Getting Familiar With The Two Major Employment Structures For German Contract Employees
There are three ways in which someone can come to work for a company in Germany: 1) Through a temporary employment company 2) By working independently as a contractor for the company and 3) through regular permanent employment. Part of the job of a recruitment company in Germany is helping the client understand the differences between these hiring methods and seeing what the advantages but also the disadvantages are. 1. AUG (Arbeitnemeruberlassung)Licence The AUG license is generally required by temp agencies that help in renting out labor to the hiring companies. The license leads to the creation of a civil contract rather than creating any type of employment relationship with the end client. The AUG license also makes the license holder liable for paying salary, the taxes and social security expenses of the employee as per the German laws. In this structure
the candidate becomes the employee of the agency, not of the company at which the employee is working. 2. Self Employed Structure No license is generally required by a top head hunting company in Germany, if they introduce a self-employed professional. In this structure, the tax liabilities are initiated along with the contract itself. No state sponsored personal health cover is provided under this structure besides which the policy of no payee taxation is followed. Care should be taken, that the person who is working for you also has other clients, else you might end up being liable for social insurances if it is found, that in fact, the person is an employee but was declared “independent� in order to save social insurance costs. Important guidelines for hiring companies For companies seeking to hire skilled candidates in Germany, it is important to ascertain the type of employment license held by the recruitment agency they choose. In case, the hiring companies seek candidates for all levels within the organization, they might need to work with different recruitment companies based on their licensing. However, irrespective of the number of agencies the hiring companies work with, they should make sure that these are totally compliant with the German taxation and social security laws. The German tax authorities are amongst the most vigilant ones across entire Europe. Hence, it advisable for the hiring companies to work with only the most renowned and trustworthy recruitment agencies in the country, known for their transparency in terms if tax declaration. This is important to ensure a smooth hiring process that is not hindered by any legal issues caused due to improper and inaccurate tax declarations by the recruitment firms.