Why are most universities reluctant to offer open-ended contracts to research-funded-staff (such as postdocs)?

Question

In some countries, labour law requires that if an individual has been employed on temporary contracts for a certain amount of time, the employer must offer them a permanent contract (or let them go). They may be reluctant to do so when labour law stipulates they need a reasonable cause to fire employees; however, if a company cannot afford to hold on to people, they can and are let go.

Somehow, different principles seem to apply within universities, where postdocs¹ and other research-funded staff are often held on contract after contract, up to an entire career long. The postdocs at my university want to persuade the university to offer postdocs a permanent contract, but with the understanding that if the money source for their salary runs out, they will be let go; just like employees in industry would. I'm told some universities already apply that principle. It would not increase the de facto job security for postdocs much, but it would open up the option of getting a mortgage for those who expect to stay in the same city for a long time.

Considering that universities could let go of staff if they can show they can no longer afford to hold on to them, why are they so reluctant to offer postdocs a contract that doesn't stipulate an ending date?

NB: to the best of my knowledge, this phenomenon is global; therefore I am interested in answers that are either generic or specific to a particular country

---

¹By postdoc I mean anyone employed by the university with a role primarily to do research. Formally my employer calls this "research funded staff" but colloquially this group is referred to as postdocs regardless of age.

Answer 1

Using the term "postdoc" may cause confusion, because to me a postdoc is by definition an early-career researcher hired for a limited period. But the question as I understand it has nothing specifically to do with the terminology. It amounts to why universities don't offer long-term contracts conditionally on maintaining adequate external funding, but rather offer successive short-term contracts.

One answer is that sometimes they do offer long-term contracts. In U.S. academic medical research, it's common to have long-term "soft money" positions for which most or all of the funding comes from grants. There are even tenured soft money positions, in which you have a guarantee that you cannot be fired without good reason, but where there is no obligation for the university to pay the salary except as supplied by external grants. (Sometimes they are responsible for a small percentage of it, and sometimes none at all.) This becomes less common as you move further from medicine, but long-term soft money positions exist across science and engineering in the U.S., at least in small numbers.

Why not always do this? One reason is to avoid raising expectations. My impression is that it's rare to offer a long-term soft money contract unless there's a reasonably high chance that money will continue to be available for quite some time. Even if there are no legal obligations, it's terrifically awkward to fire someone from a position for which they mistakenly believed funding would continue, and it's easy for people on soft money to be irrationally optimistic. (You see this frequently with tenure-track jobs: someone starts by recognizing that they genuinely might not get tenure, but after a year or two their nerves have settled and they find it tougher to take the possibility seriously.) This means there's a strong incentive not to offer long-term contracts that are too speculative.

Another issue is whether the department or university really wants this person to have a long-term affiliation. There's sometimes a feeling that people on short-term contracts don't really count for the department's reputation, since they are just visiting anyway, while people on long-term contracts count more. This means other faculty members have more of a reason to exercise oversight.

Answer 2

This answer is from a mostly German perspective, but I guess parts of it would apply to other countries with similar labour laws.

The key problem is who to "let go" when funding is short. Are you always going to fire the person that happened to work on the most recently finished project if there is no new funding coming in around that time? Well, according to labour laws you can't do that with unlimited contracts.

In industry, if money is running short for a company, it's not only up to the company to decide who will have to go and who will stay. Instead, a dismissal plan has to be carefully worked out between for example the union and the company, and deciding who has to go is to a large extent based on social aspects and time someone has stayed with the company. Take this to academia, and you'd always have to fire the youngest person when money runs short, which for sure universities don't want to do.

Also, in contrast to companies who can run up losses against their capital for some time, universities (at least in the systems I know) can not do that, so they don't really have the flexibility to tide over a bad time in funding.

Answer 3

Regarding the general employment laws, there is usually a catch with the "let go if you run out of money". Once you trigger that process, the law puts limitations on how you can hire in the future. For example, in Finland, if you lay off someone because you want to discontinue that role in the company, you are not allowed to employ anyone for the same or very similar role for a year and you are supposed to offer them an option of transferring to a different role with open vacancies, even with lower salary. (Which logically makes sense, coz otherwise companies would always use that or some other similar extenuating circumstance argument as a loophole to fire anyone unwanted with a permanent contract).

Answer 4

Because they can. It isn't that companies are less reluctant than universities to offer permanent positions; universities -- at least in many European countries -- are in a better position legally to use fixed-term contracts.

Universities' interests as employers are not so different from companies. They like flexibility.

• More and more, university research is funded by third party grants. This is a rather new development in European higher education. For example in Germany, between 1999 and 2011, third-party funding increased by 204%, while government-provided research funding increased only by 42%. These grants have a fixed duration and therefore don't allow for the long-term financing of permanent positions. To create permanent positions, financing would have to rely more on a university's basic budget, in turn requiring larger university funding, which in Europe typically comes from public education budgets. Thus, at the end of the day this is a political decision about the allocation of public spending with all the distributive bargaining that it entails.
• Postdocs are hired by PIs or department heads with permanent positions. Those have mixed incentives. On the one hand, PIs need postdocs to keep their research going. On the other hand, PIs want to remain free in their own career choices, which implies the freedom to move to a different institution. In that case, they either have to convince their current postdocs to come along and the new institution to bring those postdocs on board. The latter impairs their own 'hireability' and their bargaining stance vis-à-vis the new institution; the first depends on the goodwill of the postdoc. Or the PI can leave the current postdocs behind, but this will not be welcomed by the old institution, as it impairs its attractiveness for any successors who might want to bring in or hire their own staff.

Thus universities have similar interests as companies about flexible employment (although for partly different reasons). However, they have different opportunities:

• Short fixed-term contracts indeed allow more flexibility than permanent positions. Letting go of employees on permanent positions is costly for the employer, and it is not easy: Compensations have to be paid, notice periods and social criteria (determining e.g. who has to be fired first) have to be obeyed, and perhaps even "social plans" have to be negotiated with the unions. The scope and stringency of dismissal protection varies between countries; by and large is is stronger in scandinavian social democratic systems and in continental conservative systems with a tradition of "neocorporatist" social partnership, such as Germany and France. It is more limited in liberal systems like the UK, the U.S. and in Eastern Europe. In any case, the point of dismissal protection is obviously to make dismissals more difficult.

• Employers can use fixed-term contracts to work around this constraint, but governments set legal limits to this strategy by stipulating when work contracts can be time-bound. In Germany, for example, the Befristungsgesetz (time-limitation law) says that companies can use fixed term contracts for more than two years only for certain reasons (e.g. parental leave replacement). However, the legal bounds of fixed-term contracts are much more lenient for universities. The Wissenschaftszeitvertragsgesetz (fixed-term contract law for the sciences -- a nice German compound noun) allows fixed-term contracts for various reasons, most of which are trivial in academia. Examples include that the position is financed by soft-money (i.e. postdocs) or that the position also serves a training purpose (PhD students). I assume that similar laws exist in other countries.

In sum, universities as employers have similar interests compared to companies, but they have different opportunities.

Answer 5

I'm going to question the concept of "continuing funding source" and its expiration. Most postdocs paid from grants are in fact paid from different grants at different times, and sometimes from department money. The postdoc may or may not be aware of this, but in all cases where I have paid postdocs (quite a number of cases), we've frequently switched from which account someone is paid, in some cases making the change retroactively.

In other words, it is difficult to define what it would actually mean to have continuing funding. If I have paid a postdoc from 3 different grants in the past, all of which have run out, but I have a fourth grant that was approved, would that require me to continue paying the postdoc until that fourth grant also runs out?

Answer 6

Adding (quite late!) a slightly different perspective to the excellent answers already there.

As far as I know, in many countries in Western Europe, the long term dynamic is actually the opposite: a few decades ago, the academic workforce used to consist of a large majority of permanent employees (with public servant status or similar). Quite consistently with this model, funding was largely channeled directly to research institutions which then enjoyed a quite high degree of freedom as to which projects they choose to fund.

In the past couple of decades, these European countries progressively switched to the US/UK competitive model. Similarly to the capitalist model in economy, competition is meant to encourage the best researchers to strive for the best funding opportunities. This naturally implies a significant reorganization of the way resources are allocated: in order to maintain a permanent competition between researchers and institutions, most of the funding is allocated on a "project" basis: researchers submit their project, projects are evaluated and compared against each other, and the winning team gets the money. Projects must be limited in time for the same reasons.

Given the very high degree of specialization involved in every research project and the uncertainty for any specialized team to secure funding in the long term, it wouldn't make any economic sense for an academic institution to keep a large proportion of permanent researchers on their payroll; the model clearly calls for hiring specialized research staff on a temporary basis, for the duration of the funding.