What is a contract for services?
It is a contract in which the contractor (manufacturer) undertakes to produce a work in exchange for payment (remuneration) by the client (purchaser). In a contract for work, the work is evaluated based on the result (the work) and not on the amount of effort expended.
In a contract for work and services, the client commissions the contractor—usually a company—to produce a specific work. The contractor is obligated to produce the agreed-upon work for the agreed-upon price with the client. This is stipulated in Section 631 of the German Civil Code (BGB). The production or modification of an item may also constitute a work. A classic example: A contracting firm is commissioned to install a new heating system in an office—or to repair the old heating system.
The contractor acts independently as a business in this process. It decides for itself how, with how many people, and in how much time it will complete the work. It uses its own equipment. And it is solely responsible—and therefore liable—for the final result. The client ultimately pays the agreed-upon price for the agreed-upon result—not for labor or working hours.
Which companies use contracts for work and services?
Contracts for work and services exist in all industries. Traditional contracts for work and services, such as those for skilled trades, are common in many companies. Many firms have outsourced service areas such as cafeterias or plant security. However, companies are now increasingly outsourcing activities—even from core business areas—to contractors. This occurs in the IT sector—many automakers have outsourced the development of entire components to external engineering service providers. As well as in production—at BMW and Porsche in Leipzig, for example, contract service providers assemble axles, doors, and wheels. And finally, in the service sector—in the elevator industry, the majority of assembly and maintenance is already outsourced through contracts for work and services.
What is the difference between a contract for services and temporary staffing?
In a contract for services, the client company commissions a specific task; in temporary staffing, the company hires workers. With a contract for services, payment is based on the outcome of the work; with temporary staffing, it is based on hours worked. The contractor’s employees are not part of the client company. They may only be integrated into the client’s work processes to a certain extent. However, they are not subject to the instructions of the client company’s supervisors.
In contrast, temporary agency workers are employees of the client company. They work there under the direction of supervisors, and the works council is responsible for them. Therefore, they are also eligible to vote in works council elections at the client company.
However, these distinctions are often not observed in contracts for services. In such cases, these are referred to as so-called “sham contracts for services,” which are, in reality, disguised temporary staffing arrangements.
How can I tell if I’m working under a contract for services?
It is often difficult for individual employees to determine the terms of their contract. However, if they are permanently performing work for another company on that company’s premises, then it is likely a contract for services. We recommend: Ask your works council, the works council of the client company, or the local IG Metall office.
What does this mean for me?
In principle, it makes no difference at first glance whether the company sells products and services independently on the market—or whether it works on behalf of other companies. What matters are the working conditions and the pay, which are specified in the employment contract or in the collective bargaining agreement applicable to the company. There are also contract-for-work positions that pay very well—for example, at specialized engineering service providers. As a rule, however, the working conditions and wages are worse than those of permanent employees at the client company. Often, “contractor staff” and “external workers” are also treated significantly worse: They don’t receive discounts in the cafeteria, don’t get a spot in the company daycare—and often don’t receive proper safety equipment either.
Who is my supervisor? Who do I need to consult with regarding my work tasks?
Your supervisor is the head of the contractor company. Strictly speaking, the supervisor at the client company has no authority to issue instructions, although in practice, professional consultation may of course be necessary—but this must be clearly defined, such as in project work. For example, you can certainly tell a contractor at home, “Could you please install the door the other way around?” However, you cannot demand that the contractor work longer hours or perform other tasks. In such cases, the contractor will have to say, “Please discuss that with my boss.” So if, as a contract worker, you are regularly included in project meetings, that is problematic.
However, if supervisors from the client company regularly give you instructions, there’s good reason to suspect that this is a sham contract for services—and thus a form of disguised temporary agency work (see below).
Who pays my salary?
From your own company, not from the client company. After all, the client company pays for the work, not for you as a worker.
Do I receive vacation pay, a Christmas bonus, and other bonuses like the company’s other employees?
No. Different company—different situation. Unless your union or the works council enforces it.
Who sets my work schedule?
The contractor. It agrees on the work schedules with the client company. The supervisor at the client company has no authority to determine your work hours. Otherwise, there’s a suspicion that this is a sham contract and thus disguised temporary staffing. In practice, it’s entirely possible that you’ll have different work hours than the permanent staff.
What rights do I have?
You are a regular employee. Therefore, all labor laws apply to you. If a collective bargaining agreement is in effect, it also applies to you if you are a union member. If you feel you are being treated unfairly, you can inform your works council or contact the relevant union, such as the regional IG Metall chapter. IG Metall will advise and represent you in court as well. However, it is also important to speak with the works council at the client company.
If there is no works council at the company, we recommend establishing one as soon as possible with the help of IG Metall. Only the works council can effectively ensure that laws and collective bargaining agreements are being followed at your workplace.
How can I transition to a permanent position?
Could this be a sham contract? In the best-case scenario, a permanent position with the client company might even be possible. At the very least, there is a chance that your current temporary staffing arrangement could be converted to a direct employment relationship with the client company. In that case, you would be entitled to the industry-specific wage supplements provided for in the IG Metall collective bargaining agreement. Additionally, the works council of the client company would then be responsible for you.
Is the client company’s works council responsible for me?
While the works council at the client company is not officially responsible for you, it is responsible for your occupational safety. If workplace safety is a serious issue for you, the client’s works council can make a real difference, since the client employer is responsible for occupational safety throughout its entire facility. In addition, the client company’s works council can sometimes have a serious talk with its employer, for example, if the company is not complying with the law or if there are bogus service contracts.
