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What's the Best Way to Hire Contractors in Germany? A Guide to Choosing the Right Contractor Engagement Model

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When engaging or placing contractors in Germany, it is imperative to ensure a compliant local engagement structure is in place alongside an accurate and timely payment structure for the contractor. Germany has no common standard approach to how contractors should be paid. However, the country does have mandatory requirements for organisations that wish to engage freelance or contract talent.

Engagement models in Germany:

There are currently three primary methods or engagement structures for engaging contingent labour, such as contractors. These include:

  • Freiberufler (Freelance/Self-Employed) model: Under this model, a contingent workforce management company such as 3C Global would engage with candidates on a Statement of Work (SOW) contract for a specific project. The contractor must register as a freiberufler/freelancer with the German authorities. The contractor would invoice the client and be paid a "gross" rate on an hourly/daily basis for work completed. Tax is not deducted at source; therefore, it is managed by the solutions provider. Under this model, the freelancer is responsible for ensuring compliant practices.
  • German Labour Leasing Licence (Employed Model): This licence is also known as the Arbeitnehmerüberlassung or AÜG for short. This term translates from German to English as temporary employment. Companies hiring an employed contractor from a provider without an AÜG licence can find themselves in conflict with German Law. Under this model, a contingent workforce management company such as 3C Global would "lease" the services/skills of the employee to the end client by way of a separate leasing agreement between both companies, which is required by law. The contractor would then be paid a "net" amount for work completed. Unlike the Freiberufler model, tax and social security contributions are deducted from the source, and the contractor is issued payslips. Holiday pay and sick pay are also accounted for under this model. Obtaining and maintaining an AÜG licence is no easy task. The conditions and requirements imposed by Germany's Federal Employment Agency on organisations for attaining and maintaining this licence are strict (and rightly so). At 3C Global Group, we are expert providers of AÜG labour leasing solutions, having been granted our most recent renewal of this licence by the Bundesagentur für Arbeit (BA).
  • Employer of Record (EOR) (Employed Model): Our EOR solution in Germany is a compliant solution for organisations that wish to hire talent in Germany without the need to establish a local entity. At 3C Global Group, we can also utilise this solution for remote workers employed in a digital role by a German organisation. There are many other benefits to an Employer of Record. An EOR can also simplify global recruitment and worker engagement by performing various administrative functions and compliance responsibilities, such as onboarding, payroll processing, visa and work permit processing, tax and social security contribution payments, and maintaining employment contracts and compliance with labour laws.

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What distinguishes AÜG from EOR?

There are many key distinctions between the AÜG and EOR models of contractor engagement. An AÜG licence primarily concerns individuals who work as contractors rather than freelancers as it works within an employed model of labour leasing, whereas those working as freelancers under the Freiberufler model often have their own business entities. However, if an organisation or recruitment agency finds a suitable candidate whom they wish to engage on the basis that they are neither on their payroll nor hired on a freelance basis, a leasing model may be an ideal solution; under the labour leasing/AÜG model, another company with a valid labour leasing licence hires the candidate (e.g. 3C Global) and leases them out to the organisation. This solution can be ideal for organisations looking for a compliant solution for hiring talent on a short-term basis.

  • An AÜG is a leasing agreement specific to Germany that mainly concerns German companies who wish to engage local talent on a short-term basis for up to 18 months. For example, a business with a German entity wishes to engage a worker based locally in Germany to work on-site on a project for a 10-month duration.
  • On the other hand, an EOR allows international organisations that don't currently have a German entity to hire German talent through an EOR organisation with a local entity. Under the EOR model, talent can often be hired for a term longer than 18 months. For example, a company from outside Germany, such as Ireland, wishes to expand into the German market and hire local talent based in Germany (the worker can be remote or working from a set location within Germany). However, the hiring company does not have a local entity; in this situation, an EOR solution would enable the company to engage and hire talent locally in Germany while ensuring compliance with local regulations.

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Important to note:

In recent years, Germany's Federal Employment Agency has introduced changes in an effort to protect workers and prevent abuses in the country's labour market. One such measure is the requirement that all EOR providers in Germany hold a valid AÜG licence. This means that foreign organisations engaging contract talent in Germany through an employer-of-record solution will be required to verify that their EOR provider possesses an AÜG licence in order to comply with German labour laws.

Selecting the right engagement structure:

When deciding which contract engagement structure to use, it is imperative to remember that not every option will be the right fit for your contractors, depending on the nature of their contract. Therefore, it is essential to select a structure by which to engage and pay contractors that fully complies with German labour laws and serves to fulfil the contractor's local and international tax obligations. When navigating new markets, it is crucial to seek the expertise, services and advice of a trusted international payroll and compliance solutions provider with in-depth local knowledge of the German market and its employment laws, such as 3C Global Group.

By engaging contractors without first ensuring the correct engagement infrastructure is in place, your business or agency may face challenges managing contracts, payroll, and compliance. However, by employing a strategic partnership with a reputable solutions provider like 3C Global, your organisation can seamlessly engage, hire & place contractors in Germany.

Your trusted compliance partner in Germany:

Whether you're a contractor looking to work in Germany, a recruiter placing contractors, or a business looking to expand, ensuring compliance is essential!

At 3C Global, we offer end-to-end solutions tailored to your needs!

We offer a wide range of services, including:

  • Labour Leasing in Germany (AÜG/ANU)
  • A German Employer of Record (EOR) solution.
  • Global Payment Solutions (GPS)
  • Agent of Record (AOR)
  • International Contractor Management (ICM)
  • International Contractor Compliance Audit (ICCA)
  • Advisory, Consulting & Training (ACT)


Our services are meticulously designed to remove potential risks and uncertainties associated with launching new projects, allowing all parties to focus on their core business objectives, knowing that their contracts and practices are fully compliant.

Why choose 3C Global Group?

We understand that navigating Germany's complex regulatory environment can be daunting. With years of expertise in global compliance, we provide comprehensive solutions tailored to your organisation's unique needs. Here's how we stand out:

  • Dual expertise in EOR and AÜG: At 3C Global, we are expert providers of both AÜG and EOR solutions in Germany. This dual expertise allows us to tailor our services based on your specific operational requirements and compliance needs.
  • In-depth local knowledge: Our team demonstrates an in-depth understanding of German labour laws and the nuances of the updated Labour Leasing Act. We ensure our team is up-to-date with regulatory changes to help you navigate compliance seamlessly.
  • End-to-end support: From drafting compliant employment contracts to managing payroll and supporting your HR needs, we handle multiple aspects of workforce management. We aim to let you focus on your business while ensuring your organisation is fully compliant.


Ready to take the next step in your contract talent journey in Germany?

Or do you want to learn more about AÜG (Labour Leasing) or Employer of Record (EOR) solutions in Germany?

Contact 3C Global Group today to learn how we can help you hire and place contractors quickly, compliantly and competently in Germany.

Contact us today!

Contact our expert team today or schedule a call!

info@3cglobalgroup.com

📞IE | +353 1 44 33 710

📞UK | +44 207 1939 907

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