A Complete Employer's Guide to AUG Licenses in Germany

AUG Licenses in Germany

AUG Licenses in Germany

December 29, 2022


Picture of INS Global



Picture of INS Global



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Key Takeaways

  1. AUG (Arbeitnemeruberlassung) loosely translates as “Work Hiring Leasing Act”
  2. The AUG was initially created so that temporary workers and contractors receive many of the same fundamental rights as employees.
  3. Those hiring contractors in Germany must have an agreement with an AUG license-holding entity or agency.


If you have a business in Germany or are planning to expand to the German market, you may want to consider temporary employment or contractors for a specific project. The AUG license, or labor leasing act, is the most crucial piece of regulation in Germany for companies with this need. It permits an agency to lease workers on a short-term or fixed-term basis.

This article will walk you through the basics of the AUG license and how it applies to contractors in Germany. Here, we will also discuss the best way to hire workers quickly and in full legal compliance.


The AUG License: What is It?


An AUG (Arbeitnemeruberlassung, loosely translated as “Work Hiring Leasing Act) license in Germany involves three parties:

–     a Germany-based limited company that wants to hire a contractor or temporary worker

–     a staffing agency or entity that legally employs the workers in Germany on behalf of the original company

–     a contractor or temporary worker.

Temporary workers often do not have the same regulations as full-time employees regarding annual leave, holiday pay, business expenses, severance pay, etc. The AUG was initially created so that temporary workers and contractors receive many of the same fundamental rights.

Unlike in many countries, those hiring contractors in Germany must have an agreement with an AUG license-holding entity or agency.


What are the Requirements of an AUG Licensing Agreement?


Contractors and workers hired under an AUG contract are legally employed by the third-party agency or umbrella company. They are not employed by the company they are working for day-to-day. The agency will also handle all aspects of the worker’s payroll, social contributions, health insurance, etc.

As of 2017, an AUG contract can only go on for a maximum duration of 18 months. If the contract worker continues to work for the hiring company beyond this time, the original company automatically becomes their employer. All relevant labor laws and rules for that relationship immediately become effective.

A leased worker may also make a written statement saying that they wish to remain employed by the agency or umbrella company.


The Benefits of Using an AUG Licensed Partner


With an AUG licensed partner, you can:


Hire Workers to Meet Temporary Needs


Instead of training a full-time or part time employee for specific needs or projects, you can have the professional skills of a temp worker to fulfill those requests smoothly and efficiently.


Cut Down on Hiring Costs


Having an agency or umbrella company hire and handle your temporary workers for you means you don’t have to spend time and resources on recruitment and hiring yourself.


Test the Market in a Cost-Effective Way


Hiring new employees can be a significant investment of time and energy, especially in a new market.

By working through an umbrella company, you can have talented workers who can start working immediately. At the same time, you focus on determining whether this is a suitable market for your company.


Be Legally Compliant in Every Way


Germany’s labor laws are complex, and any mistakes made regarding worker classification or taxation can be detrimental to your company’s expansion plans.

Allowing a third-party recruitment agency to hire workers for you entrusts the safety of your workers to well-versed local law experts. This also dramatically reduces the margin of error.


Acquire The Right New Talent


When unsure about the talent your team needs, hiring temporary workers allows you to see what kind of workers fit best.

The short-term nature of the contract makes it easier for you to change directions as necessary and find a different skill set. Similarly, suppose hiring the temporary employee fits your needs perfectly. In that case, it allows you to make an employment contract with complete confidence in their skills.


AUG license in Germany



Hiring in Germany: Chose INS Global to Help You


Germany is the fourth-largest economy in the world, and its talent pool is vast and attractive. However, hiring in Germany can be complicated.

German labor law follows EU standards and requires a good deal of paperwork. The Federal Employment Agency carefully monitors AUG license-holding agencies. This aims at protecting employees’ rights at all times.

A legal team and depth of experience like INS Global’s means you won’t have to worry about running afoul of local requirements. Our legal advisors can give you counsel catered to your specific needs and situation. All the while, our global mobility experts can also ensure you meet your contractor needs safely and efficiently.

With our AUG licensed global EOR (Employer of Record) or PEO (Professional Employer Organization) options in Germany, you can legally hire, onboard, and pay independent contractors or regular employees without any risk of legal pitfalls.

Our team helps you find the best qualified workers so that you can succeed in the German market.

So, contact us here today to learn more.


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