Steady rise in temporary agency work

On 12 October 2006, the Confederation of German Employers’ Associations (BDA) argued that temporary agency work does not endanger regular jobs. BDA said that, on the contrary, such forms of work create additional employment. Since the proportion of temporary agency work has risen steadily over the last decades, the social partners have continued to discuss the effects of this trend. The possible implications of the ‘equal treatment clause’, which was added to the Labour Placement Act in recent years, form part of the debate.

According to a labour market study (in German, 968Kb PDF) by the Federal Employment Agency (Bundesagentur für Arbeit, BA), the average number of temporary agency workers increased from 134,443 persons in 1994 to 333,604 persons in 2005. While trade unions fear that the growing number of temporary agency workers will lead to a decline in regular employment, the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) highlights the positive effects of temporary agency work.

Background

In 1972, temporary agency work was introduced following the passing of the Labour Placement Act (in German, 39Kb PDF) (Arbeitnehmerüberlassungsgesetz, AÜG). The law states that temporary work agencies have to be registered and authorised by BA. The agencies are responsible for the continuous payment of their employees’ wages and social security contributions. The law has been amended several times over the last decades (see the EIRO article on Temporary agency work – the case of Germany, 85Kb MS Word doc). Among other changes, the following amendments to the act were adopted:

• Temporary agency work was only permitted on the basis of an employee having an open-ended employment contract. The employee could, initially, only be assigned to a client company for up to three months. This regulation has undergone several legislative amendments over the years, but it was finally repealed in 2003.

• The law originally contained a ban on re-employment and synchronisation. Both were prohibited by legislators in order to avoid unstable employment conditions for temporary agency workers, such as the hiring and firing of the same employee every three months. Therefore, the employment contracts of temporary agency workers had to exceed the length of their first assignment to a client company through a prohibition of synchronisation (Synchronisationsverbot). After some legislative changes first made in 1997, the bans on synchronisation and re-employment were lifted in 2003.

• In 2002 and 2003, the so-called ‘equal treatment clause’ (Gleichbehandlungsgrundsatz) was introduced and then broadened. The clause specifies that temporary agency workers are entitled to the same rights as the regular workforce in an enterprise. In other words, temporary workers in any workplace should receive the same wages and social security contributions as regular workers.

On the one hand, the reforms of the AÜG aimed to establish stable working conditions for temporary agency workers within their temporary work agencies through the clause on equal treatment. On the other hand, flexible legislative arrangements were adopted to encourage companies to use temporary agency workers more frequently, for example through abolition of the bans on re-employment, synchronisation and maximum assignment period.

Views of social partners

On 12 October 2006, BDA stated in its regular [newsletter No. 32 (in German, 77Kb PDF)](http://www.bda-online.de/www/bdaonline.nsf/id/2ACB5DF70FA7B919C12572050045AB95/$file/BDA Newsletter Nr. 32.pdf) that, since the number of temporary agency workers has risen continuously over the last few decades, temporary agency employment helps individuals to avoid unemployment or to find a job if they are unemployed. In the employers’ view, the abrogation of the equal treatment clause of the AÜG would be a further step towards increasing this positive trend.

The Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) outlined in a contributing article (in German, 156Kb PDF) to the federal government’s tenth report on the AÜG that temporary agency work in certain industries may gradually replace regular jobs. To counteract this trend, DGB calls for a stronger regulation of these sectors. In this context, it had already welcomed the introduction of the equal treatment clause to the AÜG.

Trends on take-up of temporary agency work

The Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) examined in their regular analysis report (in German, 1Mb PDF) the effects of the abovementioned legislative amendments. The study concludes that the 1985 and 1994 amendments lengthened the assignment periods of temporary workers. Since 1997, this trend has been reversed; in other words, in 2003, only 13% of all temporary agency workers had been assigned to one user enterprise for a year or even longer. For the majority of temporary workers, temporary agency employment only constitutes a brief period in their careers and might offer them the opportunity to remain in or return to the labour market.

Possible impact of equal treatment clause

However, according to the IAB report, these positive effects could be jeopardised by the impact of the equal treatment clause of the AÜG. This clause can only be suspended by the application of collective agreements that enable temporary workers’ payments and other contributions to differ from those of the regular staff. Therefore, in the wake of the equal treatment clause, many companies with temporary agency workers have concluded collective agreements.

A study by the Cologne Institute for Economic Research (Institut der deutschen Wirtschaft Köln, IW Köln), moreover, reveals in an article on temporary work (in German) that collectively agreed wages concluded by trade unions and temporary work agencies or their representatives may be regarded as too high by enterprises employing temporary workers. This could be the case for unskilled workers in particular, who constitute approximately one third of all temporary agency workers. The equal treatment clause of the AÜG might, therefore, lead to a decreasing proportion of employment in the temporary agency work sector.

Sandra Vogel, Cologne Institute for Economic Research, IW Köln