Temporary Employment Agencies: Hartz-laws Will Increase Costs and Reduce Turnover

The majority of temporary employment agencies in Germany are not expecting to see any positive outcomes following implementation of the Hartz-laws. Rather, they fear increasing personnel costs and falling turnovers. Only a few temporary employment agencies are interested in becoming a Personal Service Agency (PSA).

These are the findings of a survey carried out by the Centre for European Economics Research (ZEW), in Mannheim, from the beginning of April until the middle of June 2003. 471 temporary employment agencies took part in the survey, making it the largest survey ever carried out by an independent institution in the German temporary employment sector. 

The "First Law for Modern Services on the Labour Market", implemented in December 2002, guarantees that temporary workers are entitled to the same rights and conditions of work as regular workers. The law ensures that collective wage agreements have priority over other legal regulations, and sees that Personal Service Agencies (PSAs) are given regulations. In the future, these agencies will take on the unemployed as temporary workers on behalf of the Federal Employment Agency. More than 85 per cent of temporary employment agencies expect that their personnel costs will increase as a result of the new legal regulations. Almost half of the agencies predict that personnel costs will be subject to considerable increases.

When agencies were surveyed in regards to the effects of the new laws on turnover, opinions are not quite so unanimous. More than 70 percent expect that turnover will decrease as a result of the new laws. On the other hand, roughly 30 per cent of agencies expect that turnover will remain steady, or, that they will show slight increases. It is primarily temporary work agencies which expect to see falling levels of turnover that face tough competition from other firms.

Only a minority of around 10 per cent of temporary work agencies is interested in becoming a PSA. For around 40 per cent of the agencies this is not an option. Medium-sized and large temporary employment agencies with more than 75 temporary workers on their books showed more interest than smaller firms, which make up the greatest proportion of the temporary employment sector.

As part of the survey, information regarding the amounts charged to businesses who hire out temporary workers from temporary employment agencies was collected. Given that the Hartz-laws do not yet have any relevance here, the data collected reflects the situation before the implementation of new regulations. The majority of temporary employment agencies therefore currently charges for a temporary worker the same, or even a little under, what a company would expect to pay for a regular worker qualified to a similar level. There are, however, great differences in charges depending on the qualification level of the temporary worker. Poorly qualified temporary workers tend to be significantly cheaper than regular employees. It can therefore be expected that the implementation of the Hartz-laws, and in particular the regulations regarding equal treatment in this segment of the job market, will lead to an increase in the cost of temporary work and to a decrease in the number of temporary workers used.

Contact

Dr Bernhard Boockmann, E-mail: boockmann@zew.de

Dr Andreas Ammermüller, E-mail: ammermueller@zew.de

The brochure,"Perspektiven der Zeitarbeit" is available here for download