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Precarious Contracts at the European Central Bank

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Precarious Contracts at the European Central Bank

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Agora #87
17-20

From a staff representative perspective, we therefore need to be very careful that a possible improvement does not come at the cost of a certain deterioration.

The Euro is expected to last yet the European Central Bank (ECB) is, as many other International Organisations, intensely relying on the use of temporary (and chained) contracts. This is quite a paradox for an institution whose main role is to foster stability.

Temporary Contracts at the ECB

As evidence that the situation is not something to be proud of, the ECB no longer shares figures with the public regarding the proportion of temporary contracts in its workforce. According to IPSO sources, the proportion of permanent contracts is compared to the total “official” workforce (that is: disregarding permanent functions outsourced to third parties, such as the helpdesk, the security agents, the caterers, etc.) stands at ca 55%. Including the outsourced workers would bring that figure down to ca 40%. Trainees represent 10% of the ECB workforce. The age profile is also interesting, as it is only among the 45 years olds that the share of permanent contracts reaches at least 75% of the total.

History and underlying reasons

The wide-spread use of temporary contracts was introduced in 2004, under the aegis of Vice-President Papademos (in charge of HR), who chaired the so-called Vice-President Task Force on Human Resources, during President Trichet´s mandate. Until that date, permanent contracts were granted from the start, and temporary contracts were used for replacement needs.

As of 2004, only time-limited contracts were granted, which could be either convertible into permanent contracts after 3 or 5 years, or not convertible at all. The first official reason to switch to that model was to keep the capacity of the organisation to adjust the composition of its workforce, depending on the evolution of technology and business needs. The second reason was to simplify the management of the termination strategy.

Indeed, by default, a temporary contract elapses at the end of its term. There is no need for demonstrating that the worker is not performing to the expected level (should that be the alleged reason for termination), nor to go through the administrative hassle of an underperformance procedure. As a side remark, it is worthwhile flagging that such a precarious contract model also extend to the promotion domain, where roughly half of the promotions are granted on a temporary basis – and possibly rolled over from one budgetary exercise to the next – even when the worker has a permanent contract.

Once introduced in the ECB legal framework, the temporary contracts developed a dynamic of their own. A main factor was the so-called conflict of interests of the members of ECB´s Governing Councils, who are both deciding on ECB´s budget and staffing policies, and at the same time heading their own central bank. As head of their central bank, they are competing with the ECB in order to recruit talent. The better the ECB conditions, the harder it is for them to remain attractive.

Furthermore, the centralisation of monetary (and, later, supervisory) functions also comes at the cost of their own scope and competence. In a nutshell, the more the ECB grows, the more the National Central Banks (NCB) will have to shrink. There is therefore an incentive since the very beginning for ECB Governors to slow as much as possible the growth of the ECB, by making use of their budgetary prerogative and imposing a cap on headcount growth.

This conflict of interest is the root cause of many issues faced by ECB staff, be it the lack of available space or the high risk of burnout (see the open letter written by IPSO to NCB´s Governors in 2015). Whereas there was a theoretical cap imposed on ECB staffing, since 2004, the needs of course continued to grow, in particular but not only at the time of the 2008 financial crisis. Therefore, one way to finance such staffing needs without increasing the headcount was to rely on “off-balance sheet” temporary contracts, be they agency staff, contractors, short-term contracts, project-based time limited-contracts, etc.

Impact of precariousness for the staff and the organisation

While such a “social model” would likely be at odds with what is legally feasible in most EU member states, at the ECB this is made possible as a consequence of the extra-territorial nature of the organisation. By default, the labour law of the host member state is not applicable, and the ECB is granted a legislative prerogative to define its own labour law. Such a prerogative is very far reaching as it also covers social security law and workers representation rights. Surely the French MEDEF or the Italian COFINDUSTRIA would enjoy being able to become labour law makers, without having to face democratic accountability. There are however good reasons why this should not be possible in an economic democracy, and the extent and consequence of precariousness within the ECB is a good illustration of the abuses that such a concentration of power can generate.

Indeed, while precariousness could be perceived to be a good system from an employer perspective, due to the high power it exerts over its staff who will find it more difficult to oppose their instructions  and demands, it definitely comes with drawbacks for the staff. The possibility to be dismissed even when performance is good is creating a stress level which explains part of the relatively high of burnout rates at the ECB (approximatively one third of the staff). Future mothers find it necessary to plan their pregnancy, as the risk of one´s contract elapsing during the maternity leave or parental leave period is quite serious – with the contract granted to another worker who will be available at that time. Access to a mortgage is also rendered more difficult.

One specific reference should be made to those whose function was outsourced, as their contract is dependent on the success of their employing company in the regular procurement procedures for their function. Should their company lose the tender, for instance because staff costs were too high compared to the other bidders, colleagues have little option but to be re-employed by the winning company, generally at the cost of a renegotiation of their employment and salary conditions.

De facto, outsourcing is a way to bypass the protection granted by labour law and place the continuity of the labour relation onto the business law domain, which are much less protective of employees. As a result of this policy, a number of staff working in less attractive functions requiring lower qualifications such as catering or cleaning services are prevented from receiving the benefits normally granted to all ECB staff. As it is widely known, the existence of a large number of temporary contracts does not make it easier for the trade union to gain members, as vulnerable colleagues are reluctant to join the union before they reach adequate job security. At the same time, different colleagues working under different contract types is inherently creating division among the staff, which further weakens the bargaining position of the union and reinforces that of the employer.

Overall, the difficulties faced by temporary workers do translate into operational difficulties for the employer, as they create a situation where the incentives to reveal mistakes or challenge mistakes in managerial decisions are almost nil. Ultimately, the diversity of thinking of the organisation is affected, as the system encourages manager to surround themselves with staff who will not contradict them. Another aspect of operational risk is that workers on a temporary contract will always have to think about their next job, which is creates a risk for the organisation if key contract staff see more interesting prospects available outside.

 

The COVID crisis and the short-term structure of our “Human Capital financing”

The COVID crisis proved to be a very interesting illustration of such operational vulnerability. Indeed, the international labour market ground to a halt due to extensive travelling restrictions. There was therefore a need for the ECB to retain their existing staff, and this need was matched by a corresponding need for temporary staff to keep their jobs. Demand could however not meet supply, as the ECB internal rules inclined towards the rotation of short-term contracts meant the ECB was legally not in a position to grant contract extensions! Beyond the stress on both the business and the employee side, this forced a (temporary!) modification of the rules so that short-term contracts could be extended for a few more months. In essence, and to speak in economic terms, the COVID crisis revealed the operational vulnerability of the short-term structure of ECB´s Human Capital – in exactly the same way as a government such as that of Argentina is made vulnerable by the short-term structure of its financial capital.

IPSO´s achievement to improve the working conditions of our colleagues

IPSO, the USF branch for ECB Staff, stands firm against precarious contract practices. We have – and over many years- put a lot of effort into improving the situation of our colleagues in vulnerable positions. These actions included various public communication campaign in the media, court cases, and collective actions.

We managed also to receive a dedicated hearing at the European Parliament, focused on the ECB´s HR policies with a special emphasis on precarious contracts. Eventually, we obtained the conversion of most agency staff contracts into permanent contracts, and also obtained better conditions for those working in outsources functions when moving from one company to the next at every new tendering round. We also put a stop the so-called repeated probationary periods, which kicked in whenever a new contract was granted for the same person for the same job. We also secured additional headcount which resulted in an increase of the share of colleagues with either a permanent or a convertible contract.

We secured the improvement of a number of social security rights, be it the mere access to unemployment benefit or the right to paid maternity leave (and medical coverage of the new born) during the period covered by unemployment benefit, at the end of a temporary contract. The ECB also shifted the composition of its workforce towards so-called ESCB IO contract, i.e. temporary contracts granted to seconded colleagues from other central banks or international organisations, who at least enjoy a permanent contract in their home organisation.

The implementation of the EU Fixed Term Contract directive, which we also obtained , unfortunately proved to be of little help as it essentially resulted into the introduction of a cool-off period between two temporary contracts – cool-off sometimes exploited to reduce the benefits provided in the second contract on the basis that the colleague was this time hired locally if he/she stayed in Frankfurt while waiting for the second contract to be confirmed.

The next fight

At this stage, the ECB has come to realise the disadvantage of the precarious contract model. As the ECB needs to rely on a stable workforce, there is generally a business need for the manager to extend/convert the employees that work to their satisfaction, which is the case for most of them. Such a need therefore results in unnecessary red-tape and clashes with obligations to launch a formal campaign for vacancy longer than one years – and ensure that the colleagues can stay without breaching recruitment rules.

Furthermore, almost all colleagues on convertible contracts are eventually converted (ca 97%), which raises a question mark on the interest of the conversion machinery, which comes on top of the probationary period. Lastly, permanent contracts are a key element of employer attractiveness, which can be granted at no cost and is often a necessity when one wants to attract a sufficiently diverse workforce, including experienced experts with (current or future) family responsibilities. Therefore, there is some likelihood that the ECB might reconsider its sourcing model within the next few years.

The only drawback is that such a change would come at the price of easing dismissal conditions of the colleagues on permanent contracts, which is a desire expressed by some managers as the counterbalance for such a move.

From a staff representative perspective, we therefore need to be very careful that a possible improvement does not come at the cost of a certain deterioration. IPSO/USF-Frankfurt has a very good track record of defending the interests of ECB staff and will engage in this battle with its characteristic resolve.

Carlos Bowles

ABOUT THE AUTHOR

Carlos Bowles is the IPSO Vice-President and Former Spokesperson of ECB Staff Committee (2010-2018).

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