position, improvement of qualifications; it does not restrict other rights of employees, either. Work shaU be paid for pro rata to the time of work or the amount of work done (LC, Art. 146).
To finalise the analysis of FEF in Lithuania, we can draw a conclusion that the new Labour Code and other regulations create opportunities for the development of flexible employment forms. Our research, however, showed that active governmental policy is necessary to ensure bigger economic interests of employers and, on the other hand, better adjustment of employment using FEF with employees' interests.

Role of flexible employment forms in the labour market and the economic effect of their application
In order to tackle the issue whether or not flexible employment forms are necessary, we have to analyse their effects on the labour market and assess the economic effect of the application of such forms.
Our researches show that flexible employment forms may have both positive and negative effects on the labour market. Positive effects manifest in that FEF increase employment, minimise unemployment, improve the flexibility of employment and increase the possibilities for reconciling employment and leisure. Adverse effects lay in that FEF minimise social guarantees, restrict the possibilities for taking holiday, increase firing possibilities and the instability of employment, contribute to a decrease in income and differentiation of workpay. There being a tie between the mentioned advantages and disadvantages, FEF are reasonable to choose when work does not require daily or direct communicating with other employees or employer, is oftemporary or seasonal nature. If this is the case, such forms of employment are beneficial for both the employee and the employer.
As to the economic effect of FEF (E), it should be noted that it directly depends on the foUowing: 1. Unemployment rate (n).

Workpay rate (u).
This dependence could be expressed as follows: E = f (n; k; p; s; u). (1) It should be noted that different factors of utilising the labour force have a different influence on the economic effects of FEE 1. Researches carried out in Scandinavian countries showed that the more favourable the situation in labour market (implying a stable economic development and growth of overall production), the bigger is the economic effect of FEF application. Increasing unemployment means reducing the value of labour force and relevantly reducing the need/necessity for a more effective utilisation of labour force as a very expensive and limited resource. Accordingly, we can say that when (2) When assessing the effects of this factor (n) on FEF efficiency in Lithuania, we can note that it has been unfavourable so far. In 2003, the unemployment rate was 12 per cent in our country, while in EU countries it did not reach 8 per cent. Yet, it should be said that over nine months of 2003 (by October) in Lithuania and Slovakia the unemployment rate decreased most rapidly compared to all other acceding countries. Therefore, we can state that improving the situation in the labour market in future will improve the effect of FEF application.
2. In order to assess the influence of the second factor (k) on E, we have to presume that labour force of higher quality creates added value in the production process, though in real economy this interdependence is not always valid. For example, studies of the Institute of Labour and Social Researches carried out in 2003 demonstrated that 9 per cent of individuals who graduated from universities in 1996-2002 were employed in positions requiring no university degree. Nevertheless, this is rather an exception than a rule and thus does not contradict our presumption in essence. Accordingly, the influence of factor (k) on E could be defined as follows: (3) We can say that the influence of this factor on FEF efficiency should increase in future, as the level of high-quality labour force is regularly rising. The influence of this factor should be also increased by the development of continued education, which that directly serves the improvement of the quality of labour force.
3. Productivity (p) in modern economy is one of the key factors determining the competitiveness of an economic entity in the mar-138 ket. Productivity can be described as having major effects on the final result of production, i.e. profit (w). f(p) = w. (4) Accordingly, we can state that (5) We should also note, however, that the productivity of labour force has a very high rate of "depreciation". In other words, a man gets tired soon.
(6) Therefore, a high level of productivity can be maintained only for a certain period of time. The length of human ability to maintain the highest level of productivity shall be established for each job individually, but it should be noted that with regard to employees with equal rates of productivity, the one with a shorter work experience will show a higher average productivity compared to the employee with a 30 per cent or more longer work experience. And once again, we note that this dependence is determined by the nature of employment, work environment and the psychophysical peculiarities of employees. The rational distribution of the working time of employees is one of the most effective functions of modern personnel management, as the potential of productive labour (p) should be utilised to the utmost, while, on the other hand, labour force should be protected against "depreciation"4.
4. The impact of the nature of employment (s) on the efficiency of FEF application is similar to that offactor (k) (quality oflabourforce). The more complicated the nature of employment, the higger is the FEF effect.

(7)
When work is complicated, shorter working hours reduce the effect of tiredness, increase concentration and the flexibility of reaction. On the other hand, complicated work or work under harmful conditions requires more time for regeneration oflabour force, and thus a shorter working time ensures a more effective preparation for performance of complicated work.
S. In the assessment of workpay (u) impact on FEF, we should note that the higher the labour force costs, the higger is the efficiency of FEE Workpay constitutes the basic part of labour force costs. Therefore, it is safe to say that (8) i.e. the more expensive labour force, the bigger is the need to use it more economically. Talking about the prospects in Lithuania, we can note that the influence of this factor should grow in future, as the increasing average wage will modify a relevant increase in labour force costs.
Analysis of factors modulating the economic efficiency of FEF showed that under modern economy conditions, the need to apply FEF is constantly increasing in evenly developing economies, as FEF serve for profit growing. On the other hand, it should be noted that the mentioned analysis reflects a hypothetical economy, while in reality labour relations are conditioned not only by economic factors and striving to utilise the existing la-bour force as efficiently as possible, but also by a social and legal environment in addition to personal principles, traditions, political decisions. Yet, to generalise we can point out that irrespective of the sphere of their application, FEF shall increase the efficiency of labour force utilisation (they shall increase employment flexibility, minimise "depreciation" of labour force, minimise employment tension, increase "convertibility" of employees). This would be the economic effect of FEF application on a micro level.
Another aspect of the efficiency of FEF application is manifested in participation of employers/companies in the implementation of international objectives (employment increase; security of social stability; improvement of living standards). Implementation of the mentioned objectives ensures the efficiency of FEF application for employers on a macro or national level. The high employment rate of population, social stability and improving living standards increase consumption demand and thus directly facilitate production of domestic consumables and development of the service sector. Social stability and high living standards are the basic conditions for improving the quality of labour force. The adequately satisfied basic needs of population create preconditions for investments into human capital. A higher quality of human capital on a national level increases investment attractiveness of a national economy and creates conditions for using higher production technologies, improvement of personnel management and an increase of productivity of labour force on a micro/company level.
To summarise, our analysis has demonstrated that in the economic sense FEF application in modern economy is very useful, as it agrees with the interests of both employers and employees. However, the low living standards, lower popularity of high production technologies, higher unemployment rates and lower wages somewhat restrain the development of flexible employment forms in Lithuania. Therefore, when applying FEF in a particular company, primarily specific working conditions should be considered in order to utilise the production conditions efficiently and increase the productivity of the existing labour force.

Survey of application possibilities of flexible employment forms
After a theoretical review and analysis of the situation, it is reasonable to find out the attitude of social partners (employers, trade unions and governmental organisations) towards the development offlexible employment forms in Lithuania. For this purpose, an expert survey was carried out.
Methodology of the survey. The survey was carried out in May 2003 in Vilnius City. The objective of the survey was to highlight the legal aspects and problems of the application of flexible employment forms in Lithuania. Representatives of all social partners (employers, trade unions and governmental organisations) were questioned. A number of different literature sources and legal documentation were also analysed.
Results of the survey. 1) The survey showed that the development of flexible employment forms in Lithuania is restricted mainly by unemployment, low earnings of employees, the lack of the understanding of the necessity of flexible employment forms and inadequate awareness in some cases.
2) According to experts, there are no obstacles for developing different flexible forms of employment, i.e. various flexible employ-ment forms could be applied, such as temporary and seasonal employment, homework, etc. Unfortunately, the experts found not all wishes possible for implementation in Lithuania, as it is difficult to find jobs where the mentioned forms of employment could be applied (with the exception of temporary, seasonal employment, employment under authoring contracts, e.g., for agricultural workers, translators/interpreters, etc.).
3) As the study showed, individual categories of employees are interested in part-time employment or fixed-term employment contracts. Here we can mention disabled individuals, students, women with minor children or care-needing family members, etc. Some employees are forced to do part-time jobs, as they have to take care of minor children, sick or disabled individuals or they have to study. The key argument for some employees (usually not belonging to the above-mentioned categories) to refuse part-time employment is low earnings. 4) According to employers, application of flexible employment forms is not always worthwhile for them. Firstly, it is difficult because of work organisation peculiarities in a company (where full-time employment and presence at work is required). Secondly, it is not always worthwhile for an employer to hire two employees to the same position (due to increased managerial workload and other reasons). Yet, it depends on both a particular employer and the nature of company's activities. In some businesses, employers are interested to have part-time, temporary or seasonal employees hired under a flexible employment schedule (e.g., translators/interpreters, painters, designers, consultants, builders, agricultural workers, etc.). 5) Answering the question how to encourage employers to apply flexible employment forms, the experts found it to be a difficult task. If it is not worthwhile for employers to apply flexible employment forms due to the abovementioned reasons or they simply cannot do this because of the nature of their business, there are no ways to force the employer to apply the aforesaid forms of employment. The experts recommended that the sphere of application of flexible employment forms would be left for a collective or individual agreement with an employer; this is also set forth in the Labour Code. 6) As the study showed, most experts believe that the state should minimally regulate the application of flexible employment forms. Otherwise, employers' interests to develop their business will disappear. 7) According to the experts, after coming into force of the Labour Code and adoption of the law on labour councils (its drafting is in progress now), we can expect positive changes (many problematic issues may be regulated in collective agreements). Unfortunately, in reality, Lithuanian trade unions are weak, there are no labour councils in companies and employees themselves often don't know how to defend their interests.

Conclusions
Theoretical analysis of the conception of FEF, a review of foreign and Lithuanian experience in this respect and analysis of the findings obtained provided grounds for the following conclusions: 1) all flexible employment forms in one or another way characterise two basic types of employment: fixed-term employment and underemployment. It should be noted, however, that there is no clear distinction between these two types of employment; 2) flexible employment forms (FEF) account for a major and constantly growing part of employment in the European, Japanese and American labour markets. Characteristics and jobs of the population exercising flexible forms of employment are similar in many aspects in the mentioned countries, but the effective employment policy is different; 3) a trend of the decreasing number of underemployed individuals in Lithuania is being observed, contrary to the situation in foreign countries. In addition, such a form of employment (underemployment) is most popular in agriCUlture, trade, hotel and restaurant business in foreign countries, while in Lithuania underemployment mainly prevails in industry and trade; 4) the basic flexible employment forms defined in Lithuanian legislation are fixed-term employment, underemployment, seasonal employment, temporary employment, homework, supply of services, authoring. Yet, fIXed-term, seasonal employment and authoring are the most popular. Besides, Lithuanian legislation does not regulate such forms of employment, quite popular abroad, as distant employment (telework) and agency employment (rent of personnel); 5) flexible employment forms may have both positive and negative effects on the labour market. Yet, flexible forms of employment organisation are reasonable to apply in two instances: a) when a job does not require daily or direct communicating with other employees or employer, is of temporary or seasonal nature, temporary or casual; b) when there are no possibilities to work on a full-time basis (when one has to take care of children, fulfil other family duties; due to the state of health, age, training or studies); 6) the economic effect of the application of flexible employment forms directly depends on a number of factors: unemployment rate, quality of labour force, productivity of labour force, nature of employment and wage rates. The higher the value of human capital and products created by it, the higher is the effect of FEF application. On the other hand, the high unemployment rate reduces the possibilities of FEF development and their attractiveness; 7) the new Labour Code encourages the development of flexible employment forms. In addition, many important provisions are left to the discretion of collective agreements between the employer and the employee. On the other hand, reality in Lithuania is such that unemployment,low earnings of employees and the employers' possibility arising therefrom to hire employees for any period of time restrain the development of flexible employment forms.
The theoretical and practical analysis enables us to affirm that FEF in the modern labour market are quite a demanded form of employment, as under particular conditions they are beneficial for both employers and employees. On the other hand, the collected materiaI allows to say that the development of FEF in Lithuania is a mat!er of future, since despite the existing legal framework, high unemployment, quite low average wages and the insufficient awareness of employers and employees restrict the application of flexible employment forms in the Lithuanian economy. ivairias lanksčias užimtumo formas konkrečioje imonėje, turi būti ivertintos konkrečios sąlygos ir galimybės (pvz., darbo organizavimo ypatumai ir kt.). Socialinių partnerių (ekspertų) nuomone, lanksčių užimtumo formų plėtra priklausys nuo ekonomikos augimo stabilumo, vidutinio darbo užmokesčio padidė jimo prieaugio ir socialinio dialogo kokybės.