Job quality in call centres in Germany

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International Labour Review, Vol. 148 (2009), No. 4

Job quality in call centres in Germany Claudia WEINKOPF* Abstract. Since 1995, low-wage employment has increased in Germany, and employers have tended to seek “exit options” from regulatory frameworks, in order to save on labour costs. This article reports on studies of six call centres (four from utilities, two from financial services), exploring the respective impact of institutional frameworks (notably collective wage agreements and works councils) on work organization, and pay and working conditions in in-house call centres and external service providers. The wide variations in pay in German call centres are explained, and the repercussions of outsourcing on wages are discussed.

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mong European countries, Germany is traditionally regarded as having rather low wage inequalities. However, from the mid-1990s onwards lowwage employment in Germany rose, from 15 per cent in 1995 up to 22.2 per cent in 2006 (Bosch and Kalina, 2008; Kalina and Weinkopf, 2008) and by late 2005 it had reached almost the highest incidence of low-paid jobs across Europe, only slightly below the level of the United States (see Bosch, in this volume). Low wages particularly affect jobs in the service sector and are much more widespread in small enterprises than in large companies. Women are much more likely to be low-paid than men and the risk of low pay is particularly high for young and low-skilled workers. However, around three-quarters of low-paid employees in Germany are skilled workers and about 70 per cent are aged 25 to 54 (Kalina and Weinkopf, 2009). Against a background of weak economic performance and persistent high unemployment rates following the reunification of Germany, since the mid1990s employers have obviously been seeking and making increasing use of “exit options” to evade traditional standards, such as collective wage agreements, in order to reduce their labour costs. Collective bargaining coverage has declined substantially in recent years and, by contrast with France, the Netherlands, the United Kingdom and even the United States, in Germany there is no statutory minimum wage defining a binding wage floor at the lower end. Such exit * Institute for Work, Skills and Training (Institut Arbeit und Qualifikation, IAQ), University of Duisburg-Essen, email: [email protected]. Responsibility for opinions expressed in signed articles rests solely with their authors and publication does not constitute an endorsement by the ILO.

Copyright © The author 2009 Journal compilation © International Labour Organization 2009

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options have created a strong incentive to outsource certain activities to areas with lower (or even no) standards, and the growing number of non-standard jobs frequently on lower pay rates (particularly marginal, part-time jobs and temporary agency work) has also played an important role in this regard (Bosch and Weinkopf, 2008). In fact, call centres do not amount to an industry as such, rather to a specific form of work organization. Telephone customer enquiries, which were formerly scattered among various departments within a company, are now centralized in a call centre. The intentions behind such a decision are often a greater customer-focused orientation, on the one hand, and a more cost-effective and efficient handling of customer communication, on the other. Call centres may either be units within existing companies in various industries (so-called inhouse centres) or new, independent service providers working for one or more principals. Only in the case of the latter form of organization can one speak of an (emerging) new “industry” (Weinkopf, 2006). These characteristics make call centres particularly interesting for an analysis of how institutions have an impact on pay levels and job quality in a broader sense, and of how that impact has changed recently. More specifically, how “inclusive” is a particular, countryspecific institutional framework in the case of jobs which are to be found in existing industries and companies, on the one hand, and in an emerging sector, on the other? Are there noteworthy differences in pay and job quality between inhouse call centres and the new independent providers? This article is based mainly on research undertaken for a major study on low-wage work in Europe, which was funded by the Russell Sage Foundation between 2004 and 2007 (see Bosch, in this volume). Five teams from Denmark, France, Germany, the Netherlands and the United Kingdom carried out company case studies in selected industries, focusing on particular occupations at the lower end. The call-centre case studies were conducted at in-house call centres and external service providers in two sub-sectors: financial services and utilities. The main reason for selecting financial services was that a considerable part of the overall call-centre market is concentrated in this area. Call centres in utilities are less significant quantitatively, but interesting for other reasons. There has been very little research on call centres in this area to date. The industry, which was formerly part of the public sector, has undergone considerable restructuring owing to increasing privatization and deregulation in recent years. In the light of these factors, we were particularly interested in the effects of this development on the organization of call-centre services and on their employees. In both subsectors, the focus was on inbound activities and on call-centre agents – i.e. the employees communicating directly with customers. Six case studies were carried out in Germany – four in the utilities sector (including two subcontractors) and two in the financial services sector (inhouse call centres). The size of the call-centre units in the sample ranged from under 20 to almost 700 employees. Interviews were conducted with individuals at various levels within the companies (managers, supervisors, team leaders, training officers, employees, works councils). The total number of interviewees

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was 38 – ranging from one up to ten per case study. Most interviews lasted between one and two hours. The companies also provided additional written material, such as annual reports, presentations or training guidelines. Further information came from context interviews with trade unions, temporary work agencies, employees and works councils in other call centres, as well as press and Internet research. The aim of this article is not to provide a broad overview of the case-study findings on job quality in German call centres (Weinkopf, 2008) but to draw attention to specific aspects of the German case and to the impact of the institutional framework in that regard. In order to work out what characterizes German call centres, reference is sometimes also made to the findings of the four other European country teams (see Beraud et al., 2008; Lloyd et al., 2008; Sørensen, 2008; van Klaveren and Sprenger, 2008), and from a forthcoming comprehensive six-country comparison including the United States (Lloyd, Weinkopf and Batt, 2010). As reliable statistical information on call centres is scarce we also refer to several results from the Global Call Centre Project – a large network run by Rosemary Batt, within which comparable nationwide surveys of call-centre managers in various countries have been conducted (for an internationally comparative analysis of the findings, see Holman, Batt and Holtgrewe, 2007). 1 The remainder of the article is structured as follows. The first section contains a brief overview of the “industry” and initial remarks on certain characteristics of German call centres. The second section focuses on the impact of institutions on German call centres and analyses how the influence of industrial relations and other regulatory issues differ between in-house call centres and external service providers. Particular attention is paid to collective agreements and works councils. Then the third section illustrates the particularly wide variation in pay in German call centres and explores the reasons for that. In section four, the dual effect of outsourcing options and their repercussions on wages are examined, and in section five the work organization of German call centres and its relationship with institutions are discussed. In the final section, the findings are summarized against the background of overall trends in Germany and in comparison with call centres in the other countries.

Facts and figures on the German call-centre “industry” The public directory enquiry service of the former Deutsche Bundespost is often mentioned as a prototype of today’s call centres. The first private call centres in Germany were created at the end of the 1970s and provided mainly telemarketing services, followed in the 1980s by the call centres of large mailorder companies. In the 1990s, a call-centre market emerged in various industries 1 The German survey (referred to here as the GCC survey) was carried out by Ursula Holtgrewe, Jessica Scholten and Karen Shire from the University of Duisburg-Essen.

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in Germany, in response to both technological developments and commercial pressures. By the second half of that decade, in Germany call centres had become one area of employment showing very dynamic job growth. However, it is questionable whether an increasing number of call-centre jobs really equates to a comparable increase in total employment, because several of the new jobs probably replaced other jobs within the companies for which the call centres provide services. The fact that call centres take so many different forms makes it almost impossible to trace their quantitative development through existing statistics. All information on the development of the industry generally has a high uncertainty factor for a number of reasons. First, there is no precise definition of the term “call centre” (Bittner, Schietinger and Weinkopf, 2002, p. 50). Arnold and Ptaszek (2003, p. 40) point out, for example, that about half of the companies referring to themselves as call centres do not use the standard technical systems, such as Automatic Call Distribution (ACD) or Computer Telephony Integration (CTI). Second, it is difficult to identify in-house call centres within companies operating in a number of different industries. Thus, the available data usually rely on estimates, which differ considerably one from one other. According to estimates by a leading call-centre association (Deutscher Direktmarketing Verband, 2006), the number of jobs in German call centres increased from 55,000 in 1995 to 380,000 in 2006 and the number of call centres from 1,800 in 1998 to 5,700 in 2006. Another such association estimated the number of jobs at 435,000 in April 2008, slightly below its own earlier estimates (Call Center Forum, 2008). Cross-country comparisons typically indicate that the proportion of callcentre employees in the whole German workforce is lower (at around 1.5 per cent) than in several other countries, e.g. the Netherlands, the United Kingdom and the United States with their proportions of around 3 per cent or even more. However, it is difficult to establish whether and to what extent such differences really reflect different levels of call-centre employment or are also due – at least to some extent – to diverging national definitions of a call centre. This may be supported by the fact that international offshoring of call-centre services to other (low-wage) countries is more common in English-speaking countries. In Germany, by contrast, such strategies have not been an important issue so far, probably because few people in India, for example, have good knowledge of German. Nevertheless, several regions (Turkey, Eastern Europe, South Africa and the Canary Islands) are regarded as potentially appropriate locations for offshoring German call-centre activity (Pause, 2005). Moreover, there is clearly also scope for internal offshoring within Germany, because wage levels in eastern Germany are still substantially lower than those in western Germany. Accordingly, there are opportunities to relocate customer services to areas with lower pay rates within the national borders. According to previous research, the quality of call-centre jobs in Germany is somewhat higher than that in several other countries – those with “innovative work practices” (e.g. fewer binding scripts and less rigid monitoring and control)

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being more widespread than in the United States (Doellgast, 2005 and 2008) or the United Kingdom (Lloyd et al., 2008), for instance. Moreover, unlike in the United States, there is no trend towards relocating and centralizing call centres in “remote areas” in Germany, where physical proximity to the parent or customer companies remains a key criterion in the choice of location (Arnold and Ptaszek, 2003, p. 45 ff.). Specialization in specific customer groups also tends to be less advanced in Germany, whereas more than 80 per cent of the call centres in the United States serve both business and private customers (Batt, Doellgast and Kwon, 2005, p. 2). However, the share of subcontractors and independent service providers in the total call-centre market is what distinguishes Germany from other countries. Although precise data are not available, some indicators suggest that this market share is considerable: in the German GCC survey, at around two-thirds, the subcontractors’ share accounted for the large majority of the call centres involved (Holtgrewe, 2005, p. 5), whereas in many other countries their share was much lower (14 per cent in the United States, for instance – Batt, Doellgast and Kwon, 2005). Even though other German sources estimate the market share of independent providers in Germany at lower rates of 40–50 per cent (which can partly be attributed to diverging differentiation criteria between the call-centre types), independent providers clearly hold an important position in the German call-centre market. As will be shown in greater detail below, this seems closely related to specific aspects of the German institutional framework, which is less inclusive than was traditionally assumed. There are several loopholes and exit options whereby to evade traditional standards and these may be seen as an important contributory factor in the recent rapid growth of the independent service provider segment in Germany: whereas some (mainly in-house) call centres are firmly anchored in the German model, others (the vast majority of independent service providers) are able to operate more or less independently from the traditional institutions framing pay levels and working conditions in Germany. Accordingly, low pay is particularly widespread in the subcontractor segment and that clearly also exerts increasing pressure on pay levels, even on those in several in-house centres.

Markedly different institutional impact Although all call centres in Germany are subject to statutory labour market regulation, recent studies have already reported considerable differences between inhouse call centres and independent service providers in the extent of trade union presence and worker representation. In-house call centres are basically subject to the same institutional framework as the companies to which they belong, notably regarding collective agreements and representation of interests in the workplace. However, the scope and frequency of the latter vary according to industry and company size: collective agreements and works councils in Germany are widespread and tend to have greater influence in the manufacturing sector than in

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some service industries; firm size makes a difference, too (Bosch, Kalina and Weinkopf, 2008). The utilities and financial services industries involved in this study have traditionally had many collective agreement obligations, and are also perceived as sectors with above-average pay. To date, independent service providers (comprising the core of the call centre “industry”) have largely avoided being directly affected by the features characterizing the German industrial relations system. This is due, first, to the fact that the industry is relatively new and that the relevant institutional structures are developing only slowly. Second, however, a central feature of many external service providers appears to be simply operating outside collectively agreed standards, in order to provide services at lower cost. This is undoubtedly one of the forces driving the growth of this market segment in Germany. At the end of the 1990s, trade unions estimated at 50 to 60 per cent the share of call centres that had collective agreements (Meier, 1999). In the German GCC survey, at around 26 per cent, the share of call centres with collective agreements was far smaller, probably because of the relatively low proportion of inhouse call centres in the sample. Of these, some 46 per cent had collective agreements, whereas the large majority of the external service providers (over 80 per cent) were not subject to collective agreements (Holtgrewe, 2005, p. 13 ff.). When there was a collective agreement in in-house call centres, it was usually one covering the industry as a whole, whereas company-specific agreements predominated among external service providers (Scholten and Holtgrewe, 2006, p. 29). In our case studies, by contrast, the proportion of call centres with collective agreements (four out of six companies) was significantly higher than this figure. However, in line with the tendencies outlined above, the companies without collectively agreed wages were the two external service providers. According to the findings of the GCC survey, works councils or other forms of employee interest representation exist in some 45 per cent of German call centres, and are thus rather more common than collective agreements. Here too, however, there are clear differences between the two basic types of call centre. Whereas works councils exist in 82 per cent of in-house call centres, this is only the case in about 22 per cent of external service providers. The outsourced subsidiaries fall between these two figures, at 45 per cent (ibid.), which may be because they have retained some traditions of the parent company. In this respect, our sample deviates significantly, as all call centres in the study had a works council. However, these bodies appeared to have less influence within the external service providers. Thus, the German call-centre market splits into two. Though in-house call centres do not differ markedly from other industries since they are part of companies within these industries, many external service providers operate without direct trade union influence. The relatively minor significance of collective agreements in this market segment is also due to the fact that the actors needed to promote them are either not present or have little influence. Typically, German trade unions are industrial unions, so a number of different unions claim responsibility for call centres and there has been some disagreement over which

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should represent call-centre workers. Even the establishment in 2001 of the large united service trade union ver.di (Vereinigte Dienstleistungsgewerkschaft) following a merger of five formerly independent unions did not really solve this problem. Ver.di is organized into 13 separate departments and responsibility for call centres is still spread across industry-specific departments and the “special services” department which is responsible inter alia for independent call centres. To date, there have been few individual cases of company agreements being set up for external service providers working in several industries. The conditions needed to conclude industry-wide collective agreements, such as those recently achieved in the Netherlands (van Klaveren and Sprenger, 2008, p. 252 ff.) and France (Beraud et al., 2008, p. 258), have been rather unfavourable in Germany – partly also because of a lack of suitable actors on the employers’ side. The existing call-centre associations do not define themselves as employers’ associations responsible for collective bargaining procedures and largely pursue different objectives, such as exchange of experience, public relations, and the development of training courses or benchmarks. In the late 1990s, the German trade unions launched numerous initiatives, workshops and projects with the aim of attracting attention to working conditions in call centres and improving them (Mola and Zimmermann, 2001). However, most of these activities have since been wound down, partly because it is particularly difficult to raise the level of worker organization among call-centre employees and partly because the need for savings because of falling membership has forced unions to concentrate on more promising areas. One important, though not really successful exception was the huge conflict over the relocation of service jobs at Deutsche Telekom into a new subsidiary in 2007. This concluded with some protection for existing employees, but much lower pay levels for new entrants. A more positive example was the conclusion of the first collective agreement with an online bank in 2005. Since April 2008, ver.di launched a new campaign for lower-end call-centre work (called “support for call-centre employees”). As our company case studies illustrate in greater detail, the existence of collective agreements and works councils is a key influence on pay, working conditions and work organization in call centres. Alongside wages and special company payments, collective agreements frequently also establish whether and to what extent employees are entitled to extra pay for working unsocial hours. In the sub-sectors on which our study focuses, collective agreements also often contain clauses protecting existing employees in the event of internal relocation to other jobs or wage reductions on the introduction of new pay systems (Bestandsschutz = continuance of previously agreed terms and conditions). 2 Furthermore, on the basis of the German Works Constitution Act (Betriebsverfassungsgesetz), works councils have relatively broad opportunities 2 In one collective agreement, this is formulated as follows: “More favourable working conditions to which an employee is entitled through a company agreement or on the basis of a specific employment contract shall remain in place.”

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to influence important working conditions, such as individual workplace monitoring (Michalke, 1999). However, how far these opportunities are exploited in practice obviously differs substantially. General industrial legislation, such as that concerning protection against wrongful dismissal, restrictions on the use of fixed-term employment contracts, prevention of discrimination against part-time employees, statutory annual leave, etc., applies to all call centres. However, in some cases, its impact is influenced by whether works councils monitor compliance or whether additional collective agreements are in place. Where there is no collective agreement, for example, there is often no extra pay for night or weekend shifts. There is disagreement over whether and how far the German system of dual vocational training is relevant in call centres. Holtgrewe and Scholten (2005, p. 10), for example, assume that “qualification in call centres [...] is deinstitutionalized and turned into portfolios of firm-specific, short-term skills and ascribed personality traits”. However, our assessment suggests it is better to avoid blanket conclusions in this area. Although specific vocational training courses for call-centre occupations were not introduced until 2005 and it is still impossible to predict how much call centres will make use of them, existing studies do unanimously indicate that the vast majority of call-centre agents in Germany have completed vocational training in other areas. In fact, in most companies in our sample, such a qualification is an important selection criterion and the vocational skills learned on these training courses are often put to good use – i.e. to provide support for a work organization based on functional flexibility rather than highly segmented tasks.

Wide variation in pay The findings of the German GCC survey show that in 2004 the gross hourly wages for “typical” agents in call centres ranged between €6 and (exceptionally) €40 (Holtgrewe, 2005, p. 29), and thus a more pronounced variation in pay than in the other European countries. The average hourly wage of €11.30 was equivalent to about 76 per cent of the western German full-time median wage, and thus somewhat above the low-wage threshold, but much lower than the average wages in Danish or French call centres, which were only slightly below the national median wages. Even in the United States, the average call-centre wage (as compared with the national median wage) was higher than in Germany. Comparison of pay by type of call centre indicates that collective agreements have a positive impact on wage levels in Germany. According to the GCC survey, the average hourly wage in in-house call centres was €13.19 (88.3 per cent of the median), and thus significantly higher than those in external service providers (€10.47 = 70 per cent of the median), which were considerably less likely to be bound by collective agreements. A comparison between call centres with and others without collectively agreed wages showed similar differences (mean hourly wages were €13.72 and €10.55, respectively) (ibid., p. 31).

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The call centres in the utilities and financial services sub-sectors in which the company case studies were carried out mainly offered jobs above the lower end of the wage range. Most gross hourly starting wages (not including extra payments) in our case studies ranged from just under €11 to over €16 (73 per cent to 107 per cent of the median wage). However, there was also a wide variation of pay levels in our sample: the most striking example was one of the two external service providers, with entry-level wages of just over €6 (40 per cent of the median). The highest collectively agreed hourly wage in our sample (which experienced agents in in-house call centres could achieve only after a specified period of employment) came to over €20. Particularly striking here is the fact that in both cases the workers carried out virtually identical tasks: the low-paying service provider had taken over a large part of the total call volume of the utility company’s call centre which had the highest rates of pay in our sample. This suggests that complexity of tasks may not necessarily determine pay level. Additional press and Internet research showed that particularly low wages are to be found in certain sub-sectors involving comparatively simple tasks, e.g. the mail order business, and occur more frequently in call centres located in eastern Germany. Gross hourly wages of €5 (sometimes only €3) correspond to only around 33 per cent of the German median wage or even less and accordingly are far below the lowest pay rates in all the other European countries studied, where higher rates of national minimum wage or extensions of collectively agreed pay rates set minimum standards for the lower end of the wage range (see Bosch, in this volume). In Germany, by contrast, the lack of generally binding minimum pay rates and the unfavourable economic performance of recent years have obviously encouraged competition based on low wages. This is confirmed by calculations using data from the Global Call Centre Project: compared with the other European countries in the study, the average wage differential between subcontractors and in-house call centres was most pronounced in Germany (26 per cent compared with only 7 per cent in France and 8 per cent in Denmark – see Batt and Nohara, 2009). The lack of reliable statistical data on pay in call centres makes it rather difficult to assess the overall incidence of low pay in call centres. However, according to other calculations using GCC data, the incidence of low pay is particularly high in German call centres (36 per cent, only slightly below the Netherlands with 41 per cent), even higher than in the United Kingdom (28 per cent) and the United States (19 per cent). In France and Denmark, by contrast, at only 4 to 5 per cent, low pay is very rare (Lloyd, Weinkopf and Batt, 2010). Another rather surprising finding was that even within the call centres, there can be very pronounced wage differentials: except for two cases, we found a wide divergence of wages not based on any differences in the tasks or the experience of the workers concerned. In the in-house call centres, this was primarily the result of the legal protection of the status quo (Bestandsschutz), which ensures that employees keep their highest wage level achieved, even if they take on lower-paid work as a result of relocation within the company, or if a new wage structure is introduced entitling them only to lower wages. In one company with

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very low staff turnover and high employment stability, this (together with new collective agreements) resulted in employees being paid according to four different wage systems. At the smaller external service provider without a collective agreement but with considerable internal wage differentials, the latter were due mainly to the fact that wages were negotiated individually, so that pay rates depended on management “goodwill” and employees’ bargaining skills. The works council considered one of its most important future tasks to be increasing transparency and fairness in this respect. Last but not least, there was some evidence that lower pay rates generated by subcontractors had also exerted downward pressure on wage levels within the finance and utility companies in our sample – mainly at the lower end of the wage range, but also sometimes affecting the whole wage spectrum. Collectively agreed wages in three out of four in-house call centres were under considerable pressure. As a result of increased competition (and, in the utility companies, of privatization as well), the traditional relatively high pay in both industries, which to some extent used public-sector pay scales and pay awards as benchmarks, was increasingly being called into question. New collective agreements had since been reached in two of the companies and were being negotiated in the third; these established less favourable conditions in many respects, and this affected wages and other working conditions (e.g. bonuses, extra payments, working hours). Initially, these worse conditions often apply only to new employees, because of the abovementioned legal regulations protecting the status quo of existing employees’ wages; however, the latter’s claims are often offset against future wage increases, causing the differences between old and new employees to reduce over time. The new collective agreements also introduced additional pay grades at the lower end of the wage range. This was generally justified on the grounds that the company would otherwise not be competitive, especially in the area of lowskill services. The trade unions and works councils stressed they had only agreed to this new development in order to reduce the huge incentives for more outsourcing of certain activities (including the call centres): “Otherwise we can’t keep the jobs.” Keeping the jobs under the roof of the parent company, even at the cost of lower wages – the typical argument maintains – at least has the advantage of retaining the additional benefits not offered by external service providers, notably greater job security and more favourable working-time standards.

The particular role of outsourcing As outsourcing options obviously play an important role in the German callcentre market, it is worth analysing in greater detail the use the companies studied made of it. Among the in-house call centres, only the smallest utility call centre had no recourse to subcontracting. The managers argued that they had tried to cooperate with a subcontractor some years previously, but had quickly returned to total in-house processing of calls because of numerous customer complaints about the low quality of service provided.

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In our sample, the greatest user of outsourcing (a utility company) was also the company paying the highest wages. Recently, the extent of subcontracting gradually expanded. The two service providers with substantially lower pay levels took over most of the total volume of calls. At the same time, the number of employees in the client’s internal call centre was drastically reduced. The staff who remained mainly carried out back-office tasks (e.g. handling more complex, non-standard customer enquiries and follow-up processing). Apart from a small team of students employed solely on the telephones, the vast majority of employees worked in the in-house call centre only a few days each month. In the event of an unexpectedly high call volume which the two service providers could not handle, however, the company could react quickly by calling on the backoffice employees. Thus, in this case, it was the client’s employees who functioned as a buffer for fluctuations in call volumes rather than the external service providers, as is usually the case. Only in-house employees mentioned a decrease in service quality when interviewed; the managers did not admit any problems of that sort. Faced with particularly strong pressure to cut labour costs, they deliberately accepted a loss of service quality for the chance to save money through outsourcing and in recent years obviously had even succeeded in pushing down the price of external call processing. In the other two in-house cases in financial services, only a small part of the call volume was processed by external service providers. In one company, this concerned one specific task; in the other, certain periods in the evenings and at the weekend were covered externally in order to cut costs (mainly by saving the collectively agreed bonuses for these times). The management also provided a further argument, namely, that this arrangement was designed to reduce pressure on the company’s own staff. However, the employees themselves took a more ambivalent view: some were glad they no longer had to work until 11 pm; others had been able to integrate these hours into their private lives well and they regretted the loss of bonuses. The works councillor assumed that the strictly limited use of outsourcing achieved initially was only a test run for the management, who may intend to increase its use significantly in future. Another striking example of a substantial wage-cutting strategy was the conflict at Deutsche Telekom in spring 2007 when no fewer than 50,000 customer service employees were moved to a new service unit that was not subject to the usual, collectively agreed pay levels. The reason emphasized by the management was that pay levels current at that time were substantially higher than those of competitors. The compromise found after several weeks of strikes (organized by the ver.di trade union and the works council) included slightly reduced wage cuts for existing employees (6.5 per cent less, instead of 9 per cent), but the weekly working time was extended (without wage compensation) from 34 up to 38 hours, as originally intended by the management. Additionally, the job’s quality was substantially downgraded for new entrants: entry wage levels were reduced considerably (from €30,000 or even more to between €21,400 and €23,200 per annum) (see Frankfurter Rundschau, 2007), which is only slightly above the low-wage threshold. Once Deutsche Telekom, one of the better-off

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companies in Germany, has successfully pushed through substantial deterioration of employment conditions, it is rather likely that other call centres offering comparatively high wage levels will try to obtain similar concessions. In summary, the possibility of saving costs through outsourcing obviously has a dual effect: companies either actually use this option and outsource at least part of the total call volume to external service providers; or they obtain wage cuts for their in-house call centres (or even across the whole company) simply through the threat of outsourcing. In some cases, both options are even combined. The trade unions and works councils (at least in the sub-sectors involved in our study), appeared less and less able to prevent such practices. Even where they still retained some influence over wages and employment conditions, under pressure from employers, they often found themselves in a catch-22 situation: either they succeeded in keeping wages and employment conditions relatively high for their members, and ran the risk that companies would seek out loopholes and outsource certain services to providers not bound by collective agreements at all, or at a lower level; or they had to accept concessions for their own industry or company in order to secure jobs or, in the best case, even win some back. Doellgast and Greer (2007, p. 70) described that as “an increasingly complex mix of firm, sectoral and occupational bargaining structures” – with some companies also using “the threat of vertical disintegration to win concessions inhouse”.

Work organization How do these rather pessimistic findings on wage trends fit with the more positive findings concerning work organization? As mentioned in section 2, previous research shows that job quality in German call centres (particularly in the inhouse segment) tends to be better than in several other countries – i.e. the jobs are less routinized and monitored. In an international comparison, the findings of the Global Call Centre Project indicate that employees have above-average discretion for independent action and decision-making in Germany (only Denmark has an approximately comparable level). Whereas 38 per cent of call centres in Germany granted “considerable discretion” to their agents, 3 the percentage was substantially lower in the United Kingdom (11 per cent) and in the Netherlands (8 per cent) (Holman, Batt and Holtgrewe, 2007). The situation was almost the same in the United States: “We found that call-centre workers had very low levels of discretion at work” (Batt, Doellgast and Kwon, 2005, p. 18). Moreover, the segmentation of tasks according to customer groups and different types of task seems less pronounced than, for instance, in the United States or the United Kingdom. Batt (2001, p. 428 ff.) remarks that this creates 3 According to managers, German call-centre agents usually have high levels of discretion for “interaction with customers” (56.5 per cent considerable or very considerable discretion), taking breaks (48.4 per cent) and dealing with unexpected customer requests (“how to handle unexpected customer requests” – 39.2 per cent), “daily work tasks” (35.3 per cent) and “the pace of work” (34.2 per cent) (Holtgrewe, 2005, p. 22).

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scope for greater differentiation of wages and demands on agents (“sorting mechanism for the demand of skill”) and increases efficiency. However, the managers in our case studies mostly observed that employees’ high functional flexibility enabled them to react more flexibly to variations in customer frequency, and promised efficiency benefits in other areas. The employees were instructed to avoid passing on enquiries as much as possible, and to process a high percentage of calls to their conclusion. These features relate to the positive impact of certain institutions which still have a role to play, particularly in the in-house centre segment. Whereas in the other countries call-centre workers are mainly hired from outside, representation of employee interests is highly effective in German companies and the latter often have to accept employees from other areas of the company, so that external recruitment is only possible to a limited extent, if at all. This is fostered by collective agreements and company regulations on the protection of existing rights and protection from dismissal, and prevents the emergence of a human resources policy designed along purely market economy lines. Ultimately, this is not such a disadvantage, as one of our case studies illustrated. Although the financial services call centre in question had never recruited externally and many of the agents came from entirely different parts of the company, the quality of the company’s customer service ranked very highly in comparative studies. All in all, it can be assumed that some of the traditional German institutional arrangements remain influential in terms of encouraging firms to adopt less fragmented forms of work organization that provide greater variety and give greater discretion to workers. The presence of a well-trained, reasonably paid workforce which cannot easily be dismissed provides incentives to managers to use the workers’ skills more effectively. However, among the independent service providers the picture is less clear-cut. On the one hand, practices in in-house call centres now have even had repercussions on the external service provider segment. This is also partly influenced by client companies’ demands on their external service providers. In our sample, some of the companies hope that external call centres will provide comparatively good-quality service at lower cost. This can lead to external service providers paying greater attention to the quality of their services and tending to follow the HR strategies of the in-house call centres – for example, by also emphasizing high levels of vocational training for employees and low turnover. This was the case with the small subcontractor, whose managers described their strategy as predominantly “quality-oriented” and where work organization was similar to that of the in-house cases. On the other hand, the other large subcontractor in our sample provided glimpses of the darker side reigning in that segment. Though it did not prove possible to gain access to the lowest, most extreme cases (those run on low-paid freelance contracts, for instance), the working conditions of that subcontractor were markedly worse. The company employed by far the highest level of part-time workers (almost 80 per cent) and used a specific strategy of flexible working hours which shifted most of the workload risk onto the employees. Moreover,

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employment contracts were mostly for relatively short working hours (e.g. ten hours per week), and the employer retained the option of demanding significantly more working hours if necessary. Almost 60 per cent of all employment contracts were fixed-term and the company always used every available legal opportunity to extend temporary contracts for a further term before granting employees permanent contracts. This was done in order to achieve maximum flexibility, so as to be able to cut excess staff quickly in the event of losing major client commissions, which were typically offered for limited periods. As also learnt from the in-house case studies, quality-oriented highinvolvement strategies with comparatively high wages are currently under increasing pressure, owing mainly to increased competition and a predominance of cost-cutting strategies. Accordingly, it is questionable how sustainable such high-involvement strategies will be in future. Without political intervention to define some kind of minimum standards for pay, such cost-driven competition is likely to continue and to intensify.

Summary and conclusions Our analysis drawing on company case studies in financial services and utilities has shown that the quality of call-centre jobs in these sub-sectors in Germany is often still relatively good. Low pay is not very widespread, for a number of reasons: depending on the tasks required, the demands of the job are not low, which is reflected in the employees’ relatively high level of vocational training. Inhouse call centres in particular, where collective agreements and works councils are still relatively widespread, frequently offer decent working conditions and fairly high pay. However, among subcontractors in particular, rates of pay are often much lower because institutional protection and collectively agreed wage standards are much weaker or even non-existent. Moreover, the wage differentials between in-house centres and subcontractors obviously create strong incentives for German employers to “escape” to their advantage from prior institutional arrangements – resulting in the rather large proportion of wages below the low-pay threshold in German call centres compared with those in other countries. Accordingly, call centres are a good illustration of the vulnerability of the German system of collective bargaining to outside competition (Bosch, Kalina and Weinkopf, 2008). Subcontracting provides the opportunity to shift formerly fairly well-paid work to areas with lower or even no minimum pay standards. This has obviously been one of the main drivers of the growth in low-paid jobs in Germany in recent years. As our case studies in call centres indicated, this also exerted substantial pressure on the whole wage level – sometimes simply through the mere threat of outsourcing. A comparison with the call centres in five other countries indicated that the relative cost savings achievable by outsourcing tend to be lower (sometimes considerably lower) than in Germany. A crucial issue here concerns how far subcontractors are included in the particular national regulatory framework.

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This seems most pronounced in Denmark and France, where wage differentials between in-house call centres and subcontractors, as well as the incidence of wages below the low-pay threshold are relatively limited. In both countries, call centres are generally subject to the standard regulatory frameworks and employers appear to have very few exit options to avoid the usual standards. In the Netherlands, the picture is rather different: although the Dutch formal institutional arrangements are quite similar to those in France and coverage is similar to that in Denmark, wage differentials are quite large and the incidence of low pay is much higher. In the liberal market economies of the United Kingdom and the United States, lower wage differentials are due mainly to the fact that traditionally the whole institutional framework is much weaker. Nevertheless, in both countries the proportion of low-paid call-centre employees seems considerably lower than in Germany (Lloyd, Weinkopf and Batt, 2010). The policy demands in Germany are rather clear-cut: in order to compensate for shrinking coverage by collective agreements, more extension clauses are needed to limit exit options from collective agreements. Moreover, a statutory minimum wage is urgently needed to establish a generally binding minimum wage floor, in order to prevent very low wages corresponding to 35 per cent of the median wage or even less. New restrictions on purely cost-oriented corporate strategies would also reinforce the effectiveness of certain elements in the German institutional framework which continue to exert some positive influence on more desirable options as regards work organization.

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