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The trend of large companies founding in-house staffing agencies in order to avoid a large part of German labour law and industry sector minimum salaries could backfire in a major way according to one of Germany's labour law gurus, Wirtschaftswoche reports.
In an interview, Professor Peter Schueren of Muenster University, said "he who founds a temporary employment agency, which is in reality not active in the market but merely supplies personnel to his own head-office or another subsidiary, could face huge liability risks. The practice is an abuse of the law [and] the employment agency only exists to avoid minimum salaries and redundancy laws."
"These companies are trying to avoid industry sector agreements (Tarifvertrag), which they themselves have signed. If they can't afford to comply with the agreement, they should not have signed it in the first place. If somebody needs temporary employees, they can go to proper temporary staffing agencies."
"If an employee of an in-house temporary staffing agency sues his employer and the court agrees with him/her, the employer does not only have to pay the difference in salary and the difference in social security payments for that person but for all employees of in-house the temporary staffing agency. Since the difference in pay can be up to 40% over several years, this could become very expensive."
"[Where people have sued over this] different federal courts have come up with different verdicts and we don't have a high court decision on this subject yet."
"However, the federal court of Bremen has decided in 2008 that the federal state of Bremen cannot run an organisation, which merely exists to employ and hire out supply teachers to the state's schools. The court has ruled that these 'temporary employees' are in fact permanent employees of the state of Bremen. The people who sued in Bremen will surely have started a trend. Unfortunately, companies have not understood that yet."
To see a list of in-house staffing agencies in Germany please click here