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Contracting Blog

Concerns over Cap on German Contracts

09/08/2016

A recent labour law reform has led to the termination of one hundred and eighty local contractors.  The reform which comes into effect from January 2017 means that a cap of eighteen months has been put in place with regards to leasing temporary workers, which includes skilled contractors from abroad.  Therefore after only eighteen months in the job contractors would be classed as permanent employees.
Agencies have grouped together to fight this planned reform claiming that this will have disastrous effects.  Fears are that the freelancer status will become difficult to determine effecting the recruitment of qualified new entrants and that this will heavily impact the German economy which already suffers from a rapidly ageing workforce.  Arguments include that fact that freelancers are a necessary resource for projects and on complicated technical projects contracts can extend passed the proposed eighteen months.
Over eighty German business leaders have been published in their national press urging a rethink of the cap which has been referred to as destroying good work through unnecessary laws.  
Germany is a popular destination for contractors due to its position as a strong economic power and its affluent living conditions and this cap is likely to have a serious impact on its recruitment market.
The proposed reform is intended to protect vulnerable workers in low wage sectors who are treated as payroll contractors in order to avoid giving them the same benefits as permanent employees, but as an unintended consequence it will also have a negative impact on highly skilled contractors.
 



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