Employment with temporary work agencies in Germany

In autumn 1997, Germany's DGB trade union confederation published a report on employment with temporary work agencies in which it calls for legal restrictions and stricter regulations. This feature gives an overview of the development, legal background and industrial relations consequences of employment with temporary work agencies in Germany.

As with other countries such as Sweden (SE9705120F), Norway (NO9708118F) and Spain (ES9702103N), Germany is witnessing an ongoing debate on employment with temporary work agencies (TWA s) and its industrial relations consequences. Against the background of steadily increasing numbers of TWA employees, the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB) recently published a report on employment with TWAs which includes calls for legal restrictions and stricter regulations.

The flexible firm and temporary work

As many businesses are redefining the structure of their firms by moving to more flexible ways of staffing, the utilisation of temporary workers increases. As opposed to the permanent core workforce, using temporary workers serves the firm as a means of achieving numerical flexibility, in order to:

• meet fluctuations in the product demand;
• supplement staff due to absences from work;
• reduce labour costs; and
• find employees with scarce skills which are only needed for a short period or special projects.

Temporary workers create a buffer peripheral workforce as a hedge against market uncertainty. Furthermore, since temporary workers are less likely to be trade union members or covered by collective agreements, their use is also associated with low union influence. Alternative ways for the firm to achieve numerical flexibility are the increased use of part-timers, flexible working time arrangements, overtime and shift patterns, as well as "outsourcing" strategies.

There are two types of temporary work: the first is associated with TWAs; the second involves firms employing people on fixed-term contracts. This feature deals only with employment through TWAs.

For employees, TWA employment as a "temp" may often be associated with lower than usual remuneration and benefits, as well as less favourable employment conditions in terms of employment duration, training by the company and opportunities regarding advancement in internal labour markets. However, temporary employment may also provide an opportunity of re-entering the labour market, acquiring on-the-job experience, and becoming acquainted with a number of firms without having to switch companies. Long-term commitment is not an aim of the employment relationship, neither by the employee nor by the hiring-out employer.

Extent of TWA employment in Germany

In Germany, the extent to which firms make use of TWA employees is increasing. A recent survey reported that almost one in two employers had some experience with TWA employees.

Source: Bundesverband Zeitarbeit eV

The Federal Association of Temporary Employment Agencies (Bundesverband für Zeitarbeit, BZA) estimates that there were 413,000 temporary employees employed by 2,601 private temporary employment agencies over the whole of 1996 (though the number in TWA work at any one time are considerably lower - see table below). By occupation, 44.3 % were metalworking industry production staff, 11.4% administrative staff, and 11.4% unskilled workers. Furthermore, 18.5% were female and 61.1% were previously unemployed. In 1996, the TWA industry turnover is estimated to have amounted to DEM 6.6 billion. As a long-term trend, roughly 30% of TWA employees are later recruited by user firms for permanent jobs.

* Western Germany only.

** 31 December 1996.

Sources: (1) Bundesverband für Zeitarbeit (2) Bundesanstalt für Arbeit .

Figures from the Federal Employment Service show that the number of TWA employees, on 30 June each year, rose from 11,805 (1975) to 48,707 (1985) and 161,995 (1995) in western Germany and from 6,342 (1993) to 14,190 (1995) in eastern Germany. Most of the employees were relatively unskilled younger male workers used for production jobs with a lower than average salary.

TWA employment and labour law

German labour law defines temporary employment (or the hiring-out of labour) as "a legal relationship where a business lends temporarily an employee with whom it had concluded a permanent employment contract to another employer while the legal relationship with the first one continues to apply and the employee is obliged to work for the company and in line with the instructions of the hiring-out employer". The permanent employment relationship between agency and temporary agency worker is governed by labour law including all regular social security provisions and additional regulations of the Act on Temporary Employment Business (Arbeitnehmerüberlassungsgesetz, AÜG). Private temporary employment businesses are governed partly by the AÜG and have to be approved by the Federal Employment Service (according to § 1 AÜG).

In order to meet the increasing demands of the economy for flexible personnel, the following changes to Art. 3 § 1 VI AÜG came into effect on 1 April 1997, relaxing the legal regulation of TWAs:

• private temporary employment businesses may hire out temps for up to 12 months. Before 1 April 1997, the maximum period was nine months;
• it is now permissible to conclude a one-off fixed-term employment contract between a TWA and a worker, where the length of the fixed term is exactly the length of the period for which the worker is hired out to the user company ("synchronisation");
• the one-off conclusion of fixed-term employment contracts between hiring-out employer and temporary employee without an "objective reason" which is linked to the employee him- or herself, and the repeated conclusion of unbroken and subsequent fixed-term contracts, are allowed. Before 1 April 1997, fixed-term contracts without objective reasons were not allowed.

According to the BZA, these changes ease the entry of individuals in problem groups into the labour market and increase their chances of getting a permanent job via temporary employment. Furthermore, the changes mark a step towards equal opportunities for temporary work agencies as compared with other service businesses.

TWAs employment and industrial relations

Participation and co-determination

As regards participation and co-determination, the TWA employee remains a member of the staff of the hiring-out firm and neither has a vote nor can be elected in works council elections at the user company. However, he or she is allowed to make use of the works council consultation hours, to attend staff meetings and to exercise individual rights pursuant to §§ 81, 82 I and 84 to 86 of the Works Constitution Act (Betriebsverfassungsgesetz)(Art. 1 § 14II AÜG) at the user firm. The works council of the user employer has a right to co-determination with regard to the permanent recruitment of formerly temporary employees (Art. 1 § 14III AÜG).

Collective bargaining

Currently, employees with TWAs are not covered by collective agreements. The only collective agreement ever concluded in this area in Germany covered clerical workers who were represented by the salaried employees' union, Deutsche Angestelltengewerkschaft (DAG). After almost two decades' duration, DAG terminated the agreement in 1989. Subsequently, the BZA recommended to its member firms to retain the previous collectively-agreed employment standards. Since then, terms and conditions of employment are - under the governance of German labour law - unilaterally decided by either individual employers or collectively by member companies of the BZA. However, a number of TWAs have concluded works agreement s with their works council s.

It is not, though, necessarily the TWA employers which reject the conclusion of collective agreements. Some companies, the most prominent of which is Manpower Germany, have repeatedly declared their willingness to negotiate collective agreements, on the condition that the agreement would take into account the peculiarities of the industry and would be declared generally legally binding for the whole sector through the mechanism of the extension of collective agreements (Allgemeinverbindlicherklärung). The intention would be to improve the industry's image by forcing all companies to stick to the collectively-agreed rules, especially those with a reputation for bad working conditions. However, there are problems in organising companies with the necessary market share to meet the precondition for extension of an agreement - ie that the agreement should cover 50% of the employees in the sector. To the impartial observer, it might seem as if it were the German trade unions which were reluctant to initiate and conduct collective bargaining.

The 1997 DGB report on TWA employment

In general, trade unions oppose the use of temps as short-sighted and destructive of harmonious industrial relations. Furthermore, they criticise the fact that temps are not subject to employee participation in the user company, and that they can be exposed to the unilateral imposition of changes to their terms and conditions by the hiring-out employer.

In autumn 1997, the DGB published a report on employment with TWAs which criticised especially the following:

• the instability of the employment relationship and the high personnel turnover at TWAs. Employment contracts at TWAs are, on average, concluded for short periods. According to DGB information, no more than roughly one in three of all employment contracts at TWAs which were terminated in 1996 had been concluded for more than three months;
• substitution of permanent jobs in user firms by temps;
• poor pay - in 1995, average TWA employees received 63.4% of the pay of an average employee; and
• a trend in the direction of "precarious" work, especially as regards the integration of the TWA employees in companies' safety and health at work policies. Furthermore, the DGB accuses TWAs of relatively frequent breaches of labour law provisions on working time, payments for hours not worked, and the termination of employment contracts.

The main DGB demands are:

• stricter controls of private profit-oriented temporary work agencies;
• new laws that make sure that temps are covered by the same terms and conditions of employment (eg receive the same payments) as their counterparts at user firms;
• stricter regulations regarding work with TWAs; and
• a ban on temporary work in industries where temporary work is difficult to regulate and monitor. It is already banned in the construction industry.

Commentary

The TWA employment sector represents a "black hole" of non-unionised and non-collectivist firms in contemporary German industrial relations. The reasons for this peculiarity are complex and deserve further attention.

From the employers' perspective, there are several necessary conditions to be met relating to the peculiarities of the industry in order to make collective agreements useful and effective. The individual TWA employer operates in a market which is very competitive. This means that, unless forced in other directions by law or trade union power, a firm would voluntarily conclude company collective agreements only if its competitiveness would not be negatively affected. As regards industry-level collective agreements, the necessary conditions are even more difficult to meet. First, the agreement(s) must provide the necessary flexibility for individual companies which is required by the market in which they operate. Second, one might argue that the agreement(s) should cover the whole industry, possibly through the mechanism of general and legally binding extension (see above), in order to avoid "free-riding" by some companies. Third, since wage levels in TWAs are market oriented and thus closely tied to the labour market situation, the agreement(s) should provide only for a framework and leave the final pay determination to the individual firm. Fourth, since TWAs employ different occupational groups, the agreement(s) should provide for enough flexibility regarding different types of employees.

As regards the legally binding extension of collective agreements, owing to the insufficiently high level of membership density of the TWA employers' associations, it seems highly unlikely - as mentioned above - that any industry agreement concluded will meet the necessary condition of 50% employee coverage laid down by Art. 3 I 1 of the Act on Collective Agreements (Tarifvertragsgesetz, TVG).

From the unions' perspective, there are several obstacles to collective bargaining and concluding collective agreements. To begin with, TWAs are very difficult to unionise. The reason for this is not necessarily reluctance or resistance from the employer, but, more likely, may result from the special characteristics of the employment relationship at TWAs and of TWA employees. TWA firms are characterised by extremely high labour turnover rates and low levels of commitment by employers and employees to a long-term employment relationship. Furthermore, anecdotal evidence reports very individualistic personality traits among employees who choose to work for a TWA. As a consequence, they might be less inclined than other employees to join a union. Under such circumstances, recruiting and retaining TWA employees poses a serious problem for trade unions. Lastly, TWA employment is based on wage competition and thus must run counter to any trade union "equal pay for equal work" policy.

All these reasons may, to a certain extent, explain:

1. the strong resistance of the German trade unions against TWA employment;
2. why there are no collective agreements for temporary workers; and
3. why it seems not very likely that there might be any collective agreements for TWA employees in the near future.

As the legions of TWA employees keep on steadily growing, so too does the "black hole" in German collectivist industrial relations. (Stefan Zagelmeyer, IW)