Germany has the 4th largest labor market in the entire world. Right now, there is a huge surplus of top talent in the country, including full-time employees and contractors for hire. However, the European nation has strict regulations in place that require all umbrella companies, including EORs and PEOs, to use an AUG license when they hire temporary foreign workers.
Here is our guide to the AUG license in Germany and everything you need to know before you get started hiring temporary workers based in Germany.
An AUG license, or Arbeitnehmerüberlassung license, is the German term for “employee leasing” or “temporary agency work.” These licenses are always required when hiring employees in the country.
An AUG license makes it possible for umbrella companies to partner with a third-party personal company to lease or contract out labor in Germany without the umbrella company becoming the official employer.
In Germany, an AUG license is a type of agreement between the company that provides the temporary staffing services (personal leasing company) or hiring company, and another company (the user company) that needs temporary workers.
By acquiring an AUG license, personal leasing companies can help provide workers to the user company on a temporary basis, usually for a specified period of time. The workers are employed by the leasing company and assigned to the user company for the duration of the assignment. The user company provides the working conditions, such as the workplace, equipment, and supervision, while the leasing company is responsible for payroll, social security, and employment-related regulations.
AUG licenses are regulated by the German Temporary Employment Act which sets the policy for temporary agency work in Germany and provides protections for temporary workers. Any company that provides temporary staffing services must comply with the federal provisions of this act.
Make sure that you create a strong employment contract with the personal leasing company to ensure that all compliance regulations are clear and being followed.
A company may choose to use a AUG license for hiring in Germany for a variety of reasons, including but not limited to:
To meet temporary staffing needs: AUG licenses allow a company to access workers on a temporary basis to meet short-term staffing needs, such as during peak periods, seasonal fluctuations, or special projects.
To increase flexibility: An AUG license allows a company to quickly adjust its workforce to meet changes in demand, without needing to go through a lengthy hiring process.
To avoid the risk of permanent employment: By using an AUG license, a company can avoid the risk of having to offer permanent employment to workers after a certain period of time, as specified by federal employment law.
To comply with regulations: The use of an AUG license is regulated by the German Temporary Employment Act, and companies looking to hire temporary workers must comply with the provisions of the AUG.
In short, an AUG license can provide a company with a flexible and cost-effective way to meet its staffing needs, while also complying with German employment laws and regulations.
Without a license, companies will face legal repercussions and may not be able to hire in the country at all.
In order to obtain an AUG license in Germany, the company providing temporary staffing services must meet certain requirements:
Company registration: The personal leasing company must be registered as a legal entity in Germany with a license to operate and have a business address within the country.
Financial stability: The leasing company must demonstrate financial stability, including providing evidence of insurance coverage for potential claims and having sufficient financial resources to meet its obligations to its workers.
Compliance with labor laws: The leasing company must comply with all relevant labor laws and regulations, including minimum wage requirements, working hours, and health and safety regulations.
Approval from the relevant authorities: The leasing company must apply for and obtain approval from the relevant authorities as a federal employment agency or leasing operation, such as the local labor office (Arbeitsagentur) or the Chamber of Industry and Commerce (Industrie- und Handelskammer), in order to obtain an AUG license.
Reporting obligations: The personal leasing company must regularly report information about its business activities and the workers it provides to the user company to the relevant authorities.
In addition to these requirements, the user company must also ensure that the workers it provides to the user company are treated fairly and receive the same pay and benefits as the user company's permanent employees. This is required by German employment law.
AUG licenses are good for up to 18 months. After 18 months, workers must take a “cooling-off” period from the original client or find new contacts to take in
If a company wants to keep a workers on for more than 18 months, then they automatically become their legal employer.
Contractors who are protected during this period under the Temporary Foreign workers act are entitled to minimum wage, the right to access communal work facilities, and the right to access new job openings from their employer.
An AUG license provides several benefits for both companies and the worker. You’re remaining compliant and building new contacts throughout the entire process:
Cost savings: The user company can avoid the costs associated with hiring permanent employees, such as payroll, social security, and benefits.
Increased flexibility: The user company can quickly adjust its workforce to meet changes in demand, without the need to go through a lengthy hiring process.
Access to skilled workers: Provides access to a pool of skilled workers who are available to work on a temporary basis, helping the user company meet its staffing needs quickly and efficiently.
Compliance with regulations: Ensures that the user company is compliant with German labor laws and regulations.
Reduced risk: Helps the user company avoid the risk of having to offer permanent employment to workers after a certain period of time, as specified by German law.
As a worker, you’ll receive many benefits:
Holiday pay accrual
Sick pay accrual
Can set up health insurance
Build your contacts and resume
Although there are many benefits of obtaining an AUG license in Germany, the entire process can be muddled with compliance misunderstanding, fines for mismanagement of the license, and time limits.
Some drawbacks of the AUG license:
Processing fee of $1,300 EUR
Time limit of 18 months
28 specific regulations that holders of AUG license must comply with
Low approval rate
Frequent auditing and monitoring by the FDA (especially for newly licensed companies)
Open-ended AUG licenses expire after three years of non-use
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