The Temporary Employment Act (AÜG) regulates the temporary assignment of workers by employers (temporary employment agencies, referred to in the Act as „lenders“) to perform work for third parties (client companies, referred to in the Act as „users“). This temporary assignment of workers is also referred to as temporary employment.

The AÜG serves to provide social security for temporary workers. Among other things, it stipulates that temporary employment may only be carried out by companies that have a permit from the Federal Employment Agency. This permit is only granted under certain conditions. For example, the company must be able to properly fulfill its obligations under labor law (Section 3 AÜG).

The AÜG has been in force since 1972. The last major reform took place in 2017, and there have been regular adjustments since then.

Not everyone can simply operate a temporary employment agency – this requires a special permit from the Federal Employment Agency (Section 1 of the Temporary Employment Act). Employers who wish to lease employees to a third party must submit an application to the Federal Employment Agency. If the eligibility requirements are met, the Federal Employment Agency will initially issue a temporary permit. If the temporary employment agency applies for extensions within the deadline, it can apply for a permanent permit – provided it has operated temporary employment with a permit for three consecutive years.

To monitor compliance, the supervisory authorities have the right to conduct (unannounced) company audits. If the Federal Employment Agency finds violations of the AÜG, it can revoke a granted permit. 

The following are among the checks to ensure that the temporary employment agency is carrying out its temporary employment activities properly:

• proper remuneration, e.g. that applicable minimum wages are paid, temporary workers are correctly classified for remuneration, collective agreements are correctly applied and continued payment of wages in the event of illness is ensured
• compliance with the maximum rental period
• compliance with the principle of equality

Trade unions and works councils can also monitor the proper handling of temporary employment.

Temporary employment agencies have all the same responsibilities as employers. For example, they are responsible for salary payments, continued sick pay and vacation pay, health insurance registration, social security contributions, and payroll tax.

The general duty of care also applies to temporary employment agencies. They are responsible for ensuring the health and safety of their temporary workers. They also issue them with employment references. As employers, they are generally liable for the actions of their employees within the scope of negligence in their selection.

Temporary employment agencies are responsible for the fair treatment of their employees. They must inform themselves about the conditions in the host companies and ensure compliance with the requirements of the Temporary Employment Act (AÜG). These include, among other things, compliance with the equal pay principle, the principle of equal opportunity, and the maximum assignment period. 

The client company pays the temporary employment agency an agreed fee, also known as an hourly rate, for the hours worked. The client company only compensates for actual working hours, not for unproductive time such as vacation or illness.

When companies employ temporary workers, the principle of equal treatment applies after a maximum of nine months. Therefore, they may not discriminate against the treatment of permanent staff.

If a temporary worker acts on the instructions of the client company, the client company is liable for any damages. Furthermore, the client company is liable under what is known as subsidiary liability . This means that it may be liable for social security contributions, contributions to the employer’s liability insurance association, and income tax. As an employer, the temporary employment agency is generally obligated to pay these contributions for its temporary workers. However, if this is not done properly or not at all, for example due to insolvency, the client company is liable for the entire period of the temporary worker’s assignment. For this reason, it is important for client companies to minimize this risk in advance.

Temporary work is regulated by law just like any other type of work. However, there is a difference between employment in a company and employment with a staffing agency:

• Employees employed directly by companies usually have only one job.
• Temporary workers are employed by a staffing agency, but they are deployed to various client companies – this means that their workplace is on-site at the respective client company and changes from time to time. 

Despite different locations, temporary workers are always contracted and paid by a single employer, the temporary employment agency. For temporary workers, this means they enjoy a lot of variety while also having security: They receive a fixed salary from their employer and, as employees, have the same rights and responsibilities as traditional employees.  

The working conditions for temporary workers are regulated by the AÜG Act. 

In the event of illness, temporary workers are entitled to continued payment of wages and are also entitled to paid vacation . Collective bargaining agreements in the temporary employment sector regulate, for example, salary and pay grades based on professional training and experience, special payments such as Christmas and vacation bonuses and allowances, vacation entitlements, working hours, notice periods, and the handling of time accounts.

With the 2004 reform of the Temporary Employment Act (AÜG), the so-called principle of equal treatment was incorporated into the AÜG for the benefit of employees. This stipulates that temporary workers must be employed under the same conditions as the permanent workforce of the client company. This applies, for example, to working hours, pay, and vacation entitlements, as well as to the use of the client company’s internal facilities, such as the canteen or the company daycare center. The temporary employment agency has the right to be informed about the employee’s employment conditions. Deviations can be regulated by collective agreement.

The Temporary Employment Act stipulates that temporary workers may be assigned to the same client company for a maximum of 18 consecutive months (see Section 1 Paragraph 1b AÜG). This is the so-called maximum assignment period. This means that temporary workers may spend a maximum of 18 consecutive months with a client. After that, the assignment with that client company must be interrupted for at least three months before the same temporary worker may be assigned there again („interruption rule“). It is irrelevant whether the temporary worker was assigned to the same client by a different temporary employment agency.

This regulation is intended to prevent permanent employees from being permanently replaced by temporary workers. Because temporary employment is limited to the maximum assignment period, temporary work has become a temporary solution. Before the AÜG reform came into force, longer assignments within the same client company were possible.

Deviations from the maximum rental period

• Collective agreements in the temporary employment sector:
  Deviating regulations from the statutory maximum assignment period through a collective agreement in the temporary employment sector are not possible.
• Client companies bound by collective agreements:
  For client companies bound by collective agreements, longer maximum assignment periods are possible if the collective agreement for the client’s sector of operation or a works agreement between the client company and the client works council provides for this. In the latter case, the applicable collective agreement must contain a so-called opening clause that allows for deviating provisions regarding the maximum assignment period.
• Client companies not bound by collective agreements may, in principle, only deviate from the statutory maximum duration of employment by means of a works agreement under certain conditions. 

The equal pay principle means „equal pay for equal work.“ It is regulated by the Temporary Employment Act and stipulates that temporary workers should receive the same remuneration as comparable permanent employees in the host company (Section 8 (1) AÜG). Deviations from this principle can only be made on the basis of collective agreements and only for a legally specified period (Section 8 (2) and (4) AÜG). 

Thus, there is a right to equal pay for temporary workers. An exception exists if the temporary employment agency applies a collective agreement. 

Equal pay when applying a collective agreement for temporary employment

If a collective agreement for temporary employment applies, equal pay becomes mandatory for temporary agency workers after a period of nine months. The assignment must be continuous and to the same client. Even assignments by different temporary employment agencies are taken into account. 

If a collective agreement for temporary employment and a collective agreement for industry supplements apply, a deviation from the 9-month principle is possible up to the maximum temporary employment limit if the collective agreement for industry supplements provides for a first stage of adjustment to the salary of the customer employee after 4 or 6 weeks respectively and if a salary that can be regarded as equivalent is set after 15 months at the latest.

Challenges in implementing equal pay

For the calculation according to the principle of equal treatment, all gross compensation components of a comparable permanent employee must be taken into account. This includes not only the salary but also any additional payments, allowances, bonuses, gratuities, or staff discounts.

When similar activities are performed, the question arises as to when a temporary worker can be compared to a corresponding permanent employee. How should length of service, years of experience, or special additional training be taken into account? Furthermore, different collective bargaining regulations and exceptions sometimes apply. However, the resulting inequalities can also be advantageous for temporary workers.

The so-called revolving door clause primarily serves to protect employees. It prevents a company from firing employees only to immediately rehire them through a temporary employment agency – sometimes under worse conditions than before. If only a few days pass between dismissal and rehiring, the employee, figuratively speaking, goes out through the revolving door and straight back in. 

If a company lays off an employee and wants to rehire them through temporary employment within the next six months, it must provide equal pay. This means the company must pay them the salary they previously received as a permanent employee.

The revolving door clause is regulated in Section 3 Paragraph 1 No. 3 Sentence 4 and Paragraph 9 No. 2 of the Temporary Employment Act.

A temporary employment contract must be concluded between the staffing agency and the client company before the assignment begins. (Requirement to mark the contract as temporary employment.) Furthermore, the temporary employment agency has a duty to inform the temporary worker that they will be working as a temporary worker.

The temporary employment contract must specify the temporary worker’s first and last name. This must be done before the temporary worker begins work at the host company (obligation to specify).

These obligations serve the purpose of transparency. Contracts described as work or service contracts, which in reality constitute temporary employment, are no longer exempt from sanctions following the introduction of the regulation as part of the 2017 AÜG reform.

Violations of the identification requirement may result in the invalidation of the employment relationship between the temporary worker and the temporary employment agency and the creation of an employment relationship with the host company („fiction of an employment relationship“ subject to revocation by the temporary worker), as well as fines. Violations of only the specification requirement generally do not lead to an employment relationship with the host company, but may result in a fine for the temporary employment agency.

The Temporary Employment Act (AÜG) prohibits clients from employing temporary workers if the client company is directly affected by a labor dispute (strike). The ban on strike deployment serves to prevent temporary workers from acting as strikebreakers.

Exceptions exist if the temporary worker does not take over the work of a striker or the work of a person who has previously taken over the work of a striker.