1. New German Red Tape Reduction Act: Simplifications in employment law for companies
Germany's federal government adopted the Fourth Bureaucracy Reduction Act (Bürokratieentlastungsgesetz – BEG IV) after the third reading in parliament on 26 September 2024, thus taking a key step towards the digitalisation of personnel management (see our report after the first reading). As part of the German Evidence Act, the formal requirements are to be scaled back to allow companies to manage HR matters in a timely and efficient manner.
2. Amendments to the German Act on Temporary Agency Work
An important and long-awaited change to temporary agency work has been laid down in the first sentence of section 12(1) of the German Act on Temporary Agency Work (Arbeitnehmerüberlassungsgesetz/AÜG). The first sentence of section 12(1) of that Act will be amended to read that temporary work agreements between temporary work agencies and user undertakings no longer need to be in writing (section 126 of the German Civil Code (BGB)) the text format will be sufficent (section 126b of the German Civil Code). That means such contracts can now be provided by email, for example.
According to the previous legal situation as set out in the first sentence of section 12(1) of the German Act on Temporary Agency Work, 'in writing' meant both parties signing their names on the same document (known as "wet ink"). The signature had to be original; a scanned signature was not sufficent. Also, according to the fourth sentence of section 1(1) in conjunction with the first sentence of section 12(1) of the German Act on Temporary Agency Work, the temporary agency contract had to be laid down in writing before the start of the work assignment. Subsequently drawing up or signing the document did not meet the statutory requirements.
This had far-reaching practical implications: if a contract had to be entered into quickly because temporary workers were needed at short notice to make up for capacity shortfalls, that was only possible with immense effort (using couriers for fast delivery of contracts). If the contract was unable to be signed on time, the start of the temporary work assignment had to be postponed, which often led to a financial losses. And if there was no temporary agency contract in place in writing before the start of the assignment, it was null and void. Also, this fact could be assessed as an administrative offence subject to a fine of up to €30,000 and could result in a legal presumption of employment between the user undertaking and the employee, thereby changing employer obligations (section 9(1),(1a) and section 10(1) of the German Act on Temporary Agency Work). Breaching the requirement for a contract to be in writing thus had major legal and especially financial consequences for the temporary work agency and the user undertaking.
The requirements for text format which is now (finally) deemed sufficient are much less strict. Both paper documents (photocopies, faxes, telegrams, telexes) and electronic documents (emails, memory cards, files saved on a computer hard drive) in which the person making the declaration is named meet the requirement for text format.
3. Conclusion
The adoption of the Fourth Bureaucracy Reduction Act is a major progress for corporate practices. With the introduction of digital HR processes and simplifications in temporary work, companies will encounter much less red tape in their administrative processes, allowing them to enter into contracts and deploy temporary workers much faster. This legislation represents a decisive step by Germany's federal government towards creating a modern and efficient labour market, particularly in the area of temporary work.
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