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What you should know before working in Germany

Germany is one of the most popular destinations for contractors seeking employment across various sectors particularly in the engineering, automotive and automation space. If you are a freelancer, intending to work in Germany or an independent contractor who wishes to work for Companies based out of Germany, there are some of the essential factors that one should keep in mind before you begin your stint as a freelancer. German labor leasing laws allows immigration and employment of temporary contractors through registered agencies with “Arbeitnehmerüberlassung” or the AUG license. This not only enables companies to meet their short-term requirement of human resources, but also allows them to have access to freelancers with specialized skills. 

With effect from April, 2017, the new Labour leasing regulations have come to effect that has . This has brought in regulations pertaining to the engagement of temporary workers as much as it has it has ushered in an equal treatment to all temporary employees

Starting off -How does it work between the parties and labour leasing agencies


  1. As a freelancer/independent contractor you must register with a labour leasing agency with a valid AÜG license under German Federal laws. Not only do they have the necessary licenses and permits to supply contractors to German clients, but doing so will also ensure that all the tax obligations and social security contributions are met. These agencies can either be German or foreign agencies who possess the AÜG license, who are legally qualified to enrol contractors under the German payroll. 
  2. The registered agency then leases the services of the contractor to the hirer company on temporary basis. However, the employment relationship exists only between the agency and the employee. 
  3. The AÜG labour leasing agency/management Company is required to deduct all the social security contributions and wage tax from the gross salary of the contractor. Therefore, they must ensure that all the compliances are adhered to.
  4. Temporary workers receive equal treatment in par with the other employees. However, an exception to the rule exists if the hirer company and the employees agree to a collective bargaining agreement.

Self-employment under GmbH and AG

Not all contractors need to avail the services of the AÜG for to work as temporary workers. With respect to cases where a contractor is genuinely self-employed under a GmbH or an AG for a project that does not require much supervision by the hirer, there is no requirement for a labour leasing agency. It is the responsibility of the contractor to register with the (Finanzamt), tax office to generate your tax number as well as pay all the necessary insurance and contributions. A temporary worker is not a part of the government funded insurance program; for which reason, it is their responsibility to pay for private insurance for healthcare, life insurance, retirement pension or in case of disabilities.

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