The AUG license in Germany and its effects on hiring
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What is AUG?
AUG (or more accurately, AÜG), is short for Arbeitnehmerüberlassungsgesetz, or the Temporary Employment Act.
In Germany, the Temporary Employment Act lays out a number of regulations related to Arbeitnehmerüberlassung, or temporary employment.
The AUG license is an employment permit that allows a staffing company to lease or contract out labor to an end user.
Staffing companies are companies like an agency, labor leasing company, or employer of record (the “Staffing Companies”) that help other companies (the “Hirer”) employ workers without having to deal with the complexities of officially hiring a permanent employee.
What is temporary employment like in Germany?
At times, businesses may need to hire additional workers on top of their usual workforce. For example, a shipping company may need additional packers for the holiday season, or a software company may need extra engineers for a particular project. This can be difficult to do in Germany because the process to permanently employ and then terminate an employee tends to be complicated—terminations are well-protected under the Dismissal Protection Act. Instead, companies can turn to specialized staffing companies that lend out workers on a temporary basis. The workers remain officially employed under the staffing company. The Staffing Company bills the Hirer for the workers’ wages in addition to a hiring fee for their service.
This type of arrangement is known as temporary work. This arrangement offers flexibility and cost savings for Hirers. However, because temporary work is tightly regulated in Germany, there are rules that need to be followed to stay compliant with local employment laws.
The German Federal Statistical Office estimates that 2.5% of workers in Germany are employed under temporary arrangements. In some countries, especially Germany and Japan, temporary employment can be known as “dispatched labor”, so you may see AUG licenses categorized as a type of “dispatch license”.
Who needs an AUG license?
Any company or person who employs workers and contracts them out to a third party requires an AUG license to operate.
Leasing workers without a license can result in fines of up to 500,000 euros, and the Hirer who received services may be required to employ the worker as a direct employee.
What conditions are part of the AUG license?
If you hire through AUG, there is an 18-month cap on contracts. Once a worker works for more than 18 months with a Hirer, the Hirer is obligated to employ them as a full-time employee (or stop for at least three months before engaging with them for a new contract). This rule exists to prevent Hirers from using third-party Staffing Companies for long-term employment purposes.
Workers contracted under AUG also receive some other rights under the Act, such as the right to a minimum wage, the right to access communal work facilities, and the right to access information on job openings by the employer.
What should I know if I want to hire someone from Germany?
Many international companies are eager to hire from Germany’s talent pool and may be looking to hire a German worker remotely. AUG regulations do not apply to you if you’re hiring directly, for employees or contractors alike. However, direct hiring will require your payroll and compliance team to understand and follow German payroll regulations and employment standards.
Hiring through an AUG-licensed employer of record
Instead of having to set up a local entity, you can use an employer of record (EOR) service to hire on your behalf. The EOR is entirely responsible for calculating the mandatory taxes, social security, and health insurance contributions. This solution simplifies your hiring process, letting you attract and retain top talent without having to navigate local employment and tax laws.
If you hire through AUG, the contract must not exceed 18 months, which may be suitable for temporary needs or testing the working arrangement. After the completion of the 18-month contract, a new contract can be signed, but only after a 3-month reset period.
If you know you want to hire a German employee for an indefinite period, there are other compliant solutions that will allow you to operate without having to deal with the 18-month cap. You can chat with a Deel hiring specialist to see if this case applies to you.
Who manages implementation of AUG rules?
The Federal Employment Agency (Bundesagentur für Arbeit) in Germany is responsible for implementing the Act.
How long is an AUG license valid for?
The AUG license is valid for one year. After three consecutive years of operations, an “unrestricted” permit with no expiration can be granted by the Federal Employment Agency.
Is an AUG license the same as an ANÜ permit?
Yes, these terms refer to the same licensing requirement.
Deel is the global hiring and compliance solution for international teams. Deel works with over 200 legal experts for up-to-date compliance in over 150 countries, including Germany. Learn more about hiring employees and contractors in Germany or book a free demo to see Deel in action.