Labour leasing, also known as temporary staffing or temporary employment, is when businesses or organisations hire workers from third-party agencies or companies temporarily to meet their short-term labour needs. In this arrangement, the workers are directly employed by the staffing agency rather than the client company, which serves as the legal employer.
The process typically involves the client company informing the staffing agency about their labour requirements, including the number of workers needed, specific skills or qualifications required, and the duration of the assignment. The staffing agency then sources and recruits suitable candidates from its pool of workers or conducts new hiring per the client’s requirements.
It is important to note that labour leasing practices and regulations may vary between countries or regions. Different jurisdictions may have specific laws governing temporary employment, including provisions related to workers’ rights, working conditions, and the responsibilities of staffing agencies and client companies.
Below are the critical points of labour leasing in three essential contractor markets:
Labour Leasing in Germany
Labour leasing law governs labour leasing in Germany. An AUG licence is mandatory for all types of labour leasing in Germany. To obtain the AUG licence, the applicant company must prove to the Bundesagentur für Arbeit that it is a suitable and compliant business entity for labour leasing.
AUG licensing is complex and strict, requiring expertise. The AUG licence holder must hold the contract with the labour’s end user and bill them. It must employ the staff on its Germany payroll and deduct income tax and social charges at source.
Labour-leased staff have the right to equal treatment, and it is vital to ensure they are not financially disadvantaged compared to equivalent employees at the client. If they are, there can be a compensation claim.
One can lease staff for a maximum of eighteen months, after which they become permanent employees of the end client. If there is a break of three months or more, another period of up to eighteen months can apply without this happening.
Labour Leasing in Switzerland
The Loi de la Location de Services, or LS, regulates labour leasing in Switzerland. Similarly to the operation of the AuG, a labour leasing license is required.
The licence holder must bill the end user of the services, usually a Swiss company unless the user has no permanent establishment in Switzerland. In this case, the licence holder must contract with and bill the foreign company.
Swiss labour leasing companies can only hire personnel from the EU, or they may employ personnel from non-EU countries who already hold a Swiss work permit.
Unlike in Germany, there is no eighteen-month rule nor equal treatment, but you must comply with any collective labour agreements that may apply.
Labour Leasing in the Netherlands
Several laws covering employment, immigration, and tax law influence labour leasing in the Netherlands.
Depending on the industry, a collective labour agreement or an obligatory pension scheme could also be applicable.
From January 1, 2020, the authorities tightened the regulations of the WAB law, which introduced or formalised the following:
- Increased social security charges for unemployment benefits (WW)
- On-call workers must be guaranteed fixed hours after 12 months.
- The position becomes permanent at the client after 36 months or four consecutive contracts.
- Labour-leased staff are guaranteed equal treatment with permanent employees at the client.
- Transition compensation begins from the first day of employment.
- The payroll company must provide an Adequate Pension of around 15%, whereas a non-payroll provider employer is not obliged to provide a pension.
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