Changes with regard to agency workers in Germany

The hiring of temporary agency or “leased” workers in Germany requires the agency (or “lessor”) to hold an employee leasing licence. The licence requirement also applies to cross border situations ie to the provision of agency labour from or into Germany. A licence can be obtained from the state employment agency, usually within four to six weeks.

In the absence of a licence, the provision of agency workers is illegal and exposes both the agency and hirer to potentially high financial penalties. Although, historically, German law has permitted a number of exceptions to the need for a licence, many of these were removed by changes which came into effect in April 2011 and the remainder will be abolished  from December 2011.

The major changes are:

  • The provision of agency labour will now require a licence in all cases. This not only includes commercial agency operations but non-profit making situations.
  • The ability of an employer to dismiss employees and then re-hire them through an agency (commonly on less favourable terms) is restricted so that any employee re-hired within a six month period must receive the same pay and conditions as an agency worker as he or she enjoyed as an employee of the hirer. Only those re-engaged on an agency basis after six months have elapsed may be offered different or lesser terms.
  • The Government has expressly reserved a right to introduce a minimum wage for agency workers at a future date.
  • Engagement of an agency worker for more than six months may be considered a permanent, as opposed to temporary appointment.
  • Inter-group company transfers and secondments which have been not been subject to the licensing requirement will remain excluded, providing the group company supplying the workers does not have the primary purpose of operating as an agency.

The new provisions are not only likely to make agency working more difficult for agencies and hirers, by extending the licence requirement to situations where no licence was required previously, but may also make it less attractive financially.  Businesses will need to consider closely whether their temporary engagement of staff now requires a licence and will need to take account of the timing, implications and cost involved.