How to run a temporary work agency in Germany?

We are a law firm specialized on temporary agency work and international staff deployment. Our attorneys offer legal advice to foreign enterprises planning to either run a national or transnational temporary work agency or to post workers to Germany.
We provide complete consultation, including the choice of legal form for your business, the procurement of a work permit as well as the application for issuing a license to supply temporary workers and finally the legal assistance in the daily personnel management.

For further information or legal advice, please do not hesitate to contact us via e-mail (hennig@hk2.eu), phone (+49 (0)30 27 89 00 20), telefax (+49 (0)30 27 89 00 10) or by using this form.

What foreign enterprises need to know about temporary work in Germany

What is temporary agency work?
What is the legal basis for temporary agency work in Germany?
Are there any restrictions of temporary agency work in Germany?
What legal requirements apply to the employer-employee relationship?
Application procedure
Scope of testing
Fees
Helpful links

What is temporary agency work?

Temporary work is a form of employment where workers are employed by agencies (temporary work agencies) which in turn hire them out to a third party (the client company) where they work temporarily under the client company’s direction and supervision. The temporary worker is considered an employee of the temporary work agency, not of the hiring company. During his employment relationship the temporary worker can be hired out to several client companies. Once such work is performed cross-border, it represents a transnational temporary work agency.

What is the legal basis for temporary agency work in Germany?

Overall, temporary work in Germany is governed by federal laws, regulations in collective agreements as well as agreements between the works committee and management.

The most important body of laws regulating temporary work agencies on federal-level is the Temporary Agency Work Act (Arbeitnehmerüberlassungsgesetz, AÜG). Collective agreements regulate specific pay and working conditions. Furthermore, the works agreement may include establishment-specific rules for the use of temporary agency workers.

The German Federal Employment Agency (Bundesagentur für Arbeit, BA) is the supervisory authority of all temporary work agencies operating in Germany. It regularly publishes information sheets concerning key provisions of the Temporary Work Agency Act.

Are there any restrictions of temporary agency work in Germany?

According to the AÜG a temporary work agency intending to make the service of temporary workers available to third parties on a commercial basis, requires a license issued by the respective Federal Employment Agency. In case a temporary work agency supplies a temporary worker without the required license the employment contract between the agency and the worker is null and void. Instead, an employment relationship between the client company and the temporary worker comes about which begins on the date agreed upon by the agency and the client company (Sec. 10 (1) 1 AÜG).

The license is initially issued for one year only (Sec. 2 (4) 1 AÜG). An application for extension of the license shall be substituted no later than three months before the end of the year (Sec. 2 (4) 2 AÜG). After a period of three years an unlimited license can be issued (Sec. 2 (5) 1 AÜG).

In addition, the construction industry is subject to special restrictions: Hiring out temporary workers to companies in the construction industry for the purpose of performing work usually carried out by workers is permitted, (Sec. 1 b AÜG). Exceptions to this rule apply in certain circumstances.

What legal requirements apply to the employer-employee relationship?

The employment relationship between agency and temporary agency worker is governed by labour law including all regular social security provisions. In addition, the principle of equality (Equal Treatment/ Equal Pay) applies to all employment relationships on a temporary basis. According to this principle, temporary workers are entitled to be given the same basic working conditions, including the same salary, as a similar employee within the hiring company. Other working conditions may be agreed upon by the agency and the worker as long as the minimum wage applicable to temporary work is met.

Basic working conditions include:

  • duration of working time, overtime, breaks, rest periods, night work, holidays,
  • remuneration (e.g., annual bonuses, allowances, bonuses, rewards, employer-side subsidies to occupational pension schemes)

Temporary work agencies are exempt from the obligation to equality if:

  • The application of an effective collective agreement was agreed upon in an employment contract.
  • The hourly wage of the collective agreement does not fall below the minimum wage. The hourly minimum wage rates are currently at 8.15 € in the west and 8.22 € in the east including Berlin (as of 2016).

If all these conditions are fulfilled, the provisions of the collective agreement apply to both periods of assignment and periods without assignment.

In practice, this exception has become the rule as it provides advantages for all parties affected: The client company does not have to disclose its remuneration system, the employees are not exposed to changes in their working conditions and the temporary work agency has a reduced administrative expenditure since the working conditions of its employees do not change constantly.

Application procedure

How do I apply for the temporary agency work license?

For the initial issue of a license the following documents must be submitted to the respective Federal Employment Agency:

  • Articles of association
  • Certificate of good conduct
  • Information from the commercial central register about the applicant and legal representatives of the enterprise
  • Trade register excerpt
  • Certificate from the health insurance in which most of the employees are insured, as far as contributions have been paid
  • Declaration of consent for the request of information from the tax office
  • Certificate from the employers’ liability insurance association
  • Proof of liquid assets such as all bank deposits held on demand or credit confirmation regarding tolerated overdraft. In order to proof its creditworthiness, an agency that intends to hire up to five employees must proof liquid assets of at least EUR 10.000. With an intended employment of more than five employees, the amount increases to EUR 2.000 per employee.
  • Sample employment contract and sample employee leasing agreement

Depending on where the registered office of the foreign enterprise is located, the comepetence for issuing a license differs.

 

Competent authority for granting a license

 

Federal Employment Agency Competent for companies with registered office located in…
Düsseldorf Polen, Großbritannien und Irland, Niederlande, Malta, Rumänien, Bulgarien, alle nicht EU/EWR-Staaten
Kiel/ Hannover Dänemark, Norwegen, Schweden, Finnland, Island, Estland, Lettland, Litauen, Kroatien, Ungarn, Slowakische Republik, Tschechische Republik
Nürnberg/ Stuttgart Belgien, Frankreich, Luxemburg, Spanien, Portugal, Italien, Griechenland, Österreich, Liechtenstein, Slowenien, Zypern

Source: Federal Employment Agency

 

Scope of testing

When establishing a temporary work agency, the Federal Employment Agency particularly examines the company owner’s personal reliability. If certain facts or circumstances indicate that the applicant will not comply with the applicable law and statutes, the Federal Employment Agency may deny the granting of a license. Examples of such facts, enumerated in Section 3 (1) Nr.1 AÜG, include non-compliance with:

  • provisions of social security legislation,
  • provisions of the SGB III on placement service as well as on the employment of foreigners (§ 284 ff. SGB III),
  • provisions of employment protection legislation,
  • obligations under employment law.

Fees

For issuing or extending a limited license, the German Federal Employment Agency charges the applicant EUR 1.000. The fee for an unlimited license amounts to EUR 2.500.

Helpful Links

English language version of the German Federal Employment Agency (Bundesagentur für Arbeit).

Please find also more detailed information at „temp work in germany„; in the construction sector also our website soka-rechtsanwalt might be helpful.