8 Labor Laws In Germany To Be Aware Of When Hiring Abroad

8 Labor laws in Germany to be aware of when hiring abroad

Navigating German labor laws for employers is crucial, especially for those involved in temporary employment. The Employee Leasing Act, or AUG, plays a key role here. It outlines the need for an AUG license for temporary employment agencies. This ensures compliance with hiring employees in German regulations. Moreover, it upholds discrimination laws in German workplaces, ensuring fair treatment for all. Additionally, it touches on aspects like German retirement pension contributions, NDAs, and Data Protection in Germany. Understanding AUG is essential for businesses aiming for success in Germany’s job market. This guide aims to provide a comprehensive overview, making complex regulations easy to grasp. Also, you can contact our experts here at ThisWorks for more info.

1. Need for an AUG License

An AUG license is obligatory for any German employer planning to lease workers. This license is your key to functioning legally. It ensures you meet all German labor laws for employers. Holding an AUG license indicates you’re serious about following the rules. It’s not just about legality; it’s about duty. With this license, you’re ready to offer fantastic possibilities while protecting workers’ rights. Let’s look into why this license has such significance.

Why You Need It?

The license does more than just allow you to lease staff. It also guarantees you’re up to speed with Discrimination laws in German workplaces. Plus, it covers you on matters like German retirement pension contributions. Not to forget, it’s also vital for NDAs and Data Protection in Germany.

How to Obtain an AUG License?

Once you pass all the official checks, you’re on your road to earning the AUG license. Remember, this license is more than a permission. It’s a commitment to fair and legal employment practices in Germany. Here’s clear guidance on how to get the license.

Application Submission: Start by submitting your application to the Federal Employment Agency. This is your first step into the realm of lawful employee leasing.

Documentation: You’ll need to offer a selection of documents. These include your business registration and proof of financial stability.

Compliance Check: The agency will assess your application. They ensure you meet all German labor rules for employers.

The Federal Employment Agency looks for particular factors in your application:

Financial Reliability: Your firm must be financially solid. This indicates you can meet your responsibilities to leased staff.

Legal Compliance: You must comply with all relevant laws. This contains discrimination laws in German workplaces and NDAs and Data Protection in Germany.

Fair Treatment: The agency checks if you can give fair wages and working conditions. This accords with the principles of German retirement pension contributions.

2. Equal Treatment and Pay for Leased Employees

In Germany, fairness in the workplace is a must practice, especially when it comes to leased personnel. At the basis of these policies is a simple yet strong idea: leased employees should enjoy the same perks and salary as their permanent equivalents. Equal treatment and remuneration for leased employees are not merely legal requirements. They represent a dedication to fairness and respect in the workplace. By obeying these standards, businesses contribute to a more equal and productive work environment.

Equal Pay: From day one, leased personnel must earn the same wage as permanent staff doing similar tasks. This rule bans any salary discrimination in the workplace.

Working Conditions: Beyond wages, leased employees are entitled to the same working conditions. This includes access to facilities, work hours, and breaks, guaranteeing a level playing field for all.

3. The 18-Month Leasing Cap

In Germany, there’s a clear guideline regarding leasing employees: the 18-month cap. This limit impacts both employers and temporary workers. The 18-month leasing cap is a major aspect of hiring employees in German regulations. It fosters a balanced approach to temporary employment, benefiting both employers and individuals.

The 18-Month Rule Explained

You can’t lease the same employee to the same company for more than 18 months. This regulation ensures variety and fairness in temporary employment. Employers need to plan properly. After 18 months, you must either hire the staff permanently or cycle them out. This maintains your team dynamic and is consistent with German labor rules for employers. For workers, this cap means an opportunity for various experiences. It also opens the door to potential permanent opportunities after the leasing period ends.

Managing the Cap

Strategic Planning: Employers should maintain track of leasing periods. This assists in avoiding unintentional breaches of the 18-month guideline.

Rotation and Hiring: Consider rotating personnel or giving permanent employment as the 18-month milestone approaches. This maintains compliance and workforce stability.

4. Documentation and Reporting for AUG Compliance

For organizations adopting the AUG setup, careful documentation and timely reporting are non-negotiable. These approaches not only ensure compliance but also preserve the interests of all parties concerned. Keeping correct records is the backbone of AUG compliance. Here’s what you need to maintain:

AUG licensing Proof: Always have your AUG licensing papers ready. It’s your ticket to lawfully leasing employees.

Employee Contracts: Maintain thorough contracts for leased personnel. These should replicate the criteria for permanent staff, reflecting German labor rules for enterprises.

Wage Records: Documenting pay rates is vital. It confirms compliance with equal pay standards, a cornerstone of fair employment practices.

Reporting Obligations

Regular reporting to labor authorities maintains your firm visible and compliant. Report the start and end dates of employee leasing terms. This assures adherence to the 18-month cap. Submit data confirming leased employees receive the same benefits and salary as permanent ones. This corresponds with discrimination legislation in German workplaces. Report on occupational health and safety measures for leased staff.

5. Sector-Specific Prohibitions on Employee Leasing

AUG setup requires awareness of sector-specific rules. Certain businesses face limits or outright prohibitions on employee leasing, while others enjoy exceptions. Understanding these limitations and exceptions is vital for maintaining compliance with German labor regulations for firms. It assures your organization may utilize the benefits of employee leasing without falling afoul of industry-specific restrictions.

Industries with Leasing Restrictions

  • Construction: The construction sector confronts severe regulations due to concerns over safety and employment stability. Leasing staff here demands careful consideration of legal restrictions.
  • Healthcare: In healthcare, the focus on patient care and the delicate nature of the work typically limit the usage of leased staff.
  • Public Sector: Government and public services often restrict employee leasing to maintain transparency and public responsibility.

What Are the Exceptions?

While some sectors face restrictions, there are instances under which a leasing license might not be necessary:

  • Group Companies: Within corporate groups, shifting personnel between entities may not require a separate AUG license, boosting internal freedom.
  • Short-term Needs: For urgent, short-term projects, notably to avert layoffs or manage unanticipated demand spikes, exceptions may apply.
  • Cross-Industry Collaborations: Projects combining many organizations from different sectors might allow for more flexible personnel leasing arrangements under specific agreements.

6. Social Security Contributions for Temporary Employees

In Germany, paying sufficient social security contributions for temporary workers is not only a legal requirement—it’s a cornerstone of equitable hiring practices. Social security in Germany covers health insurance, pension, jobless insurance, and nursing care insurance. Both employers and temporary employees share the responsibility for these contributions, offering a safety net for workers.

Employer Responsibilities

Employers must pay social security at the same rate as permanent employees. This ensures temporary workers receive equivalent benefits. Making donations on time is important. Delays might result in penalties and risk the employee’s coverage. Contributions are based on the employee’s gross pay. You as an employer need to determine this carefully to avoid underpayments or overpayments.

Temporary Employee Considerations

Temporary employees should be told of the deductions from their compensation for social security. Clear information from employers on this topic aids in transparency. Despite their temporary status, these workers are entitled to the entire spectrum of social security benefits, including health care, pension accrual, and unemployment payments. For temporary employees from overseas, businesses must traverse extra requirements to ensure compliance with both German and international social security agreements.

7. Termination Rights and Protection

Terminating temporary job contracts in Germany comes with its own set of rules. Terminating temporary employment contracts demands careful consideration of legal requirements and the interests of the individuals concerned. These standards guarantee justice and clarity for both employers and temporary workers.

  • Notice Periods: The law gives minimum notice periods for discontinuing temporary employment contracts. These periods change based on the contract’s duration and the employee’s employment.
  • Severance Pay: In certain instances, temporary employees may be qualified for severance pay. This depends on the contract terms and the circumstances of the termination.
  • Employer Obligations: Employers must clearly explain the reasons for termination, adhering to the principles of justice and transparency. Moreover, employers need to follow the prescribed notice periods, giving employees ample time to plan for their future moves.
  • Employee Rights: Employees have the right to obtain a clear reason for their termination, guaranteeing openness in the process. If employees think their termination breaches their rights, they have the option to seek legal help and perhaps contest the decision.

8. Health and Safety for Leased Employees

Ensuring the health and safety of leased personnel is a main problem for businesses in Germany. But stressing health and safety goes beyond just compliance. It’s about building a workplace where every employee feels valued and protected. It’s not just about meeting legal requirements—it’s about providing a safe and supportive work environment. Here’s what you as a company need to know.

Key Health and Safety Responsibilities

  • Workplace Assessments: Employers must frequently analyze the workplace for possible dangers. This proactive approach assists in identifying and managing hazards early.
  • Safety Training: Providing comprehensive safety training is important. It provides leased workers with the expertise to overcome workplace hazards.
  • Personal Protective Equipment (PPE): Supplying important PPE is a must. It’s a basic but important step in protecting employees from job injuries.

Creating a Culture of Safety

Encourage leased employees to share safety problems. An open-door strategy can lead to speedy resolutions of possible hazards. Keep safety measures up to date. As workplace dynamics change, so should your attitude to health and safety. Also, ensure that health and safety rules encompass all employees, including those on temporary contracts. Everyone needs a safe workplace.


German labor laws for employers are important for enterprises operating in Germany. The Employee Leasing Act (AUG) is an important component, assuring compliance with hiring employees in Germany regulations. Businesses must also be diligent in keeping discrimination laws in German workplaces, along with obeying NDAs and Data Protection in Germany. Understanding these standards, especially those governing German retirement income payments, is vital for building a fair, compliant, and successful work setting within Germany.

Frequently Asked Questions

Is at-will employment allowed in Germany?

No, Germany doesn’t have “at-will” work like some other countries. Both employers and employees require a good reason and sufficient notice to end a job.

What are the consequences of misclassifying employees in Germany?

If you erroneously classify a worker as a contractor when they’re truly an employee, you could risk fines, unpaid taxes, and even legal problems. It’s best to be sure about the difference.

What protections does Germany offer against discrimination in the workplace?

Germany has strong rules against discrimination based on topics like gender, ethnicity, religion, age, and handicap. Employers must treat everyone fairly.

Do German workers have the right to unionize?

Yes! German workers can join unions to fight for better pay and working conditions. This is a protected right.

What statutory benefits are German employees entitled to?

German workers have items like paid vacation time, sick leave, and parental leave. These are minimum rights given by law.

Are non-disclosure agreements (NDAs) legally binding in Germany?

Yes, NDAs can be used in Germany, but they have to be fair and detailed. They can’t stop an employee from reporting criminal acts, for example.

Are employers required to offer retirement pensions in Germany?

They’re not required to give private pensions, but companies must contribute to the government’s pension system for each employee.

How is personal information safeguarded in German employment?

Germany has stringent data privacy regulations. Employers can only gather the personal information they really need and must keep it safe.

What does the Works Constitution Act (BertVG) entail for German employees?

This regulation lets employees in larger organizations elect a “works council”. This council has a say on matters like working hours, safety, and even layoffs, giving employees a voice

Article Author – Gino Peters

Gino Peters is the Commercial Director at ThisWorks, with a rich history of nearly a decade in international payroll. Throughout his tenure, he has consistently kept abreast of evolving labor legislation, ensuring that ThisWorks remains at the forefront of industry knowledge. Beyond his vast expertise, Gino is deeply committed to advising and guiding clients and partners with precise insights. His leadership guarantees that all content and operations at ThisWorks meet the highest standards of clarity, accuracy, and compliance.
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