Changes to German Employment Law: AUG License

Germany’s employment market is the fifth largest in the world with the number of contractors and self-employed people reaching nearly half a million. Many companies in Germany choose employee leasing services for various reasons. However, new strict laws for employment secondment came into effect as from 1 April 2017.

Firms hiring people to work on behalf of other companies in Germany (check out our Germany PEO services page), as part of the Global PEO solution, are now legally required to have an AUG license. It is important that you familiarise yourself with the law as this could have serious financial and legal consequences.

AUG (Arbeitnehmerüberlassungsgesetz) license is a labour leasing license which allows the employer to lease labour to the end user without the end user actually becoming the employer.

There was no restriction on the period that workers can be engaged through AUG license until recently. As from April 2017 a contractor automatically becomes their end-user’s employee after the 18-months period. If they wish to remain freelance, the contractor will have to seek an alternative workplace.

If you are considering using an employee leasing firm or International PEO, make sure that the Employer of Record has an AUG license in order to contract out the employee. Otherwise, you could inadvertently become the employer. If the employee leasing firm does not have an AUG license, the end client whose project the contractor is working on, will be considered the worker’s employer.

Germany has one of the most challenging and complex employment legislations, however, it should not stop you from expanding your business there. Reach out now to our employment specialists to get more information about hiring or working in Germany.