Temporary Employment

Germany's temporary employment sector has seen rapid growth in recent years, with the number of temporary employees rising from 340,000 in 2000 to 824,000 in 2010. While this growth has continued apace in 2011, the temporary work sector remains small in relation to the size of the overall workforce. Indeed, temporary workers represent just 3% of all German employees required to pay social insurance contributions. This puts Germany in fifth place internationally for the size of its temporary employment sector, behind the U.K. and the Netherlands.

The temporary employment sector has received a great deal of public criticism. Temp work is often attacked as "precarious" because temps make less money and have less job stability than their permanent counterparts. On the face of it, this criticism has merit: The pay gap between temporary and permanent employees in 2008 and 2009 was 20% and 10%, respectively. Yet it is often overlooked that this pay gap reflects important structural differences: temp employees are younger, more frequently lack formal qualifications, and are at greater risk of becoming unemployed.

Comparisons between the temporary and permanent workforce invariably rely on a standard measure: permanent, full-time employment in a job subject to social insurance contributions. While such jobs are surely preferable, for the unemployed they are often not an option. And generally speaking low-skilled employment is better than unemployment, even when the job in question does not pay a living wage. In Germany, at least, employees who do not earn a living wage may receive supplementary benefit payments so they can pay for necessities while actively participating in the labour market.

The opponents of temporary employment also frequently neglect the strong empirical evidence that employment as a temp increases one's chances of obtaining a permanent position. This effect is often delayed, and, when expectations are unrealistically high, may seem modest. Yet surmounting the challenge of unemployment necessitates a range of targeted policy instruments, and temporary work is one available tool, as recently noted by the German Council of Economic Experts in its Annual Economic Report.

In December, Germany’s Federal Labour Court found that one of the unions in the temporary employment sector was ineligible to engage in collective bargaining because it did not fulfil new requirements specified by the Court. This decision means that the affected employees and social insurance carriers have a right to collect on the wages and social insurance contributions that have been outstanding since the Court's decision. This is not a matter of dispute. Rather, the issue at hand is whether or not these claims to back wages and contributions are valid retroactively for all collective wage agreements that have been concluded with the union. In the view of the German Council of Economic Experts, the temporary employment agencies that have been affected by the decision should be granted protection of confidence against these claims based on the principle of legitimate expectation, since these agencies could not have foreseen that the signed wage agreements would become invalid due to a legal judgement.

Legislators should discuss this matter and determine whether clear rules are needed for collective bargaining eligibility. In Austria, for example, there is a fast-track procedure for determining whether an organisation can engage in collective bargaining.