Gig Economy Employers Navigate Germany’s Temporary Employment Act

Germany’s Temporary Employment Act passed in 2017, but the effects continue to be felt as the country’s Federal Employment Agency reports a three percent decrease in temporary worker employment in 2018. Uncertain economic conditions and demographic changes contribute to the reduced hiring, but AÜG licensing regulations are also a factor.

In Germany, contractors or agencies that hire people on behalf of other companies must have an Arbeitnehmerüberlassungsgesetz (AÜG) license. In addition, the act imposes a time limit on a worker’s employment through that third-party agency to 18 months. At the end of that period, if the worker is still employed by the client through the agency, that worker becomes the client’s employee. The worker may also remain with the contractor or agency but must submit a written request to the federal employment agency to do so.

Takeaway: The total flexible workforce numbers may have decreased, partly because AÜG licensing regulations pushed many flexible workers to be reclassified as permanent employees. At the same time, however, companies continue to engage workers through non-employee paths. Companies in Germany are well served to focus on identifying, classifying, and tracking their non-employee workers. For these employers, a focused resource management effort helps reduce the risk of temporary workers automatically converting to a new employee status due to AÜG rules.

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This update contains general information only, and AGS is not rendering legal advice. Before making any decision or taking any action that may affect your business, you should consult qualified legal counsel. AGS shall not be responsible for any loss whatsoever sustained by any person or company who relies on this update.