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Temporary Agency Work and Equal Pay in Germany: Collective Agreements May Allow for Lower Remuneration of Temporary Agency Workers

Jun 27, 23 • Employment LawNo Comments
Collective Agreements May Allow for Lower Remuneration of Temporary Agency Workers

The equal pay principle is a crucial prerequisite for temporary employment relationships in Germany. In these arrangements, temporary workers are assigned to the hiring company for a specified period to perform work according to the employer’s instructions. This principle ensures that temporary workers receive remuneration at the same level as the comparable permanent workforce of the hiring company.

Nonetheless, temporary agency workers typically receive lower pay than permanent employees under collective agreements. In a ruling on May 31, 2023 (Case number: 5 AZR 143/19), the German Federal Labor Court (Bundesarbeitsgericht, BAG) confirmed that it is permissible for temporary agency workers employed under collective agreements to be paid less. With this decision, the BAG has now adopted the European Court of Justice’s (ECJ) viewpoint (ruling from December 15, 2022, C-311/21).

BAG: No claims for payment differences in the remuneration of the core workforce

The BAG was presented with the following facts: the plaintiff was employed by the defendant, a temporary employment agency, as a temporary worker. The collective agreement on temporary employment from the Association of German Temporary Employment Agencies (iGZ) and the United Services Trade Union in Germany (ver.di) applied to the employment relationship.

In the context of this employment relationship, the plaintiff worked as an order picker for a retail company from January to April 2017, earning an hourly rate of 9.23 euros. In comparison, comparable employees who were directly employed by the hiring company received a wage of 13.64 euros per hour.

Consequently, the plaintiff filed a lawsuit against her employer (the lender) in the Labor Court, seeking payment of the difference between her remuneration and that of the permanent staff. The plaintiff based her argument on the principle of equal treatment outlined in the Temporary Employment Act (AÜG).

After the lower courts deemed the action unsuccessful, the BAG also rejected the plaintiff’s appeal as unfounded. Previously, the BAG presented the question of whether the collective agreement violated European law provisions of the Temporary Agency Workers Directive to the ECJ. The ECJ confirmed that unequal treatment under collective agreements is permissible under certain conditions in European law.

A less favorable salary in exchange for additional compensatory benefits

In accordance with the principle of equal treatment, the terms and conditions of employment for a temporary worker must at least be equivalent to those of a permanent and comparable employee of the hiring company. This legislative approach aims to protect temporary agency workers from unequal treatment.

A temporary employment agency, however, is only required to pay the temporary worker the salary dictated by the collective agreement, which may be lower than the salary for permanent staff at the hiring company. The fact that this allows for potentially inferior treatment of temporary agency workers does not contradict the mandates of European law, as long as ‘the overall protection of temporary agency workers’ is maintained, states the BAG, as per the ECJ.

Therefore, collective agreements may allow for unequal treatment concerning individual terms and conditions of employment. However, overall protection can be ensured if the collective agreement also offers other compensatory benefits, such as continued payment of remuneration during periods when the worker is not assigned to a hiring company. This would provide an advantage that compensates for the unequal treatment in other areas, regardless of whether the temporary workers are employed for a fixed term or an indefinite period.

Remuneration must adhere to minimum wage requirements

Furthermore, collective agreements guarantee that remuneration for temporary agency workers adheres to the legal protection regulations. This encompasses compliance with regulations on minimum wage and other wage floors.

An additional legal requirement specifically designed to protect temporary agency workers in Germany includes two key provisions. Firstly, the temporary employment agency must assume operational risk for periods of no employment assignments without available alternatives. Secondly, any potential reduction in remuneration – deviating from the principle of equal treatment – is generally limited to a duration of nine months.

WINHELLER advises on employee leasing and remuneration for temporary agency workers in Germany

Companies currently engaged in or seeking to engage in commercial employee leasing, as well as companies hiring temporary workers must adhere to numerous formal and legal requirements in addition to the principle of equal treatment. In this, mistakes can rapidly lead to financial setbacks. This is due to the heightened risk of fines, claims for damages and the inadvertent establishment of employment relationships with the hirer.

WINHELLER advises companies on drafting contracts and provides support for practical implementation. Additionally, our experts support temporary employment agencies in applying for an employee leasing license.

Continue reading:
Staff Leasing in the High-wage Sector in Germany
Equal Pay Claim in Germany

Ellen Pusch

Ellen Pusch specializes in employment law and inheritance law at our Munich office. She drafts and optimizes employment agreements as well as specific types of termination agreements and assists with restructuring projects and M&A transactions (transfers of undertakings).

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