42 881,880 6.4%

Milllion people in the German workforce

Temporary workers in Germany

Germany’s unemployment rate

German Labor Market and Temporary Worker OverviewWith more than 42 million people comprising the German workforce, the country’s labor market landscape is ripe with talent and is the largest labor pool in Europe. German corporations benefit from the nation’s exceptional education system and compulsory vocational training, with more than 80 percent of the workforce receiving vocational training and/or an advanced degree. Consequently, Germany’s average unemployment rate was 6.4 percent in 2014, which is among the lowest in Europe. Global labor market analysts predict job prospects for full-time employees and temporary workers to remain favorable in Germany throughout 2015.

In the past decade, temporary worker numbers have more than doubled. There are 881,800 temporary workers in Germany, according to April 2015 figures from the Federal Employment Agency (BA). This brings the temporary worker rate to 2.5 percent of the country’s workforce.

LABOR MARKET REPORT

GERMANYJ u l y 2015

German tax rules require companies to properly identify independent contractors as temporary, non-employed workers. Both employers and independent contractors face legal burdens should workers be improperly classified, as social security contributions are a key requirement for employees hired directly by a corporation.

Independent Contractors Face Stringent Regulations and Misclassification Risks

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Booming Economic Conditions Promote Temporary Worker Engagement In a May 2015 report, global think tank, Ifo Institute for Economic Research, said it expects Germany’s economic prowess to remain solid, as the country has been Europe’s most colossal economy since 2011. The country’s favorable economic conditions have cultivated considerable growth in the temporary labor market. The trends below are of particular importance to the temporary labor landscape:

• More frequently, organizations rely on temporary workers and providers of staffing and recruitment services to deal with economic volatility and fluctuations in customer demand. Historically, most temporary jobs targeted low-skilled workers, but the demand for high- killed temps in industries such as administrative/ clerical, financial and information technology have flourished in recent years.

• Germany’s job growth has been particularly progressive for temporary agency workers due to the 2012 deregulation of the temporary agency market in Berlin and low-income jobs subsidized by states.

Strict Labor Regulations Benefit Temporary Workers Germany’s temporary staffing services are highly regulated and MSPs are unable to contract with suppliers for the benefit of another service recipient. According to the Arbeitnehmerüberlassungsgesetz (AUG), temporary workers need to be employed by a German subsidiary which holds the AUG License and which renews this license annually. Third parties (such as umbrella companies) cannot be added to the chain. Additionally, labor legislations listed below illustrate the country’s rigorous requirements for using temporary workers:

• Germany’s “equal pay - equal treatment” legislation requires benefits and working conditions for temporary workers to mirror those of permanent employees. Temporary workers may engage with a corporation for two years, at which time they will become permanent employees. Contract extensions are allowed a maximum of three times within the two-year timeframe.

• According to Staffing Industry Analyst (SIA) findings, the equal pay legislation will favorably impact the German staffing industry as a whole and will be particularly helpful for temporary workers.

• German regulations require companies to set wage rates by collective bargaining agreements industry-wide.

• In 2013, the Confederation of German Trade Unions increased temporary workers ’ minimum wage to €8.50, with rates increasing in increments through 2016.

Multinational German powerhouses such as Allianz, Volkswagen and Siemens all utilize managed service providers. German organizations are deploying MSPs to manage compliance, risk related to external providers, reporting/ analytics and transparency. • Besides a number of large staffing agencies such as Randstad, Adecco, and Persona, there are many smaller niche staffing agencies with a strong German presence.• Many large German organizations use an average of 48 suppliers (when all temporary labor categories are accounted for).

Increasing Demand for Transparency, Analytics Drives MSP Use