Contract and agency labour: even engineers earn less

09.04.2013

Even highly qualified people in technical jobs are employed as contract workers and assigned to other companies. Often they earn up to one-fifth less than permanent employees.

A recent study by the trade union-affiliated Hans Böeckler Foundation and the WSI in Germany found that engineers, IT experts and technicians who are employed by third party service providers also earn less than permanent workers, and often they have to work longer hours. Nevertheless they are not all that dissatisfied with their jobs.

The study discovered a clear income gap – the contract workers earn significantly less than the other employees. Engineers earn about 18.4 percent less than permanent workers, technicians 18.5 percent, and for IT experts it is as much as 22.1 percent. In addition contract workers generally receive less holiday pay or Christmas bonuses or profit sharing benefits.

What is important for income is whether the employees are covered by a collective agreement or not. A collective agreement has a positive impact on earnings, both for permanent workers and workers employed by third party services providers. Those with a collective agreement earn between 150 and 900 Euros a month more than those without a collective agreement. On the other hand contract workers do not have a collective agreement. The study assumes that this may have to do with the fact that the rates paid to contract workers are lower than the negotiated rates for the industry. That is why agencies can only get engineers, IT experts or technicians to work for them if they pay more than the rate paid to contract workers.

Actual hours worked are much longer than what is stipulated in the collective agreement. The difference is particularly striking for workers employed by third party service providers. Most of them work more than 40 hours a week.

Contract workers and workers employed by third party service providers are more likely to have short-term contracts. IT experts are the ones most affected by short-term contracts.

Job satisfaction is not reflected in pay, however. 44 percent of contract workers are not very or not all all satisfied with their pay, as opposed to 34 percent of workers who are employed by third party service providers or permanent workers. Only 5 percent of contract workers, 7 percent of workers employed by third party service providers and 8 percent of permanent workers are satisfied with their pay in all respects.