Hiring out employees as temporary workers: an alternative to short-time work?

The subject of short-time work has come to the fore again as the number of COVID-19 cases is once more on the increase. Hiring out employees as temporary workers for a limited period of time can be a short-term and non-bureaucratic alternative that can be used to bridge the crisis and avoid short-time work and dismissals. Consequently, a closer look should be taken at this instrument, which, to date, has been given little attention in practice during the coronavirus crisis.

The hiring out of employees as temporary workers is linked to strict requirements under the German Temporary Work Act (Arbeitnehmerüberlassungsgesetz); in particular, a licence is required to hire out employees, except in a limited number of cases where a statutory exemption applies.

Pursuant to Section 1(3)2a of the German Temporary Work Act, employers are exempt from the obligation to obtain a licence in cases where employees are only occasionally hired out between employers, provided the employee concerned has not been hired and is not employed for the purpose of being hired out. The criterion “occasionally” means that the hiring out of employees as temporary workers may not take place on a regular basis but only exceptionally. Consequently, if an employer hires out its employees systematically and repeatedly to work for other employers, this no longer constitutes the occasional hiring out of employees.

The German Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales) has provided employers with guidelines for interpretation on its website. According to said guidelines, the requirements for an exemption under Section 1(3)2a of the German Temporary Work Act are met if the employees concerned have agreed to being hired out, the hiring out is not intended to take place permanently, and the duration of the individual hiring out is limited to the duration of the then current situation of crisis. Even though the statutory principle of equal pay does not apply to the hiring out of employees under Section 1(3)2a of the German Temporary Work Act, this principle must nevertheless be observed, in the opinion of the Federal Ministry of Labour and Social Affairs.

In this regard, the Ministry has pointed out on its website that especially in light of the European principle of equal treatment, hired-out employees should be put on equal footing with the regular workforce of the hiring business. Contrary to the legal situation according to statutory law, employers should, therefore, apply the principle of equal pay also when hiring out employees as temporary workers under Section 1(3)2a of the German Temporary Work Act. Furthermore, it should be noted that hiring out employees in the construction industry is generally not allowed if the plan is for the hired-out employees to be employed in a construction business (Baubetrieb – a term defined in the German Construction Business Ordinance (Baubetriebe-Verordnung)) for the performance of work that is regularly carried out by blue-collar workers.

Another exemption from the obligation to obtain a licence is contained in Section 1a of the German Temporary Work Act, which might apply to smaller undertakings. In order for said provision to apply, the employer must employ fewer than 50 persons, the employees must be hired out with a view to avoiding short-time work and dismissals, and the German Federal Employment Agency (Bundesagentur für Arbeit) must be provided with prior notification. As a further prerequisite, the employee must not have been hired and be employed for the purpose of being hired out. The employees may not be hired out as temporary workers for a period longer than 12 months.

However, unlike in the case of Section 1(3)2a of the German Temporary Work Act, this privilege is limited to being exempt from the obligation to obtain a licence; as a result, the further provisions of the German Temporary Work Act, in particular the principle of equal pay, apply by operation of law.

The instrument of hiring out employees as temporary workers can benefit all the parties involved in times of crisis in individual cases. In spite of this, care should be taken when applying these statutory exemptions, because of the statutory restrictions and the serious consequences that a violation may have. We therefore recommend consulting with the competent employment agency before hiring out any employees as temporary workers.