Labor law challenges of the shortage of skilled workers - a partially solvable problem

August 2022 · Estimated read time: mins

How to address the shortage of skilled workers? A look at options under labor law

Shortage of skilled workers, war of talents, problems with young and the same phenomenon has many names and many causes. Be it demographics, technological change, global crises, one thing is certain: in many sectors and industries, vacancies could not be adequately filled for a long time due to a lack of suitable personnel. Recruiters, HR managers and personnel developers are faced with a particular and especially long-term challenge that is more likely to intensify than to ease in the future. If the baby boomers, i.e. those born in the 1950s and 1960s, retire from 2025 onwards, around 30% of today's working population will be lost over the next five years. This enormous loss of manpower can certainly not be absorbed by work compression and restructuring alone.

How can companies meet this challenge? In terms of labor law, there are certainly some instruments for tackling personnel shortage:

Prevent fluctuation/exodus
In order to retain staff and prevent fluctuation and churn, companies have a variety of predominantly financial approaches at their disposal: Retainer bonuses, post-contractual non-competition clauses, exclusion of termination options, other financial incentives such as employee equity share programs, option programs, etc. However, these instruments can only be implemented by means of an agreement with the employee. If the employer wishes to use such instruments across the board, the co-determination rights of the works council must be observed.

These various approaches have had considerable effect in the recent past. However, it is also important to keep in mind that younger employees in particular (“Generation Y and Z”) are by no means solely "money-driven" anymore and often turn down such offers on the part of the employer, in favor of the freedom to switch to other employers even at short notice.

Rethinking parental leave
Employers could also rethink the issue of parental leave. Far too often, employment relationships with fathers and mothers are terminated at the end of parental leave because it is not operationally feasible for the employee to return to work - often on a part-time basis. The resulting outflow of expertise and manpower can certainly be prevented more frequently than in the past by consistently maintaining the employment relationship and taking appropriate organizational measures.

The argument that employees on parental leave would lose touch with the company's further development due to the often years-long break from work was often true in the past. The return to work was in fact very difficult - regardless of the legal situation. This de facto problem could be reduced by measures such as regular training and participation of employees in company training measures during parental leave. In addition, employees on parental leave would not lose contact with the workforce and the reality of the company.
Individual supplementary agreements to the employment contract are required to implement such measures.

Driving digitization forward
The takeover of operational tasks by robots is progressing at high speed. Companies can handle a larger volume of operational tasks with fewer personnel.  But even this approach is not a no-brainer, because only a few and only very simple operational tasks can be automated - so far. Nor can the personnel freed up by automation be immediately assigned to higher-value tasks. Costly education and training are required to effectively design and implement this operational change. Here, too, mandatory co-determination rights of the works council must be observed during planning and implementation.

Use of temporary work
Temporary work is a legally and economically established option for performing operational activities with non-own personnel. The co-determination rights of the works council must also be observed when using temporary workers. However, temporary work is only suitable for covering a temporary and less permanent shortage of the company's own workforce. Moreover, in the case of industry-specific or activity-specific shortages of skilled workers, the shortage is now so glaring that there are not even enough temporary workers available. The use of temporary workers is therefore more appropriate for company-specific skills shortages.

Establishment of joint ventures and joint operations
Merging operational activities with those of other companies is certainly a suitable way of counteracting a shortage of skilled workers. This can be done operationally by setting up joint operations (several legally independent companies run a joint operation) or by setting up a joint venture (several companies take a stake in one company). In the areas of research and development, but also in the area of production, this is already being done successfully and has been for some time in many industries. Here, antitrust issues must be taken into account, as well as questions of industrial property rights, but also, to a considerable extent, labor law challenges. Questions of works constitution law, collective bargaining law and transfer of business law have to be dealt with in such constructions. And: You first have to find a company with which it makes sense to set up a joint venture or joint operation at the operational level. Time aspects also play a major role. After all, setting up a joint operation or joint venture is not a project that can be implemented within a few months.

Relocation of business activities abroad
Even if the global political situation has changed, the relocation of business activities abroad is still a good way of counteracting the shortage of skilled workers, at least locally. Whereas in the past it was mainly business and logistical aspects that motivated the relocation of production facilities abroad, now there is also the aspect of a shortage of skilled workers. Business activities are "migrating" to where there are sufficient workers. One particular motivation for such drastic measures is the fact that the influx of well-trained skilled workers to Germany, particularly from non-European countries, still faces considerable political, legal and social obstacles and reservations. The relocation of business activities to other countries raises issues of particular relevance in terms of works constitution law, protection against dismissal and collective bargaining agreements.

In summary, it can be stated that there are certainly effective ways for companies to counter the ongoing and worsening shortage of skilled workers. However, these means involve considerable financial investment and legal challenges. And: The shortage of skilled workers can only be eliminated in the long term through decisive political action, not only in Germany but also beyond. Without the influx of trained specialists from abroad, the shortage of skilled workers cannot be overcome in the long term.

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