Contractors Rights

If you’re working for a company as a contractor, your employer is bound to the Employee Leasing Act, otherwise known as the Arbeitnehmerueberlassungsgesetz. Under this mandate, any individual or company that hires employees in Germany as contractors must hold a specific license called the Arbeitnehmerüberlassung. If they don’t have this license, they could be in serious trouble with the German government.

In case you work for a company that is from outside Germany or if you are being sent to Germany on a short term basis, there are ways to obtain the AUG license through a third party - i.e. shortening the admin procedures to hire someone legally.

If you work for a company that has a headquarters in another country, and you are doing work that is based elsewhere - this is also technically not allowed if your employes does not have this license because in the eyes of the law, you are working as a contractor for another entity of the organization (in other words - they would be liable/breaking the law). Example: you are employed by a local entity (GmbH, UG) in Germany, but are doing work for a separate company based elsewhere (i.e. another company branch).

Authors note: At a previous employer that laid me off illegally, they had been doing this without the license (i.e. I was working on projects regularly that were not based in Germany and were not supporting the German office). I was able to use this to our advantage to get a better settlement because they were worried they would be reported and subsequently fined.