Opportunities and risks in managing contracts for work and contracts for services

Starting with the German meat industry, the sector-specific prohibition of contracts for work and temporary employment services is under social and political discussion. These types of contracts are misused time and again to exploit workers or to bypass social standards. As alternatives to conventional contracts of employment, they are opposed, above all, to the interests of the workers’ representatives.

Strict regulations are therefore imposed on the use of external labor, in particular by the Law on Temporary Employment
(Arbeitnehmerüberlassungsgesetz). The use of contracts for work and contracts for services is also monitored by governmental authorities and severe penalties are imposed for any findings of non-compliance. At the same time, the concrete consequences are extremely difficult to assess. The finding of a fictitious contract for work, for example, results in substantial fines, permanent employment of the foreign workers with retroactive effect, and substantial additional payments. In addition to process stoppages and the loss of reputation, criminal investigations against the decision makers and custodial sentences are possible.

On the other hand, the types of contracts mentioned above allow fluctuations in capacity to be compensated, cost advantages to be realized, or expertise to be purchased. This enables companies to strengthen their competitiveness and increase their profitability. How can the company’s management make use of these opportunities while at the same time minimizing the risks?

Through a responsible, transparent and intelligent approach to these types of contracts. In addition to the contractual level, local cooperation is a priority that needs to be actively developed. In our clients’ projects, we develop precise tender documents, define work processes taking into account all of the departments involved, train both managers and employees, and perform internal audits on a regular basis.

We recommend that you, too, take the time to draft correct contracts for work and contracts for services, and we will be offering interesting approaches in our presentation.