Contract for work and labour versus temporary employment
In practice, contracts for work and labour and temporary employment often have the same objective, even if they are completely different in legal terms. In both cases, work is transferred from the core workforce to others. In both cases, personnel from outside the company are brought into the company, either literally or figuratively, by providing additional labour at a different location.
For a company, this raises the question of which of the two types of contracts is better. This decision is important because the two types of contracts are regulated differently. They entail different rights and obligations and these must be clearly and separately implemented in practice. Failure to do so can lead to serious legal problems.
The difference between temporary employment and a contract for work and labour
In reality, the distinction between the two can be blurred and this is a legal risk. When assessing which legal relationship exists here, we do not look at what is stipulated on paper. Instead, it looks at how it is handled in practice. This can then lead to the aforementioned serious legal consequences if the paper and the practice are not the same. The distinction between the two forms of contracts is made on the basis of certain characteristics, which are as follows:
1. The labour force
In the case of employee leasing and contracts for work and labour, employees are seconded to the customer's company. In the case of employee leasing, the aim is to purchase precisely these workers. They are paid by the main company. An agreement is made between the customer and the hiring company as to which and how many workers are to be seconded. The workers council also has a say in whether staff can be hired out and to what extent.
The contract for work, on the other hand, does not concern itself with the labour force. A specific result is ordered from the contractor. How the contractor then achieves the result is up to him. This also includes how many employees he deploys. This has no influence on the amount of the agreed remuneration. The workers council has no say here.
2. The time required
Temporary workers are paid according to the hours they work. This means that the time actually worked is paid at the end. In addition, the assignment of temporary workers is limited to 18 months, although this can be extended to a maximum of 24 months by collective or company agreement.
For the creation of the work, although a deadline is agreed, it is irrelevant how long the work was actually worked on. Payment is made for the result, not for the hours worked on the result. This makes payment easy to calculate in advance, while at the same time incentivising the contractor to be more efficient.
3. The organisation
In the case of temporary employment, the hirer is responsible for organising the workers. It is therefore up to the hirer to deploy the labour efficiently and to monitor the quality of the work.
Under the law on contracts for work and services, the contractor works entirely on his own responsibility. He determines all work processes himself. This also includes the organisation of the personnel used, such as their number, responsibilities and qualifications. The contractor is also responsible for ensuring the quality of the work.
4. The right to issue instructions and the affiliation
Temporary workers become part of the contracting company and are therefore treated the same as the permanent workforce. The user company also has the right to give instructions to temporary workers. Additionally, they fall under the jurisdiction of the works council.
If a contractor company sends employees to the ordering company, they nevertheless remain part of the contracting company. They can be integrated into the processes of the ordering company if this is necessary for the production of the work. However, they do not participate in the general processes of the company and the workers council is not responsible for them.
In practice, the ordering companies also issue instructions to the contract workers. However, these instructions only serve to ensure a smooth process. For example, the painters involved in a project may be told which materials and colours to use. However, it is the contracting company that determines when and where the work is to be carried out.
5. The risk
In the case of temporary employment, the responsibility for the temporary workers lies with the hirer. This means that the hirer also bears the risks with regard to the deployment of the temporary workers, their productivity and any damage they may cause.
Under a contract for work and labour, the risk lies entirely with the contractor. It is responsible for deploying its own staff correctly and is liable for any damage caused by them. It should also be clearly noted here that a sham contract for work is always automatically deemed to exist if the contractor is not liable for the work.
6 The legal regulation
The contract for work and labour is regulated in the German Civil Code (BGB). For temporary employment, on the other hand, the regulations can be found in the Temporary Employment Act (AÜG).
It follows from the law on contracts for work and labour that a direct contractual relationship arises between the client and the contractor. However, a triangular relationship arises in the context of employee leasing. There is a contract between the hirer and the hiring company and a further contract between the temporary worker and the hiring company. The hirer takes on the de facto role of the employer. More about labour law >>>
Why employee leasing?
The temporary contracts is a very good solution if labour is simply required across different areas of the hirer's business. It also has the advantage that the hirer is always in control of the work. He has the right to issue instructions and the temporary workers are integrated into the organisation of his company.
The use of personnel leasing is also very straightforward, as operations continue as usual. Instead of hiring new permanent employees, the tasks are simply performed by temporary workers, which is the main practical difference. The only challenge is the maximum duration limit for temporary assignments. However, since this restriction applies to individual workers, it can be managed by continuously recruiting new employees. Temporary employment contract - content and meaning >>>
Why a contract for work?
To work with a work contracts and address personnel shortages or capacity constraints within a company, the tasks must be clearly definable as specific work assignments. Additionally, they should be bundled into a single project or block, allowing a service contract company to take over with a team of contract workers.
If this prerequisite is met or can be achieved through a corresponding reorganisation with a shifting of the core workforce, the contract for work and services offers a number of advantages. In this case, the external workers work under the management of the contract labour company so that no resources and time are required.
There is no time limit. If a work consists of producing more and more new units, the contract can be continued again and again. Thanks to the payment for the result, financial planning can be simplified here. Scheduling is also easier, as the work or units must be delivered at specific times.
The contractor also assumes risks such as work destruction, idle labor, and even damages incurred during the creation of the work. This provides significant relief for the client.
Which form of contract is recommended in which case
If the main company wishes to retain control over all work, then it is better to hire out employees. The same applies if the work is to be spread across the entire company. A shorter duration of the contract is also an advantage for a temporary employment agency.
If, on the other hand, the performance of the service is to take longer and it is a block that is to be completed by a team, the contract for work and labour is better. This is especially true in terms of financial and time planning security, as well as risk assumption.
Conclusion
The difference between a work contracts and temporary contracts may be fluid in practice, but from a legal perspective it is better to ensure a clear demarcation here. In the case of temporary employment, the hirer determines the labour force and the time spent. The temporary worker becomes part of the permanent establishment and the latter has the right to issue instructions to them. In contrast, in a contract for work and labor, the contracting company assumes both responsibility and risk. The external workers are not integrated into the client company.
When deciding whether temporary employment or a contract for work and labour is the best option for a company, it is important to consider how much control and for how long the temporary employees or the contract for work and labour company are needed. Then there is the risk and the organisation of the main company.
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