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Working with a(n Engineering) Service Company: good or bad ?

Awesome Jobs.

Fascinating Jobs.

But all of them only temporary employment?


Service Companies?

You have nearly completed your technical studies. You have have polished your LinkedIn profile for a job search. You may very well have the first job offers from service companies in your inbox already.

What’s more: Online job portals are crawling with job offers that have service companies hiding behind them.

Mhh….. is starting your career at one of these companies a good idea? What do you need to know about their contracts?

How do I detect the service company behind a job ad?

Some engineering companies are quite big employers, and are well-known. But maybe their names don’t ring any bells when you’re scanning the job portals and reading the ads. So, how do you detect service companies when all the titles sound the same?

Well, you don’t detect anything reading the job title. And not necessarily when reading the company’s name, either, as many don’t have “consulting” or a similar indicator mentioned in the company name.

Students discover temporary work usually as a way of making extra money, typically in a part-time or temporary position such as working on a production line. There is a similar principle in engineering: as a candidate you sign a contract with a service company and you get your salary from this them. But the day-to-day work is conducted via temporary assignments at the location of a client company.


Starting a Job in Wolfsburg does not automatically mean being employed at VW

Some time ago, a friend proudly told me that his daughter had completed her degree in mechanical engineering and had already found a job with VW in Wolfsburg. I was really quite impressed, as it is incredibly difficult to compete with the several thousand applicants at larger companies. So I asked a little more closely… and quizzed him a bit longer ….until he admitted that she is indeed working with VW, but has signed her contract at a service company. That’s fine and there’s nothing wrong with it, but it also indicated to me that this kind of gig-style labor has become normal in our economy, even for careers like engineering.


What are service companies for, anyway?

Many service companies have a large pool of candidates, as they are searching on behalf of many clients at the same time. They are very experienced in recruiting, and they talk with lots of candidates every day. They are extremely familiar with the candidate market. Many a human resource department that is not hiring all the time and doesn’t have the latest information will rely on the assessment of the recruiting service company. Or it may simply not be worth their while to go through the lengthy process of recruiting, selecting and testing candidates themselves  – not if the company just wants to hire 1 single engineer.


Example 1: A small company with less than 30 employees is looking for an engineer.

The 15-person engineering department is in need of a new colleague. The company does not have a personnel department, and has neither the time nor experience to search for a candidate themselves via job ads. Therefore, they ask three service companies to present suitable candidates.  These companies now start the search for the most suitable candidate.

The managing director of the small company soon gets the profiles of 5 candidates and wants to interview 3 of them in person. In the end, he decides on one of them, who will get a contract with the service company but will start working in the engineering department of the client company (the client pays the salary price plus an additional percentage or stipend to the service company).

In the first year, the new employee really hits the ground running. S/he is doing so well that the company offers them a fixed contract. S/he agrees and the service company receives financial compensation for the portion of the contract that was unfulfilled. Now the small company has a capable employee of their own – and the engineer has a “real” job.


Example 2: An automobile corporation is planning a research project to design a new clutch.

The project is intended to take two years, and ten engineers are needed. The company can provide three engineers from its existing workforce, but is in need of a further seven professionals. A service company is requested to “rent out” the needed professionals to them for a period of two years.

For the automobile ­company, it would have been a risk to hire these seven professionals themselves. Who really knows if in two years they will still need them? Speaking of which: personnel planning has really grown difficult. Not long ago, ten years would have been considered to be a typical planning period. However, everything has changed because of the pace of technological development and because of globalization. Which company really knows how many employees, and with which qualifications, will be needed in five or ten years?


Are contracts with service companies a good idea?

A contract is a contract! For you, it’s important in the first place to understand that it is a proper German contract. The contract gives you all the rights and duties required by law. You will pay your contributions for health insurance and taxes. Usually, you’ll have the same statutory minimum vacation time and the protection against unjust termination. And most importantly, the contract enables you to be granted an Aufenthaltserlaubnis (provided that you earn enough in your field).

Which client will I be working for?

You cannot find out by reading a job advertisement what client company is being represented, or where the workplace itself will be. Most of the time, they won’t even tell you in the first interview, but later. The service company carefully checks your professional qualifications and if you are suitable, they suggest your profile to the client. If the client agrees to meet you, than you will have the next round of interviews, this time at the client company. You need to convince the decision-makers there that you are the perfect fit for the position. And only if the client agrees to take you will you be offered a contract from the service company.

Is the salary lower at a service company?

It might be – but then again, it might not be. The service company makes money by receiving a commission for “making you available” to the client, which is over and above the cost of your salary. In addition, some companies agree on a provision in case the client wants to hire you after a certain period, e.g. a year.

The service company is quite aware of the market situation and knows that highly qualified graduates and professionals are in the position to ask for a competitive salary. Therefore, your salary will definitely be somewhere in the typical market range. And don’t underestimate your own role in negotiating your salary!


The power of collective bargaining: tariff rates may influence your salary

Working in a manufacturing company goes hand-in-hand with the tariff-scale of the IG Metall (Industriegewerkschaft Metall: “Industrial Union of Metalworkers'”). This is the union representing companies in the technology and automobile sectors. They set the salary range according to a rate scale which standardizes salaries up to a certain amount – and the salary rates are especially high at IG Metall.

The unions of other sectors e.g. the service industry, have considerably less influence. But you can still negotiate your individual salary. I know graduates who have marketed their skills very well, and who have started at service companies with an extremely high starting salary. Of course, it has a lot to do with how strongly your profile is needed by the economy at the moment.

Many Germans are discontented with the gig economy

There is major criticism of the role and function of this type of “gig economy” in Germany’s society. Even for engineers.  But the disadvantages of this labor market model tend to particularly affect unskilled people or those with lower qualifications. Their work force can be replaced much more easily, they don’t have the power to defend their interests, and they suffer from poor working conditions.

Service companies are a Chance to get into the market for Young professionals

For graduates as well as professionals, service companies may offer great opportunities. They have a big slice of the cake in terms of vacant positions nationwide. In the end, every person has to find out how for him- or herself how much their individual profile is wanted by companies. And it depends on how much time you can afford to spend looking for job and / or how long you can finance yourself. Therefore, give it a try, attend interviews at many companies and talk to them on career fairs and practice (up-)selling yourself.

The path via a service company can be a really good entrance to the working world.

Fingers crossed and good luck!


4 Comments Add New Comment

  1. Vineeth says:

    This is a very comprehensive yet simple guide about German Job Market. Well detailed explanation with examples always make it easier to understand.
    Thanks a lot Nicola.

    1. nicolapilz says:

      Thanks for your comments, Vineeth! There a many specialized job fairs allover Germany where candidates have the opportunity to chat with recruiters both from service companies AND ‘regular’ employers. A pleasant way to stay updated about current opportunities, benefits and salaries.

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