Temporary employment

What is temporary employment?

A brief summary

Temporary employment is the temporary provision of an employee (temporary worker) by their employer (lender) to a third party (hirer) in return for remuneration. Terms such as temporary employment, temporary work or personnel leasing are synonyms for employee leasing.

The hirer has the right to assign the place of work. The hirer is also responsible for paying the employee’s salary, social insurance and protective equipment. However, the specific right to determine the exact workplace, working methods and specific tasks is the responsibility of the hirer. However, the hirer must also ensure that the temporary worker has equal access to social facilities, e.g. canteen, etc.

By hiring out employees, it is possible to provide a company looking for personnel, often at short notice and for a limited period of time. This enables the company to maintain its operations and compensate for understaffing.

In Germany, the Temporary Employment Act (AÜG) legally regulates the guidelines for the application of temporary employment.

Why do you need a temporary employment agency?

Companies need personnel to provide the company’s services or produce its products. These companies are often exposed to economic fluctuations of various kinds. These are, for example, seasonal effects, such as high staffing requirements in winter in a ski resort, in summer in tourist beach resorts or when staff are absent due to illness or parental leave, for example. The company wants to ensure that sufficient manpower is available at the right time. This is the only way to provide the service or produce the product.

The legislator has created a form of temporary employment for these cases, the temporary employment agency. This enables companies to react to these fluctuations. This enables them to compensate for the necessary personnel requirements over a defined period of time, even at short notice.

What roles are there in employee leasing?

In essence, temporary employment is divided into three parties. The lender, the hirer and the temporary worker. These three parties have a special relationship, which is regulated by the Temporary Employment Act.

The lender

The lender is the employer of the temporary worker in question. There is a regular employment contract between the lender and the temporary worker. The lender has the right to assign the place of work. The lender is also responsible for the employee’s salary, social security and protective equipment. The lender is authorized to issue disciplinary instructions to the employee, e.g. to ensure that working hours start on time.

The borrower

The hirer is the company that has the personnel requirements. It needs the temporary worker’s labor to provide its service or produce its product. A temporary employment contract is concluded between the lender and the hirer, which regulates the assignment. The hirer has the specific right of disposition or the technical authority to issue instructions for the exact workplace, working methods and specific tasks. However, the hirer must also ensure that the temporary worker has equal access to social facilities, e.g. canteen, etc.

The hirer usually pays the lender a monthly fee for the personnel provided. This amount of money is often higher than a normal employment relationship.

The temporary worker

The temporary worker is the active employee. Although the temporary worker has an employment contract with his employer, the lender, he works directly for the hirer. They work there under the instructions of the hirer. In his employment contract with the hirer, the salary, vacation, possible bonuses and sickness regulations are set out, as in a regular employment contract. The temporary worker receives his salary from the hirer.

Are employee leasing, personnel leasing or temporary work the same thing?

Yes, temporary employment, personnel leasing and temporary work are essentially the same thing. A personnel service provider (lender) provides a company (hirer) with temporary staff (temporary workers) in return for a fee so that a company can provide its service or produce its product.

What advantages does a company have from hiring out employees?

Greater flexibility

Companies can use temporary staffing to adjust, expand or reduce their personnel capacity at short notice. Thanks to the deadlines defined in the temporary employment contract, companies can quickly increase their staffing requirements with temporary workers. However, they can release temporary workers just as quickly if there is overcapacity. This allows a company to respond very flexibly to economic fluctuations.

Better planning capability

The transfer contracts allow the exact expected costs and quantities to be agreed and planned. This ensures planning security for companies. Furthermore, the hirer often only earns money when the staff are hired out. Therefore, there is also an enormous motivation to provide appropriate personnel. The company can then use its own capacities for other activities, e.g. quality assurance instead of recruitment.

Less recruitment time and costs

If a company uses employee leasing, the company pays for the successful deployment of a temporary worker. The company saves itself the investment required in advance, e.g. to find, recruit, employ or train the employee. In addition to the financial investment, the company also saves the time required to recruit a potential employee.

Such processes can sometimes take 1 to 12 months. By then, the personnel requirement may no longer exist. Temporary employment is particularly popular for seasonal and temporary requirements. This is because the employee would only work temporarily even if they were hired directly. The necessary upfront investment would therefore be lost.

What are the disadvantages of temporary employment for a company?

Total costs

In addition to the many advantages, there are of course also disadvantages. The higher cost of labor per hour worked is a noticeable disadvantage. The costs to be invested for recruitment, organization as well as compensation for illness and vacation are allocated by the hirer to the individual working hour plus a corresponding return to the hirer. What is attractive and justifiable in short periods of time becomes more and more expensive for the hirer as the duration increases. It is therefore important to carefully weigh up in a precise personnel requirements and cost plan whether employee leasing is really the right way to go. Otherwise, these costs can quickly exceed the natural employment.

Time limit

Another disadvantage is that, as stipulated and intended by the legislator, temporary employment is always limited in time. In any case, an assignment ends when the maximum permitted assignment period is reached. The maximum duration permitted by law is 18 months. Nevertheless, the maximum permitted assignment period can be extended, for example in the course of a collective agreement.

Legal uncertainty

If the personnel service provider – the hirer – does not comply with the legal requirements, the personnel service provider may lose its temporary employment permit. The employment relationship would then arise automatically and directly between the hirer and the temporary worker. However, this is exactly what the company wanted to avoid.

What is the legal basis for temporary employment?

The Temporary Employment Act, also known as the AÜG, regulates all rights and obligations relating to temporary employment. It follows the European Temporary Agency Work Directive 2008/10/EC. The origins of temporary employment began around 1948 in the USA. The first assignments in Europe began around 1956.

What rights and obligations arise from temporary employment?

From the previous explanations, employee leasing seems simple and easy to implement. However, there are some important framework conditions for the hirer and the borrower to consider.

Permit for temporary employment

Only the employment agency issues the temporary employment permit to the personnel service provider, the temporary employment agency. The employment agency checks all contracts and data associated with the temporary employment contract. This ensures compliance with the legal requirements. It is essential that the hirer asks for and checks permission before working together. Temporary employment without a permit is not permitted.

The temporary employment agency also requires the consent of the temporary worker. The latter must agree to be loaned to one or more employers and to follow the instructions. All documents must be concluded in writing. In addition, the temporary worker must be informed of their rights and obligations under the AÜG.

Equal Pay

Equal pay stands for equal pay. A temporary worker has the right to equal pay at the hirer from the first day of the assignment compared to the hirer’s workforce according to the position assigned. Companies can deviate from this basic regulation if they use an industry supplement tariff.

Equal Treatment

Equal treatment stands for equal treatment. Temporary workers also have the right to be treated in the same way as their colleagues at the hirer. This applies, for example, to access to canteens or social facilities such as company kindergartens. If these and other provisions of the AÜG are disregarded, the hirer may be subject to administrative offenses and fines of up to €500,000 per individual case. In addition, the permit can also be withdrawn.

Transfer period

The legally permissible maximum assignment period is 18 months. Nevertheless, the maximum permitted assignment period can be extended, for example as part of a collective agreement. If the lender disregards these regulations, e.g. by exceeding them, the employment relationship between the lender and the temporary worker loses its validity. Instead, a direct employment relationship is created between the hirer and the temporary worker.

What is a temporary employment contract?

A temporary employment contract is concluded between the lender – the personnel service provider – and the hirer – the company with personnel requirements. The contract specifies the exact activities of the temporary worker, the working hours and the remuneration. In practice, the personnel service provider often invoices the working hours of the temporary worker on a monthly basis according to the agreed billing rate.

When concluding an employee leasing agreement, attention should be paid to the completeness of the necessary components. Among other things, it should include

• The permit for temporary employment
• Obligation to inform the hirer in the event of discontinuation or non-renewal
• Job and qualification definition of the temporary worker
• Working conditions for compliance with equal treatment
• Remuneration of a comparable employee at the hirer to comply with equal pay

How do I find the right recruitment agency?

Due to the many legal regulations and possible consequences, it is important to choose the right personnel service provider carefully. It is generally advisable to obtain specific references from other customers of the personnel service provider. You can also ask for and check the temporary employment permit. Coordination with the employment agency or the involvement of specialist lawyers in employment law can also help in selecting the right service provider.