What Is an AUG License?
If you’re hiring contractors in Germany, you’ve likely come across the term AUG license. Under the Arbeitnehmerüberlassungsgesetz (AUG), any company supplying its workers to clients to work under the supervision, direction, and control of the client must hold a license. The license holder must have a contract with the client, as explained in the video below. As such, an AUG license is a key requirement for staffing agencies placing talent in Germany.
At Workwell-Global, we simplify this process. As your unlimited licensed partner, we make it easy to compliantly place and payroll contractors in Germany, without the headache.
What Is the Temporary Employment Market Like in Germany?
Before we jump into more detail on what the AUG license is, understanding demand for temporary employment in Germany provides insight into why many companies hire within this market. Consequently, they need to be aware of the requirements to engage temporary workers compliantly in Germany.
According to the German Federal Statistical Office, approximately 9.5% of the workforce in Germany is working as temporary work agency workers as of 2023. A segment expected to generate €26.2 billion in revenue by 2025.
In Germany, operating a Temporary Work Agency to provide labour leasing services is governed by the AUG.
Temporary employment/ labour leasing in Germany is a widely used model that allows companies to bring in extra support quickly and flexibly. Whether it’s additional staff during peak retail periods or highly skilled contractors for a tech project, temporary work helps businesses respond to market needs without the complexity of direct employment.
This model is especially popular in Germany due to strict protections under the Dismissal Protection Act, which can make permanent hiring more challenging and less agile.
To navigate these complexities, many companies rely on staffing agencies or Employer of Record (EOR) (EOR) providers licensed under Germany’s AUG law. Staffing agencies help German businesses find temporary workers and use an Employer of Record to engage them. The EOR acts as the legal employer, handling payroll, tax, and compliance, while assigning the worker to the end client.
This keeps the process efficient and fully compliant with German employment regulations.
Who Needs an AUG License to Hire in Germany?
Under AUG, any company that employs workers and assigns them to a third-party client in Germany to work under the supervision, direction and control of that client must hold an AUG license. Whether you’re based in Germany or abroad, if you’re placing a contractor with a German end client, AUG license requirements still apply.
Is an AUG license always necessary?
If you’re a staffing agency leasing workers to another company in Germany, an AUG license is mandatory under German employment law.
Hiring contractors in Germany without this license can result in serious consequences, including:
- Fines of up to €500,000
- The client (hirer) is legally required to employ the worker directly
For recruitment agencies and global employers, securing the correct license ensures full compliance with AUG regulations and protects both the end client and the worker.
Here Is an Example of How the AUG License Works
Imagine a recruitment agency based outside of Germany wants to place a skilled contractor with a tech company in Berlin. Without a local entity or local registration, the agency cannot legally employ the contractor or fulfil the required tax and employment obligations under German law.
By partnering with an unlimited AUG-licensed Employer of Record in Germany, like Workwell Global, the process becomes compliant and efficient.
Under German labour leasing rules, the Employer of Record becomes the contractor’s official employer, taking care of payroll, taxes, social security, and full employment compliance. The contractor is then leased to the German end client to deliver their services without making the client the legal employer.
This setup protects all parties. The recruitment agency can expand into Germany compliantly, the end client avoids unnecessary employment risk, and the contractor is fully supported under German law.
Benefits of the AUG License to Hiring Companies in Germany
Rather than setting up a local entity or navigating Germany’s strict employment laws alone, many businesses choose to engage workers through an unlimited AUG-licensed partner. Here’s why:
- It allows companies to respond quickly to market demand by deploying skilled workers on-site without delays.
- Using an AUG license partner simplifies the legal and administrative burden for businesses unfamiliar with German labour regulations.
- It ensures compliance from day one, helping businesses avoid risks like misclassification or non-compliant employment structures.
By working with an unlimited AUG license holder like Workwell Global, companies gain a compliant route into the German market with the support they need to hire confidently.
What are the Shortcomings of an AUG License?
While an AUG license allows you to compliantly hire workers in Germany, it also comes with significant challenges that businesses should be aware of before pursuing one.
Difficult to secure an AUG license in Germany
It is difficult for a company to obtain an AUG license, as discussed in our webinar below. You need:
- A German entity to submit an AUG license application
- Time to wait 12-18 months to secure the AUG license
- Evidence, such as German worker timesheets, once in place you will be subject to audits
An AUG license limits contracts to 18 months
While we’ve already highlighted that the AUG license limits worker assignments to 18 months and carries strict compliance responsibilities, there are additional drawbacks that businesses should be aware of if they’re considering applying for one themselves.
If you’re hiring temporary workers under an AUG model, it’s important to note that contracts cannot exceed 18 months with the same hirer without a three-month break or a new hirer in place. If you’re seeking a longer-term solution, our team can advise on the best structure to suit your plans from AUG-compliant contracts to permanent employment routes.
Speak to us to make placing contractors in Germany work for you.
How to obtain an AUG license?
According to the law firm Luther Rechtsanwaltsgesellschaft GmbH, the application for a temporary employment permit (AUG license) in Germany involves a non-refundable processing fee of €1,300.
If granted, the license must be renewed annually until you qualify for an open-ended version, which is rarely awarded without multiple appeals. Even then, open-ended AUG licenses can expire if not used for three years.
The burden doesn’t stop there.
As a license holder, you must meet strict regulatory standards set by the German Federal Employment Agency. Non-compliance can result in steep fines ranging from €30,000 to €500,000, and newly licensed companies are subject to frequent audits.
For many businesses, these administrative and legal responsibilities make holding an AUG license a heavy lift, which is why so many agencies choose to partner with an experienced, fully licensed provider like Workwell Global instead.
Hiring Through an Unlimited AUG-Licensed Employer of Record
Securing an AUG license in Germany is no small task, and an unlimited license is even harder to obtain.
To be granted one, a provider must operate compliantly under a limited AUG license for at least three consecutive years, meeting strict ongoing checks from the German Federal Employment Agency.
At Workwell Global, we’ve done exactly that and can proudly say that we are an unlimited AUG license holder. Which means you can rest assured you are operating compliantly in Germany, in addition to contractor payroll being covered!
Why Workwell Global’s Unlimited AUG License Matters for Your Business
Germany is the largest staffing market in Europe, and one of the most popular countries our clients want to place contractors in.
With our unlimited AUG license, you can:
- Place contractors in Germany confidently
- Reduce compliance risks for your recruitment agency
- Avoid the delays and admin of setting up your own entity
- Keep payroll, timekeeping, and local employment law fully covered
To give some insight into what this milestone means behind the scenes, Ronald Vermeulen, our Compliance Consultant at Workwell Global, shared the following:
“The Bundesagentur für Arbeit has recognised that our systems, from contracts and timekeeping to invoicing and payroll, meet the highest standards. This unlimited license is more than a compliance milestone; it’s a mark of trust and quality for our clients.”
If you’re placing contractors in Germany or planning to, you’re now backed by one of the few employment partners who hold an unlimited AUG license and everything that comes with it speed, scale, and full confidence in compliance.
I Want to Hire Someone from Germany – How do I Stay Compliant?
Hiring talent in Germany can open doors to a highly skilled workforce, but navigating employment law and payroll requirements can be complex.
You’ll need to ensure your business is set up to meet Germany’s employment standards, social security contributions, and tax obligations.
Add on top of these regulations, German employment legislation changes which you must keep on top. We shared some examples in a webinar we hosted to keep recruitment agencies compliant when placing contractors in Germany.
Keeping up to date with employment legislation in Germany can be both time-consuming and costly to manage without local expertise.
That’s where Workwell Global steps in. Our Employer of Record Germany solution gives you the ability to hire employees or contracts without establishing a local entity. We handle everything from payroll and tax to health insurance and compliance, so you can focus on building your team without the admin.
Catch up on the full webinar for an example of how you can stay compliant when hiring contractors in Germany.
Ready to Hire Contractors in Germany? Here’s What’s Next
Placing contractors in Germany means getting to grips with local employment laws, and AUG Germany is a key part of that. From understanding the AUG license obligations to ensuring compliant payroll and worker assignments, there’s a lot to manage.
With the right partner, it doesn’t have to be complicated.
At Workwell Global, we specialise in supporting recruitment agencies to place contractors in Germany without the need to set up a local entity. As an unlimited AUG licence holder, we handle payroll, compliance, and every step in between so you can focus on growing your business.
Disclaimer: Workwell Global does not endorse any personal views or opinions of the author. All information here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.