Germany is well known for its rich culture and traditions. In addition, it has one of the strongest economies in Europe, making it attractive for business opportunities. However, it's crucial to understand German labour laws because they can affect your workforce strategies and growth.
Germany has strict labour laws that work for the benefit of the labour market and workers. Despite the strictness of the laws, you can achieve growth by employing experts across the globe without the unnecessary cost of establishing a local entity. But how?
To better understand labour laws in Germany, we will explain AUG licensing, and which labor and tax laws companies should comply with before hiring in Germany.
AUG (Arbeitsnehmerüberlassung), or the labour leasing act, is a mandatory employment permit in Germany that allows agencies to contract or lease out labour to the end user (Germany-based companies). With AUG, the end user isn't the official employer of the contingent employee because the contract is between the employee and the agency.
To get the AUG license, it's a requirement that you be well-versed in German employment laws, tax requirements, and compliance obligations.
An AUG contract involves the client company, a contractor, and an AUG entity. Under the temporary workers' act, an AUG entity is responsible for any compliance and payroll obligations.
The license is applied at Bundesagentur für Arbeit (the Federal Employment Agency). To obtain the permit, you need to follow the laid-out procedure from the Federal employment authority.
First, ensure you submit the following documents to the Federal Employment Agency.
The documents to be submitted are often changed, and it's always good to consult with the federal employment agency to check which additional documents need to be submitted.
According to the Federal Employment Agency, the license is usually granted 12 weeks from the date of submitting the application. A clearly and professionally filled application and complete documents might accelerate the application process.
The AUG comes with its fair share of conditions, such as:
1. Contracts run for a maximum of 18 months. After the 18 months have elapsed, the employee then enters a three-month + 1-day reset period before they can proceed to a different entity. Subsequently, the client can do the following after the 18 months:
2. Under AUG, employees have rights such as the right to access job opening information posted by the employer, the right to a minimum wage, and the right to fully access communal work facilities.
Your entity needs an AUG license if you plan on employing workers and contracting them to a third party. Operating without a license can be catastrophic on your end because of the repercussions involved, such as:
The AUG license adds significant value to the companies running operations in Germany. Some of the benefits the companies enjoy are:
The AUG license comes with its share of benefits, but it has its own downside of shortcomings.
When looking for a prospective candidate for employment, keep in mind that they will be entitled to the following benefits:
Expectant mothers may not report to work six weeks before the delivery date. Additionally, they may also not work for the next eight weeks after delivery. Females will not work for 12 more weeks after delivery day especially if they had premature or multiple births.
Furthermore, expectant mothers enjoy maternity benefits from their respective health insurance policies during maternity leave.
Once the six-week limit is attained, the health insurance takes over and sorts out the employees' sickness allowance.
When you work with an Employer of Record (EOR) like Remofirst, you can hire and manage employees in Germany and 150+ other countries without having to worry about the nuances of local employment laws. Simply bring us your remote candidate, and we will take care of all of the international HR, global payroll, and health benefits for your employees.
Want to learn more about how easy it is to hire and manage a global team? Request a demo today to learn how Remofirst can help you hire compliantly in 150+ countries.