What is an AÜG Licence?
An AÜG Licence, from the German Arbeitnehmerüberlassungsgesetz, or Employee Leasing Act, is the legal authorisation required for any company that supplies or leases employees to another business in Germany.
It is issued by the Bundesagentur für Arbeit (Federal Employment Agency) and is mandatory for all organisations engaging in labour leasing, temporary staffing, or Employer of Record (EOR) arrangements where one company formally employs a worker who performs services for another.
In essence, the AÜG Licence defines who can act as the legal employer when people are “loaned” to another business. It’s one of Germany’s strongest worker-protection tools and a cornerstone of its employment law system.
Why does Germany require an AÜG licence?
Germany has some of the world’s strongest labour protections, and the AÜG Licence is a key part of enforcing them.
It exists to make sure that workers provided through leasing arrangements are treated fairly, with equal pay, benefits, and working conditions to those directly employed by the company they’re seconded to.
The licence protects employees by ensuring:
- Equal rights under German labour law.
- Coverage under Collective Bargaining Agreements (CBAs).
- Proper contributions to tax, social security, and pension systems.
It also keeps employers accountable by requiring them to renew their licence regularly and undergo compliance audits by German authorities.
When is an AÜG licence required?
An AÜG Licence is required whenever one company employs workers who perform their duties under the supervision or direction of another company.
That includes:
- Traditional temporary staffing arrangements.
- Project-based secondments or contracted labour.
- Employer of Record (EOR) models, where one company employs on behalf of another.
Even if your company isn’t based in Germany, you still need an AÜG Licence to second workers to a German client or entity.
Without one, all workers placed under another company’s supervision are legally reclassified as employees of that company, triggering backdated taxes, contributions, and potential fines.
What are the legal limits of an AÜG licence?
Holding an AÜG licence allows a company to lease or second employees, but only for a limited period.
Under German law:
- Leased employees can work for a client for up to 18 consecutive months.
- After 18 months, they must either be hired directly by the client company or end their employment.
- The licence must be renewed regularly and can be revoked if the company fails to comply with reporting or equal-treatment requirements.
These time limits ensure that staff leasing remains temporary, not a substitute for permanent employment.
What happens if a company operates without an AÜG licence?
Operating staff leasing or EOR activities in Germany without a valid AÜG Licence is a serious violation of labour law.
If discovered, authorities can:
- Automatically reclassify the leased employee as a direct employee of the client.
- Impose fines of up to €500,000.
- Demand backdated tax and social security contributions.
- Ban the company from providing leasing services in the future.
Beyond the financial penalties, operating without an AÜG Licence severely damages a company’s credibility with regulators and employees alike.
How to get an AÜG licence
To obtain an AÜG Licence, a company must:
- Register a German entity and provide full business documentation.
- Demonstrate financial stability and the ability to meet payroll obligations.
- Comply with German labour and tax law, including social security contributions.
- Follow all relevant CBAs, ensuring equal pay and benefits for leased employees.
- Renew the licence every three years and cooperate with routine compliance inspections.
The process is rigorous and intentionally so. It’s designed to make sure only responsible, compliant employers are allowed to lease workers.
How Boundless uses the AÜG licence
Boundless holds an active AÜG Licence and uses it to legally employ people in Germany on behalf of our customers.
Here’s how it works:
- Boundless is the legal employer. We sign the employment agreement, manage payroll and tax, and ensure compliance with all German labour laws.
- You direct the work. Your employee is integrated into your team day to day, while Boundless handles the legal and administrative side.
- The employee is fully protected. We guarantee equal rights, pay, and benefits in line with German labour standards.
Employment under an AÜG Licence can last up to 18 consecutive months. After that, your company can choose to hire the employee directly or conclude the assignment.
Our approach allows companies to hire compliantly in Germany through a legally recognised and tightly regulated model. No shortcuts, no grey areas.
Key takeaways
The AÜG Licence isn’t a loophole. It’s the law. It’s what separates compliant global employment from risk and reclassification.
- The AÜG Licence is required for any staff-leasing or EOR activity in Germany.
- It’s issued by the Bundesagentur für Arbeit (Federal Employment Agency).
- Employment under an AÜG Licence is limited to 18 months per worker.
- It guarantees equal rights and protections for leased employees.
- Boundless holds an active AÜG Licence, ensuring fully compliant employment in Germany.
At Boundless, we don’t just hold the licence; we hold ourselves to the same standard it sets: fairness, transparency, and total compliance. We’d love it if German law allowed longer employment terms, but we’d never trade legality for convenience.
What is Boundless?
Boundless is an Employer of Record. As an Employer of Record, we handle the most complicated parts of hiring talent abroad so you can focus on growing your team internationally. If you're looking to expand your team across borders but don't want to go through the trouble of setting up a legal entity, Boundless can help. Speak to an expert at Boundless to learn more.
