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 (a “hirer”).
Staffing Companies are companies like an agency, labor leasing company, or employer of record (like Deel) that help other companies 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 (EOR 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.
The German Federal Statistical Office estimates that 2.5% of workers in Germany are employed under temporary arrangements. Some countries label temporary employment as “dispatched labor”, so you may see AUG licenses categorized as a type of “dispatch license”.
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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?
Contracts must be capped to 18 months. After 18 months, the employee enters a three-month reset period before continuing the engagement. Alternatively, the employee may start a contract with a new Hirer without delay.
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.
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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, whether it be employees or contractors. However, direct hiring will require your payroll and compliance team to understand and follow German payroll regulations and employment standards. That’s often a costly and time-consuming process.
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 (Krankenkasse) contributions. This solution simplifies the 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 between you and the Staffing Company must not exceed 18 months. After the completion of the 18-month contract, a new contract can be signed with a new Hirer or 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. Consult with a Deel hiring specialist to see if this case applies to you.
Who manages the 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.
How Deel solves hiring in Germany
Deel holds an AUG license, enabling our clients to compliantly hire workers in Germany. Deel Germany GmbH, our locally owned entity, acts as the Employer of Record for the employee. Deel’s global hiring solution means we manage all German payroll deductions, tax obligations, and employment liability on your behalf.
To unlock the German talent pool, start by requesting a new quote on the Deel platform. We’ll collect details of the new position for a Scope of Work (SOW) and send you a Framework Agreement to legally set up the leasing arrangement. The Framework Agreement only needs to be completed once. Once signed, we can officially onboard the worker with an Employment Agreement.
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 the platform in action.