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Temporary Employment in Germany Automatically Leads to Employment Contract After 18 Months

Sep 30, 21 • Employment LawNo Comments
Temporary Employment in Germany Automatically Leads to Employment Contract After 18 Months

Temporary employment is a popular means companies in Germany take advantage of to cover short-term peaks in demand without having to hire new staff on a long-term basis.

However, in practice there are also risks for the hiring companies (hirers) which must be avoided at all costs. Hiring companies are only allowed to use temporary workers from agencies that have the necessary permit for the supply of temporary workers. If hirers use temporary workers from agencies that do not have the necessary permit, both the lender and the hirer will face penalties and fines. In this case, hirers face a fine of up to EUR 30,000. 

Temporary employment over 18 months leads to employment contract

In addition to this well-known risk, there are other facts that must be avoided in the context of leasing temporary workers in Germany. An important example of a risk on the part of the hirer is standardized in §§ 10, 9 and 1 of the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG). These stipulate that an employment contract is deemed to have been concluded between the (temporary) worker and the hirer if the same temporary worker has been employed by the same hirer for more than 18 months. It may therefore be the case that a hirer finds themselves as the employer of a worker without either of them having desired the situation.

Can an automatic employment contract be prevented?

This can only be prevented by the temporary worker if they submit a declaration of retention to the hirer within one month of the transition in the employment relationship. However, this declaration shall be effective only if 

  • the temporary worker presents it in person at an employment agency prior to submission,
  • the employment agency marks the declaration to be submitted with the date of submission and a statement that it has ascertained the identity of the temporary worker and
  • the declaration is received by the lending agencies or hiring company no later than the third day after it is presented at the employment agency.

These conditions are difficult to comply with in practice, particularly because hiring out to the same hirer beyond 18 months is generally carried out unknowingly.

Content of the employment contract after the temporary employment

The weekly working time agreed upon between the hirer and the lender for the deployment of the temporary worker shall apply for the employment contract deemed to have been concluded between the hirer and the temporary worker. If the temporary employment contract between the hirer and the lender does not contain any provisions on the working hours, the working hours normally applicable in the hirer’s company shall also apply in the relationship between the hirer and the temporary worker.

The amount of the salary to be paid, on the other hand, is determined by the provisions normally applicable within the hirer’s company.

The remaining content of the employment contract, such as annual leave, is also primarily based on what is usually stipulated for other employees of the hiring company.

Tax consequences after the temporary employment

In addition to the consequence under labour law that an employment relationship exists between the hirer and the temporary worker, there are also consequences under German tax and social security law. The law provides that in this case the lending agency and the hirer are jointly and severally liable for the social security contributions, provided that the agency continues to pay the salary to the employee.

In particular, it should be noted in this context that, in accordance with the principle of accrual applicable in social law, social security contributions must be paid to the collection agency in the month in which the employee’s entitlement to wage payment occurs. This point in time is not determined by any knowledge of the hirer as the employer of the transition of the employment relationship, but by the point in time when the employment relationship transitioned. This can lead to substantial back payments plus interest. 

In addition, there is a risk of criminal prosecution, including for social security fraud.

WINHELLER provides support before, during and after the temporary employee leasing process

It remains that: Care must be taken when hiring personnel externally. Clients should carefully check in advance whether the contractual partner has the necessary employee leasing permit. Our experts in German employment law will be happy to support you in all matters relating to the use of external personnel.

Continue reading:
Permit for Staff Leasing in Germany: Application, Requirements, Costs
Staff Leasing: Foreign Collective Agreement to Be Applied to German Employment Contracts

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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