Increased regulation for staffing companies in Germany

Written on 1 Dec 2015

German Labour Minister Andrea Nahles has, on 16 November 2015, proposed new legislation that will add further regulatory restrictions on staffing companies in Germany. The draft legislation flows from the coalition agreement between the key German political parties (the CDU and SPD) on 27 November 2013. 

The most important points are:

  • Assignments of temporary workers will be limited to 18 months. After that it may then be possible to place another temporary worker in that workplace. This assignment limit can be disapplied by collective bargaining agreements (Tarifverträge) or works agreements (Betriebsvereinbarungen), but only for hirers which are bound by collective bargaining agreements (tarifgebundene Entleiher). 
  • Temporary workers will have equal pay rights, as a general rule, after nine months in a role. Where a collective bargaining agreement is applicable and covers equal pay, equal pay rights will take effect after 12 months. (The UK rule is 12 weeks.)
  • Temporary workers may not be used as strike-breakers. (The UK currently has a similar rule.)
  • Aggregate numbers of temporary workers at an employer will generally count towards the thresholds at which certain legal obligations will apply under the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). (This broadly reflects the position in the UK for similar purposes.)
  • It will be unlawful for there to be more than one supplier between worker and end-hirer. This so-called ban on lease in a chain (Verbot des Kettenverleihs) is in line with the practice of the Federal Employment Agency (Bundesagentur für Arbeit), and makes the usual MSP contract structures usually used in the UK and USA illegal in Germany (although there is an alternative MSP model which can work).
  • Hirers have to inform works councils on scope, place, and time of the placement of temporary workers.
  • Whether someone is a “Temporary Worker” (as opposed to a genuine freelancer) governed by relevant German labour law, tax law and social security requirements is largely determined by whether they are deemed to be “dependent”. What dependent work is will be set out in the German Civil Code (Bürgerliches Gesetzbuch). Some fear that there will be changes in the relevant rules such that statement of work (“SOW”) type consultancy could henceforward be interpreted as dependent work. This is an important topic for many suppliers who have previously relied on SOW to avoid the application of German labour law, tax law and social security requirements.
  • The new legislation will come into force on 1 January 2017. 

Although staffing companies may have concerns about this further regulation, some commentators believe these measures will lead to greater legal certainty, making hirers more confident about using staffing companies.