(English) Further study confirms negative effects of bogus self-employment legislation on the competitiveness of the German economy

This text is an automatic english translation of our original article about this topic: 

Photo: Pixabay, Hans

So far, our survey of March 2019 - conducted jointly with GULP - was the only one study on the economic effects of the current legal situation. Now a second study by scientists confirms our alarming results - also from the perspective of personnel service providers and end customers.

Matthias Sellinger and Philipp Tachkov from the Institute for Management and Innovation (IMI) at the Ludwigshafen University of Applied Sciences (Chair: Prof. Rainer Völker) were commissioned by the Rhineland-Palatinate Ministry of Economic Affairs to investigate the "Effects of the legislation on temporary employment and bogus self-employment on the quantity and quality of knowledge transfer between external experts and clients". (Rhineland-Palatinate has been governed since May 2016 by a traffic light coalition under Prime Minister Malu Dreyer (SPD). Economics Minister is Volker Wissing of the FDP.)

The study had already been commissioned in the summer of 2018 and then written in December, but its long version was only published this week. We contacted Prof. Völker last summer, but were not interviewed for the study. The study was therefore completely independent of the VGSD.

The most important results at a glance

• The authors put their focus on knowledge-intensive services provided by highly qualified and well-earning specialists.
• On the basis of interviews with experts, hypotheses were worked out and, in order to check them, 190 freelancers, 125 executives from personnel agencies and 323 from client companies were interviewed nationwide.
• In each of the three sub-groups, a majority of respondents consider it necessary to revise the law. For example, 71 percent of clients and 54 percent of contractors consider the AÜG to be in need of reform with regard to the definition of bogus self-employment.
• The criteria contradict today's work reality (e.g. when using agile methods) - in particular with regard to communication, place of work and working hours. Therefore, they are sometimes difficult or impossible to implement.
• With regard to status assessment procedures, the study confirmed that the criteria are not transparent enough, that this leads to uncertainty among the clients and that they limit the use of the self-employed as a consequence. A "general decline in demand for knowledge-intensive projects" can be seen from many discussions.
• Where the self-employed continue to be employed, the bureaucratic effort for this has increased, and where temporary employment agencies are used, the flexible organisation of working hours for employees is clearly impaired.
• 42% of clients report additional expenses for legal advice, 32% for employee training, 24% for restructuring in their (award) processes and 12% for additional payments. Only 23% do not state that additional costs have been incurred. Of the contractors, 20% reported additional legal advice costs, as well as the fact that they had to purchase their own work equipment to a greater extent than before. About 10% each reported organisational adjustments and additional payments. (pages 36 and 25, respectively)
• The study speaks of "high uncertainty regarding the AÜG reform", which would lead to clients filling an increasing number of knowledge-intensive projects or even all projects with temporary staff instead of self-employed workers.
• This is anything but successful: "However, the knowledge-intensive projects carried out through the provision of temporary workers show poorer project quality, delays in progress and also poorer achievement of objectives in the majority of respondents."
• Finally, a large number of indicators show that legislation has negative effects on the extent and quality of knowledge transfer to the client: "Since the knowledge of external experts plays an important role for many companies in their innovation processes, the current legal situation could have negative effects on the economic performance and innovative strength of the companies."

Other interesting details / Quotes

• "The fact that prior to the 2017 law reform of temporary employment a recommendation of the German Bundestag originally envisaged an exemption for knowledge-intensive services (which, however, was not included in the law reform) proves the necessity of this investigation". (p. 3)
• "For example, 44.5% of the clients surveyed agreed to consciously reduce the number of freelancers employed due to current legislation. Nearly one third of the clients surveyed stated that their company completely refrained from using freelancers". (p. 13)
• Among the clients "approx. 54% of the participants agreed with the statement that the recommended criteria for knowledge-intensive services are difficult to meet". (p. 14)
• "More than half (approx. 56%) of the surveyed participants from the target group of clients thought that uncertainty about the legal situation and its consequences had increased. Only approx. 12% of the surveyed participants disagreed with the statement". (p. 14)
• "Approximately 66% of the clients surveyed stated that they had company standards for working with freelancers. These company standards often result in clients restricting the use of external experts." (p. 15)
• "More than 30% of the freelancers surveyed stated that their income has fallen in recent years as a result of the legal situation". (p. 16)
• About 50% of the clients surveyed stated that they had less know-how available for knowledge-intensive processes or projects due to the reduction or renunciation of cooperation with freelancers, that they lacked know-how to prepare for digital trends and that projects were delayed. (p. 16)
• 44% of the clients stated that projects were relocated abroad due to uncertainty. (p. 16)
• The assessment of the freelancers on the points just mentioned was even more pessimistic. Of these, 50% had observed a relocation of knowledge-intensive projects abroad, 64% delays in projects and 67% the lack of know-how to prepare for digital trends. (p. 16 et seq.)

What changes meet with the greatest approval from clients and contractors?

The authors made (unfortunately only) four suggestions for improvement and asked for their agreement. Here is the resulting ranking:

• Transparent status determination procedure: 85 / 73% approval (for clients or contractors)
• Change of the criteria: 82 / 80%
• Recognition of alternative retirement provision methods (instead of contributions to pension insurance): 74 / 85%
• Implementation of a salary limit: 58 / 42%

Our conclusion on this

The study confirms what we and other market participants have been warning against for years: The AÜG and the resulting legal uncertainty have negative effects both on us self-employed persons and on our clients. It contributes to German companies falling behind in international competition. For this reason, there is a far-reaching consensus among the clients and contractors concerned that a legislative reform is urgently needed.

In April the SPD-own restaurant forum had published one Positionspapier, whose argumentation is now impressively underpinned by the study in many details: For a successful digitization of Germany it needs independent ones, who bring in their knowledge in the context of agile projects with their clients. Employee hiring is for this no alternative.

We hope, this realization intersperses itself now also in the Federal Ministry of Labor and leads time near to solution-oriented discussions with all concerning. A model for this could be the technical discussions of the BMAS to the age precaution obligation.

Parliamentary questions to the federal government like those of FDP member of the Bundestag Thomas Sattelberger, whether negative economic effects of the AÜG are known, can no longer be denied by the government in the future and the problem can thus be denied.

To the study (PDF, 27 pages)