The Strategic Use of Temporary Agency Work - Functional Change of a Non-Standard Form of Employment

Article excerpt

Using data from the German case, the paper examines a new form of client firms' utilization of temporary agency work that is distinctly different from traditional forms responding to production problems. Client firms, particularly from manufacturing, increasingly use temporary agency workers as a quasi-permanent component of their workforce. Management's primary aim is to establish a "security net" for the short-term-profits by bypassing German statutory dismissal protection. However, since client firms' regular employees and the temporary agency workers tend to perform the same tasks, a secondary effect of the strategic use of temporary agency work can be observed: the disciplinary effects associated with precarious work are tangibly amplified and expanded.

Key words: temporary agency work, work, labour relations, corporate governance, Germany

1. Introduction

Temporary agency work (TAW) has experienced a dramatic development in Germany over the last economic cycle. First, no other industry experienced comparable job growth during the boom between 2005 and 2008. The number of workers employed by agencies more than doubled to over 800.000 on the eve of the current crisis (Bundesagentur 2008: 5). Manpower, Adecco and randstad, all international players, were the three largest growing employers in Germany both in 2006 and in 2007, which reflects client firms' increasing reluctance to directly hire workers covered by statutory dismissal protection. Second, in the same way the industry benefited from the boom years, it was subsequently hit hard by the economic crisis following the breakdown of the Lehman Brothers Bank in September 2008. Between 2008 and 2009, the number of temporary agency workers decreased by more than 300.000. Client firms particularly in the manufacturing sector retained their core workforces but laid off a huge number of their so called "temps". Together, these two developments: the enormous expansion during the boom and the rapid contraction in the crisis, demonstrate the TAW-sector's increasing responsiveness to the economic cycle, and moves the German sector closer to its counterpart in the US (see Theodore/Peck 2002: 479).

The sector's close link to the economic cycle is a direct consequence of the reform of its regulatory framework in 2003. Compared to the Anglo-Saxon countries, Germany was traditionally characterized by a rather rigid regulation of TAW. In order to protect the standard form of employment, regulation constrained agencies' arbitrariness as employers and restricted client firms' use of TAW. In its initial version from 1972, the Labour Placement Act limited the period a worker could be hired out to a client firm to three months, and prohibited the use of fixed-term contracts by agencies (Bode et al. 1994). Despites numerous reforms, the maximum period of assignment and the restrictions on fixed-term contracts remained cornerstones of the German regulation until the end of the millennium. However, following a period of intensive lobbying by international agencies as well as powerful German business interests, the TAW-sector was deregulated in 2003. The maximum-period of work assignments and the remaining restrictions of the use of fixed-term contracts were removed (Weinkopf/Vanselow 2008). The reform enforced by the red-green government moved regulation in Germany closer to the traditionally liberal models in the Anglo-Saxon countries. Furthermore, due to its numerous exemption rules, the European directive on TAW, adopted in 2008, does not constitute a challenge to deregulation in Germany. Formally prescribing equal treatment of temporary agency workers and client firms' regular employees, the directive opened up exemptions based on collective agreements.

The deregulation in 2003 laid the foundation for the remarkable development of TAW in Germany in the subsequent years. The rapid expansion was not only a result of the sector's penetration of new client firms and new industries; a growing number of large, world-market oriented corporations, the BMW-plant in Leipzig being the most prominent example, used the deregulation to alter their deployment of this non-standard form of employment (Dudenhoffer/Buttner 2006; Promberger et al. …