Why is the contract for work and labour better than its reputation?
The Work contract is simply a contract in itself. It is governed by legal regulations and is often linked to other contracts, for example an employment contract with a contractor. In all of these cases, contracts are voluntary agreements between the parties and are not ineffective just because individual black sheep do not comply with laws and contracts. With this fact in mind, it makes sense to take a look at the reputation of labour contracts. It should also be borne in mind that the use and forms of work contracts in companies have increased significantly in recent years. Just as with temporary work, the same factors are behind this.
- The contract for work and labour - modern outsourcing
- The pressure on all employees
- Contracts for work as a rescue measure
- Revolution contract for work
- The contract for work and labour as a path to freedom
- The contract for work and labour as an opportunity
- The abuse of work contracts
- The contract for work and labour and its advantages
- Zeitarbeit International - Your personnel service provider for work contracts
The contract for work and labour - modern outsourcing
Work contracts are the means for today's companies to hand over core tasks to other providers who can perform them more cheaply. This ranges from real core tasks to supporting work that allows the actual work of the company to be focussed on more important areas.
This means that companies are taking an increasingly targeted approach to finding tasks that they can outsource. Typically, these are processes for which no special skills are required. These are, for example, sorting empties, packing, working in the WarehouseThe tasks include the maintenance of the vehicle fleet, the technology and the workshop, as well as tasks in the area of clearance work, delivery tours and general care of the vehicle fleet.
On the other hand, there are other projects in development or commercial areas. These are also increasingly being outsourced, although here the contract for work and labour is used to buy in special skills.
This means, for example, that a drinks retailer takes care of its own drinks with its regular staff. A subcontractors takes care of the cleaning, a haulage company takes care of the delivery and an IT company takes care of the new accounting software.
What can be achieved with work contracts?
In itself, this is exactly what is meant by Contracts for work and labour is to be achieved. This means that the outsourcing of certain tasks is not itself the problem. This only comes into play when the work contracts are used, for example, to undermine the protection afforded by collective labour agreements and employee rights in order to reduce costs.
If a collective agreement has been concluded for a company, it applies to the core workforce. The employees of the subcontractor, on the other hand, are not covered. This allows the subcontractor in question to pay its employees less and to organise the processing of the relevant areas more favourably for the main company.
In addition to the standard wage, the contracting companies also save on the payment of night and Sunday bonuses. They do not have to worry about the holiday entitlements of the contract workers and they have no say in the main company. Furthermore, the works councils that exist in the main company have no say when it comes to the conclusion of a contract for work and labour. They can neither influence this nor provide assistance to the contract workers.
The labour market is not called the labour "market" for nothing. Here, too, individual employees are in competition with each other. As in the market itself, everyone comes under pressure when prices fall in one area. For the companies, this means that the wages of the core workforce also come under pressure. If the permanent employees demand too much, their jobs can also be outsourced and they lose their jobs.
While this pressure exists and often leads to restrained wage demands, this does not mean that the works councils have no power at all. They can take a look at the contracts for work and labour and check whether this is not concealed temporary work. They can also talk to the contract workers and inform them of their rights. With regard to the management in the main company, the works councils can make proposals to improve the security and working conditions of the employees.
Ultimately, works councils can also use their right of co-determination to make regulations for external employees and their access to certain areas in the parent company. While the free movement of labour, freedom of contract and freedom to provide services are regulated by law, this does not mean that the principle of equal treatment and the fundamental freedoms of employees can be undermined.
There are more and more examples of permanent staff being made redundant and then the workers from the contract labour company turning up on the doorstep the very next day. If you take a look at one of these cases, you can quickly doubt the validity of the work contracts.
Permanent staff with an income at the usual local level are dismissed after years and often replaced by external workers who earn less than half as much. The case is clear: the employer wanted to save money and replace a large part of the workforce.
But if you take a closer look, you realise the pressure German companies are under precisely because of cheap competition from abroad. Customers don't buy the German product on the shelf in the nearest supermarket if it is twice the price of the cheap competition. They also want the lowest price. Accordingly, the companies concerned are on the brink of going out of business and instead of simply giving up and losing the investments and work of the past years and decades in one fell swoop, they are resorting to a new means, the contract for work and labour.
With the contract for work and labour and the use of external workers, the companies concerned are still able to hold their own on the market. This means that they remain German companies. They also retain at least part of their core workforce so that not everyone loses their jobs, as would be the case in the event of bankruptcy.
Savings through work contracts
There are two sides to every story and this is all too often overlooked. If companies come under pressure, they have to find their own way of dealing with it. A contract for work does not just save costs for employees. It also saves costs in the area of recruitment, as the contract labour company recruits its own employees. It also saves costs for the size of the employee pool, which must be kept in stock. External workers can step in at any time if required.
This allows companies to concentrate on the area in which they are most familiar and in which they generate their profit. The rest is then outsourced and taken over by other companies under their own management.
The free market has a declared goal. This is to offer more goods and services at more favourable prices. However, favourable prices and services do not come from anywhere. They come from the increased efficiency of large companies, which puts pressure on smaller companies. And they come from new ways of reducing costs while increasing productivity.
This is why there is freedom of contract and the free market, so that companies can find their own way of offering more for less. One of the means is the contract for work and labour and it has proven itself in practice. More and more companies in more and more sectors are using this form of contract to outsource certain parts of their work for less cost and less effort.
Where are contracts for work and labour used?
From supermarkets and hospitals to hotels, building sites and bakery factories, more and more work contracts are being used everywhere. While on the one hand this depresses wages, on the other hand it means that companies can be set up and find customers that would otherwise not exist, the contract labour companies. These companies hire people who would otherwise find it difficult or impossible to find a job without the contract labour company.
While wages are rising overall, the demands on productivity are also increasing. Good employees are promoted. Employees who cannot keep up are threatened with the end. Now, however, they have a new opportunity to find a job within the framework of contract labour companies where the pay is commensurate with their skills. If this is not the case, for example if they are very highly qualified, they will also find their way into a permanent workforce.
Alternatively, highly skilled workers find themselves in contract work companies whose aim is not to take on simple work for unskilled labour. Instead, they become employees in companies that conclude contracts for work and labour, which involve the provision of rare skills with correspondingly high pay.
Negative effects of labour contracts
The negative effects of work contracts are often exaggerated. For example, it is claimed that hundreds of thousands of people are only employed on low wages as a result of contracts for work and labour. There is no need to doubt these figures, as their significance is indeed interesting.
They state that in a labour market with around 45 million employees, hundreds of thousands may only earn a little because they work for contractors. This means that the vast, vast majority of workers are not even remotely affected. They also show that this is a minority whose qualifications do not allow them to compete with the other 45 million employees. In a free market system, where there are always winners and losers, this is a situation that has to be lived with.
In this case, the contract for work and labour and the contract for work and labour companies even have an important catch-up function in that they still offer these less qualified workers a way into gainful employment. In other words, they are saved from unemployment. In addition, contract work organisations have an important bridging function in that they bring jobseekers into employment and allow them to prove themselves by working in a company. They can then be taken on as part of the permanent workforce and thus obtain a permanent position.
While the contract for work and services via contractors prevents employees with lower skills or qualifications from becoming unemployed and paves the way for jobseekers to enter the labour market, there is another group of people who need to be considered. These are freelancers, or simply freelancers.
This is a special group of people. They often come with a strong desire for freedom and often have special talents and experience. With a contract for work, they are now able to market these talents and experiences without being bound by an employer's instructions or spending their days in an office, regardless of whether they have work or not. Instead, they can work from home on their own initiative and with their own resources on assignments from companies as their clients, thereby securing a sufficient income while retaining their independence.
Freelancer
Freelancers are important contractors for companies, especially when it comes to IT or marketing projects. In Germany, there are around 3.6 million freelancers or solo self-employed people who earn their living with contracts for work. Depending on the freelancer's qualifications, hourly rates can exceed €100. The solo self-employed pay their own social security contributions and taxes from this.
Companies find freelancers on their own portals. These facilitate the conclusion of contracts, allow the freelancer and company to be evaluated and also take care of the transfer of the fee.
A global comparison even reveals a trend towards more freelancing. In 2023, around 48% of the world's working population were self-employed. Freelancing is an easy way to move in this direction, where freelancers can remain solo self-employed or build up a team and thus an entire company.
At 72%, most freelancers in Germany are academics with at least a bachelor's degree, but often also a master's or doctorate. This also explains the high incomes and the attractiveness of freelancing, especially for freelancers.
The contract for work and labour as an opportunity
In the end, you simply have to see the work contract as an opportunity. It's not a lottery win where only the numbers decide. It's not a panacea. It is simply an opportunity for the individual. The extent to which the individual can make the most of it is up to them. At the very least, it is a chance to avoid or end unemployment or, at best, the opportunity to gain freedom and a very good income.
But this is also where the problem lies. When people talk in general terms about wage rates of two euros an hour, they often forget what is behind it. This is because a company has found itself under such price pressure that it has to cut costs. Then a contract labour company has agreed to take on the work for a very low wage. And then an employee was found who was willing to accept such a low hourly wage at the contract labour company.
All these aspects must not be forgotten. The main company has not reduced costs of its own accord. The market situation forced it to do so. The contract labour company was not forced to accept the low wages. Instead, it saw this as a positive opportunity for itself. The employee in the contract work company was also not forced to work there at gunpoint and receives compensation from the labour office instead of receiving benefits from the labour office at 100%.
Contracts for work are not bad in principle
Anyone who wants to use such extreme examples to talk down contracts for work should not forget that they are not fundamentally bad. Rather, they are a normal instrument of the market and have been used as such for thousands of years. Every plumber, every expert opinion, every bespoke suit that has been tailored, all of this was agreed with a contract for work and labour.
So what are the differences? On the one hand, knowledge and skills are utilised. On the other hand, on the side of wage dumping, the simplest and therefore also the least paid jobs are transferred.
However, the question for the individual is where they want to find themselves in this spectrum. The spectrum must then be completed. Does the individual want to be very well paid as an expert, pay for their daily labour as an average employee or perform the simplest tasks for minimal pay?
What makes the difference for the individual?
Training, attitude, skills, motivation and experience. With the right training, the path to a permanent position is easily open. If the training is completed with a good result, higher salaries are also conceivable.
If the person concerned has a healthy attitude towards freedom, then they can embark on the path to freelancing as an expert with a good qualification. If they also have special skills, such as creativity, then the prospects of success as a freelancer increase enormously. However, you also need to be able to motivate yourself.
If, on the other hand, you are looking for less independence, need more motivation from outside and are not quite as blessed with creativity, you are in the right place as an employee.
The experience in turn helps both the employee and the freelancer. The latter often gains even more experience through their work, as they work almost exclusively in one specific area, while employees often do a variety of different jobs.
The abuse of work contracts
Does all this mean that it is always down to the individual, the person concerned? No, it is of course also the case that there are always black sheep, just like everywhere else. These black sheep exploit a system for their own benefit and to the detriment of others.
When does such abuse occur? The provisions of the law on contracts for work and labour, the distinction from Temporary employment agency and provisions to protect employees' rights are sometimes not formulated clearly enough. This allows companies that are not facing the end to resort to wage dumping measures.
In such cases, this means that the main company would be perfectly capable of operating with the existing profit margins. However, unscrupulous profit-seeking then demands lower costs in order to increase the profit margin to the maximum possible.
Consequences of abuse
In such a case, the result depends on the management. If wage dumping is to be maximised, a large proportion of the workforce may quickly find themselves without work just so that they can be replaced by temporary workers or a contract labour company. If the desire for higher profits is present, but not taken to an extreme, then contractors and temporary workers only replace a small proportion of the workforce. Their example, however, puts pressure on the rest of the permanent workforce to work more and not demand higher wages.
How can you recognise the black sheep? For contracts for work and labour, it's even easier than people often imagine. This is due to the nature of the contract. A contract for work and labour requires the successful completion of a work as specified in the description. This means that the contractor is responsible for bringing about success using its own resources and planning. The labour that is used for this belongs to the contractor. The same applies to the materials used.
If a subcontractor is now commissioned to take over parts of the work of the ordering company, a black sheep is no longer concerned with the creation of a work. Instead, the regular employees in the ordering company are to be replaced. This means that there is no clearly described work that must be completed by a certain date.
Similarly, the workers will not work independently following only the instructions of the management of the subcontracted company. Instead, they will be under the supervision of the parent company.
Last but not least, the subcontractor will not bring its own materials, but will simply use what the main company provides. If only one of these characteristics is present, there is a presumption that a disguised loan of labour is taking place. If all three characteristics are present, it is certain that this is a bogus labour contract.
It is therefore not the case that an existing law and a contractual form is being abused. Instead, existing law is being broken and a non-contractual form, the contract for work and labour, is being applied to a relationship, temporary work, which is not permitted here.
When it comes to the contract for work and labour, a distinction must therefore be made between a genuine contract for work and labour and a sham contract for work and labour. The contract for work and labour is a very good instrument in its statutory application and has its own advantages. The sham contract for work and labour is a breach of the law with corresponding consequences.
The contract for work and labour and its advantages
The contract for work and labour allows freelancers and contractors to find clients and work on projects. At the same time, it is an instrument with which the service can be securely remunerated in the form of the work created. Conversely, the contract for work and labour gives the customer all the tools they need to obtain a corresponding value for the remuneration paid.
Cooperation in the contract for work and labour
In other words, the contract for work brings legal certainty. Within the framework of contractual freedom, this is linked to the independence that entrepreneurs and freelancers need in order to carry out their entrepreneurial activities on their own initiative.
If an ordering company is a good customer who acts fairly and pays a fair fee, then it is valuable to contractors and freelancers and will be treated accordingly. If a subcontractor or freelancer acts fairly and does a good job, they will also be treated accordingly.
This means that if both know and fulfil their roles, they have a good working relationship, which is promoted by the provisions of the contract for work and services. This allows them to work together successfully over a longer period of time while maintaining their independence. A subcontractor thus remains a subcontractor and does not become a subdivision of the ordering company. A freelancer remains a freelancer and does not become just another employee in the company.
The minimum wage
While contracts for work are often seen as a means of engaging in wage dumping, the legality of such activities must also be questioned here. Due to its nature and characteristics, the contract for work and labour itself has no influence on the remuneration of employees.
What actually happens when a contractor is appointed is that a low wage is agreed between the customer and the contractor. For the contractor, this means that only a small budget is available to pay the employees. Their remuneration must therefore be correspondingly low.
In this context, however, it must also be pointed out that there are statutory minimum wages. The minimum wage applies to all employees in Germany who are at least 18 years old. This applies regardless of whether the employee is German or non-German and regardless of whether the company is German or foreign.
Although there are exceptions to the minimum wage, these rarely apply to the average employee. For example, employees under the age of 18 without a vocational qualification are exempt from the minimum wage. There are also special rules for the long-term unemployed, for whom the minimum wage only applies after 6 months of work. Apart from this, however, the minimum wage must always be paid.
Deviations from the minimum wage are also possible under collective bargaining law. This is why certain sectors have their own collectively agreed wages, which are also lower than the statutory minimum wage. However, this does not mean that wages of only €2 per hour are permitted. The minimum wage also applies regardless of how long the employment has existed, in which industry or what scope it has. It therefore also applies to mini-jobbers.
In addition to the trade unions, the Federal Customs Administration is primarily responsible for ensuring compliance with the statutory minimum wage. Violations of the statutory minimum wage can result in fines of up to €500,000. Anyone who is confronted with wage dumping can therefore take action. The same applies if permanent employees of contract workers find out that they are not being paid the statutory minimum wage.
Conclusion
There are cases in which regular employees have lost their jobs due to the appointment of a service contract company or are under pressure not to demand excessive wages. However, there is often corresponding market pressure on the company to reduce prices and therefore also costs in the company.
Just because there are laws doesn't mean that nobody breaks them. Accordingly, there are also cases of black sheep in the area of contracts for work and labour who engage in wage dumping with bogus contracts for work and labour. However, there is no clearly defined work, the workers are not independent of the parent company and the materials of the contract work company are not used.
Apart from extreme examples and black sheep, however, it is the responsibility of the individual to position themselves in such a way that they have opportunities on the labour market. This means that with the right qualifications, attitude, motivation, experience and skills, there are many opportunities. These include working as a solo self-employed person with work contracts, setting up your own business and working as an employee. Here it depends on the wishes of the person concerned which path is taken.
However, if there is a lack of qualifications, attitude, motivation, skills or experience, contracts for work and labour and work contractors are still a way of preventing unemployment. They are also a way for jobseekers to find paid work through contract labour companies.
However, the contract for work and labour, collective agreements, statutory minimum wages and other regulations provide a good framework that prevents wage dumping and allows many freelancers and companies to acquire customers and do business. They promote mutual cooperation and fair remuneration and prevent or at least make it more difficult to abuse contracts for work and labour.
Zeitarbeit International - Your personnel service provider for work contracts
No matter which country of the European Union they subcontractors or need an experienced service provider, we can support you with all questions relating to contracts for work and labour. In the area metal construction or electro we can also offer you a Partners from Lithuania and the entire Baltic region with a lot of manpower. Some of our customers have been working with our international specialist companies for twenty years and Subcontractors together. Regardless of how many employees you need for your order or assignment, simply contact our team for an uncomplicated enquiry.
Even if you need references or model contracts, we will be happy to support you when it comes to your work contract and use our experience to show you completely new and legal ways. Temporary work international looks forward to your inquiry!