Corona is pushing back temporary employment

Labor Minister Hubertus Heil wants to restrict fixed-term employment. A new survey now shows that the time limits have been falling on their own in recent months.

AAccording to Labor Minister Hubertus Heil (SPD), employers abuse their power by only giving applicants temporary employment contracts instead of employing them for an unlimited period. Therefore, he wants to restrict this by law. But now, of all things, the Corona crisis and the economic downturn are causing the time limits to fall by themselves. This is shown by a new survey from the Institute for Employment Research (IAB). Fixed-term contracts are on the decline, especially in the private sector.

In total, there were still 2.4 million employees with fixed-term contracts in mid-2020. That was 12.4 percent less than a year ago and even 24.3 percent less than in mid-2018. The trend started before Corona and then continued at full speed. The share of employees with fixed-term contracts in relation to all employees has fallen from 8.3 to 6.3 percent since 2018. IAB researcher Christian Hohendanner points out that there are now fewer new hires overall. In addition, fewer employees were taken on permanent positions after their fixed-term expiry: their share fell from 44 percent in the first half of 2019 to 39 percent most recently. And on the other hand, more time limits than usual expired without replacement.

The proportion of employees who only have fixed-term contracts differs significantly between the sectors: In the private sector, the rate fell from 6.3 percent in 2019 to 5.2 percent. In the public sector it stagnated at 6.9 percent. And in the “third sector”, that is, employers who are predominantly recognized as non-profit, the figure was 12.5 percent. In some cases, however, the government also supports fixed-term contracts financially: with its “Participation Opportunities Act” introduced in 2019 for long-term unemployed Hartz IV recipients, it subsidizes around 50,000 temporary positions in all three sectors.

Criticism of the new law

On the one hand, the Minister of Labor is currently campaigning for this promotion, which has been offered on a trial basis, for the unemployed to be anchored in law. On the other hand, Heil has submitted a draft law to the Federal Cabinet, which is intended to make it more difficult for companies and applicants to freely negotiate fixed-term contracts: If the position offered does not meet the criteria of a statutory special permit, fixed-term contracts would then only be permitted for a maximum of 18 months – and only as long as less than 2.5 percent of the workforce has the relevant contracts.

Economists expect that the interest of many companies in fixed-term employment contracts will increase again if their business situation improves somewhat, but they are still unsure whether there will be enough for new permanent positions. The German Economic Institute (IW), which is close to the employer, warns against the law, because even for employees, temporary work is often better than none at all. The mechanical engineering association VDMA is even calling for more leeway for fixed-term contracts – the sooner the job market will pick up again after the crisis.