Sanctions and Penalties for Non-Compliance with the German Employee Leasing Act (AÜG)

Operating under the German Employee Leasing Act (Arbeitnehmerüberlassungsgesetz – AÜG) involves strict compliance with various legal requirements. Failure to adhere to these regulations can result in significant sanctions and penalties. This article outlines the potential consequences of non-compliance to help foreign companies understand the importance of following the rules when leasing employees in Germany.

Key Areas of Non-Compliance and Their Consequences

1. Lack of Proper Licensing:

  • Operating Without a License: Leasing employees without a valid AÜG license is illegal. Companies caught operating without the necessary license face heavy fines, which can amount to up to €500,000.
  • Expired or Invalid License: Continuing to lease employees with an expired or invalid license can also lead to substantial penalties.

2. Violation of Equal Treatment and Pay Rules:

  • Inequitable Treatment: Leased employees must receive the same working conditions and pay as direct employees. Failure to ensure this equal treatment can lead to fines and back payments to employees.
  • Minimum Wage Violations: Not adhering to minimum wage laws can result in fines and required back payments. This includes ensuring all leased employees are paid at least the minimum wage.

3. Inadequate Documentation and Reporting:

  • Incomplete or Incorrect Documentation: Companies must maintain comprehensive records and provide regular reports to the Federal Employment Agency. Failure to do so can result in fines and increased scrutiny during audits.
  • False Information: Providing false or misleading information in applications or reports can lead to severe penalties, including fines and possible criminal charges.

4. Unregistered Leased Employees:

  • Failure to Register Employees: All leased employees must be properly registered with social security and tax authorities. Non-compliance can lead to fines and additional penalties for unregistered workers.

5. Breach of Employment Contracts:

  • Improper Contract Terms: Employment contracts must comply with AÜG standards. Any deviation from these standards can result in penalties, including the requirement to amend contracts and potential fines.

Specific Penalties for Non-Compliance

  • Fines: Non-compliance with the AÜG can result in fines up to €500,000. The exact amount depends on the severity and nature of the violation.
  • Revocation of License: Persistent non-compliance or serious breaches can lead to the revocation of the employee leasing license, prohibiting the company from continuing its operations.
  • Legal Action: In cases of severe violations, such as fraudulent activities or significant mistreatment of employees, legal action can be taken against the company and its management. This can result in criminal charges and further financial penalties.
  • Back Payments: Companies found guilty of underpaying leased employees may be required to make back payments to compensate for the wage differences. This includes paying any owed social security contributions.

Mitigating Non-Compliance Risks

To avoid these severe penalties, companies should:

  • Ensure Proper Licensing: Always maintain a valid AÜG license and renew it as required.
  • Adhere to Equal Treatment Laws: Ensure leased employees are treated and paid equally to direct employees.
  • Maintain Accurate Records: Keep thorough documentation and comply with all reporting requirements.
  • Provide Accurate Information: Always provide truthful and accurate information to the authorities.
  • Regular Audits: Conduct regular internal audits to ensure compliance with all aspects of the AÜG.

How WW+KN and Baker Tilly Can Assist

At WW+KN, a Baker Tilly company, we offer comprehensive support to ensure your company complies with the AÜG. Our services include:

  • Legal Consultation: Expert advice on maintaining compliance with all AÜG requirements.
  • Documentation and Reporting Assistance: Helping you keep accurate records and fulfill reporting obligations.
  • Training Programs: Providing training on the legal aspects of employee leasing and best practices.
  • Compliance Audits: Conducting regular audits to identify and rectify any compliance issues.

For further guidance and support reach out to WW+KN, a Baker Tilly Company. Our experts are here to assist with payroll-related aspects and ensure compliance with all relevant regulations. Interested parties can contact us at info@payrollgermany.de.