Understanding the difference between a "contract for work" and a "labour transfer" is a legal necessity. And it is of great importance in German labour law. The distinction between these two types of employment contracts contributes to a cooperative and legally secure working environment. It is an important guide to ensuring compliance with the legal framework in Germany.
For employers, choosing the right contract plan is critical to managing teams. At the same time, it ensures legal harmony. For employees, on the other hand, understanding their contract means knowing their rights and responsibilities. Let's take a closer look at the meaning and differences between a work contract and an employment contract.
What is a work contract?
A contract for work and services is a contractual agreement in which one party ("contractor") undertakes to provide a specific service. The other party ("customer") is obliged to pay for this service. This type of contract focuses on the outcome of the work and not on control over the provider of the work/service. The time spent on the execution of the work is not important here. Nor the way it is completed. What is important is that the work or service is carried out successfully.
The company that fulfils the order is self-employed. It is solely responsible for its own taxes and contributions. And it is not considered to be directly employed by the client. The work contract offers a great deal of flexibility and is results-orientated.
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What is temporary employment?
The Employee leasing is a special form of employment contract. It is used in temporary employment or personnel leasing. As the legal employer, the staffing agency handles personnel leasing by hiring temporary workers and assigning them to the client company under a fixed-term employment contract. The duration of this type of employment is determined in advance.
In connection with the temporary employment of employees, three parties are usually involved:
- Employees (temporary workers) - A person who is employed by a personnel service provider. They are employed to fulfil tasks for the client company.
- Employer (the recruitment agency) - The legal employer of the leased employee. The staffing agency is responsible for all administrative tasks relating to the employee. This includes taxes, payroll accounting, contributions, etc. The agency has a contractual relationship with both the employee and the client company.
- Client company - An organisation for which the temporary worker performs business tasks. This company needs additional labour for a limited period of time. It is a company that is looking for additional labour on a temporary basis. It therefore obtains the required labour through the recruitment agency. In order to utilise the services of the staffing agency, it concludes such a contract with said agency. The client company supervises the employee's work. However, the employee is employed by the recruitment agency and not by the client company in which he performs his work.
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Is a temporary employment contract an employment contract?
An employee leasing agreement (also known as a labour hire contract or temporary employment contract) is a form of employment. It is fundamentally different from a traditional employment contract.
An employment contract is usually concluded between an employer and an employee and regulates the conditions of direct employment. The employee is permanently employed by the employer and performs his work directly for him.
An employee leasing contract, on the other hand, is concluded between a lender (often a personnel services company) and a hirer (the company that requires the temporary employee). The lender hires the employee and leaves them with the hirer, who utilises the employee's work performance. The employee is therefore employed by the lender, not the hirer, and performs work for the hirer.
A standard employment contract typically establishes permanent or long-term employment. In contrast, a temporary employment contract, also known as a fixed-term contract or labour hire agreement is limited in time.
What needs to be taken into account when hiring out employees?
When it comes to temporary employment, there are various legal and practical aspects that are important for both employees and employers. Here are some points to consider when hiring out employees:
- Employment contracts and agreements: both the lender (the personnel service company) and the hirer (the company that needs the temporary employee) must conclude clear and legally valid employment contracts with the employee. These contracts should specify working conditions, salary, working hours and all other relevant details
- Legal regulations: specific legal rules and regulations apply to temporary employment. These include, among others, the Temporary Employment Act (AÜG) in Germany or similar laws in other countries, which protect the rights of temporary workers and regulate the conditions for employers.
- Equal Treatment Principle: according to the Equal Treatment Principle, temporary workers must generally receive the same working conditions as comparable permanent employees in the user company. This affects, among other things, salary, working hours, vacation entitlement and other social benefits.
- Clear communication: transparent communication between the lender, the hirer and the temporary worker is crucial. All parties should clearly understand expectations, responsibilities and work requirements.
- Occupational safety and health protection: the hirer is responsible for compliance with health and safety regulations in the workplace, including ensuring that temporary workers receive appropriate training and safety equipment.
- Monitoring and control: the lender and the hirer should jointly monitor the work performance and satisfaction of the temporary worker. Regular communication can help identify and solve any problems at an early stage.
Summary
It’s important to note that standard employment contracts and temporary employment contracts serve fundamentally different purposes and follow distinct structures. These contracts serve different workforce needs and establish distinct frameworks for employment relationships. Both the standard employment contract and the temporary employment contract are governed by German labor law. Their shared objective is to ensure legal compliance, fairness, and transparency in the employment relationship.
