Managed team or staff augmentation? What the AÜG means

Whether an external team counts as temporary agency work under German law depends on how the work is run in practice. Section 1(1) of the Arbeitnehmerüberlassungsgesetz (AÜG) treats workers as supplied to a client when they are integrated into the client's work organisation and subject to its instructions.

What does the AÜG regulate?

Employers who, as lenders (Verleiher), supply their employees to third parties (Entleiher) as part of their economic activity need a permit under section 1(1) of the AÜG. It also says workers are supplied "wenn sie in die Arbeitsorganisation des Entleihers eingegliedert sind und seinen Weisungen unterliegen": when they are integrated into the client's work organisation and subject to its instructions. Supply is lawful only if the worker is the lender's employee.

The Federal Employment Agency (Bundesagentur für Arbeit, BA) calls this, in its Fachliche Weisungen zum AÜG, a general ban with a reservation of permission. We read the current version, valid from 1 July 2026.

The words "staff augmentation" appear nowhere in the law or in that guidance, and we found no official text that applies the AÜG to the term by name. Below, we use it for a provider's employees working inside a client's team, which is our reading of how the market uses it.

How does a managed team differ from agency work in law?

The BA guidance names the elements of a work contract (Werkvertrag, section 631 of the BGB): an agreed result that can be attributed to the contractor, the contractor's freedom to organise the work, the contractor's right to instruct its own staff, the contractor bearing the entrepreneurial risk including warranty, billing by result, and acceptance of the work by the client. A service contract (Dienstvertrag) owes an activity, and the guidance says it exists only if the provider performs it under its own responsibility and plan, with its people largely free of the client's instructions on how.

The Federal Labour Court (BAG) draws the line at the kind of instruction. In its ruling of 5 July 2022 (case 9 AZR 323/21), it says that a client may give instructions for carrying out a work contract, but "die werkvertragliche Anweisung ist sachbezogen und ergebnisorientiert", while the employer's right to instruct "ist demgegenüber personenbezogen, ablauf- und verfahrensorientiert". Telling a contractor what must be delivered is one thing, and telling individuals how and when to work is another. The court decided that case under the AÜG as it stood in 2010, not under the 2017 text the lower court had used.

The BA adds a caution: the assessment must not be schematic. One or several criteria do not yet point to a contract type, and only a weighing of all of them does. It refers questions about a specific case to lawyers.

For IT projects the legislative record is also relevant. In its report of 19 October 2016 on the 2017 reform, the Bundestag's labour committee said the new definition in section 1(1) sentence 2 was not meant to change the legal position for consulting firms. The new rule should not stand in the way of work and service contracts in consulting or IT projects for optimisation, development and introduction, and the general rules for telling them from agency work continue to apply. A committee report is not itself law.

What if a contract says one thing and the work runs another way?

The BA and the BAG both say that actual practice outweighs the label. If contract and performance contradict each other, the BAG says performance decides, because it best shows what the parties really intended. Section 611a of the BGB says the same for employment contracts in general: the name in the contract does not matter if the actual performance shows an employment relationship.

The AÜG has a sharper rule since 1 April 2017. Under section 1(1), lender and client must state in their contract that it is agency work before the worker starts, and must name the person with reference to that contract. The BA guidance says the purpose is to prevent hidden agency work, and that a permit holder who labels it a work contract is treated no better than one without a permit. The 2016 committee report, summarising the government bill, explains why: a supposed contractor could previously fall back on a permit held in reserve.

The consequences are in two sections. Section 9 makes the worker's employment contract with the lender invalid if the lender has no permit, if the disclosure and naming rules were broken, or if the maximum duration was exceeded. Without a permit, the contract between lender and client is invalid too. Section 10 then provides that an employment relationship between client and worker is deemed to exist, with at least the pay agreed with the lender. The worker can object by declaring in writing within one month that he keeps the contract with the lender, but only in the form section 9(2) sets out, which starts with presenting the declaration in person at an employment agency.

Section 16 lists administrative offences. Supplying a worker without a permit, using a worker who was supplied without one, supplying beyond the maximum duration, and breaking the disclosure or naming rules can each be fined up to EUR 30,000.

Proof can decide a case. In the 2022 case the BAG held that the worker must first present facts pointing to agency work. Only if he cannot see the contracts between the companies must the client set out its terms.

How long can a worker stay with one client?

Section 1(1b) sets the maximum at 18 consecutive months per worker and client. Earlier assignments to the same client count in full if the gap between them is no longer than three months, whether the earlier lender was the same or another one. A collective agreement of the client's sector can set a different maximum, and the section lets clients not bound by a collective agreement adopt it through a works or service agreement, in some cases up to 24 months.

The BA guidance adds how the period is counted. It runs from the first day of the assignment and counts calendar months, not hours: a worker assigned for three days a week over six months has used six months. The guidance's own example gives 3 April 2026 as the first day and the end of 2 October 2027 as the last lawful day. A gap of more than three months restarts the period.

The cap applies to agency work only. A genuine work or service contract does not fall under the AÜG, so the 18 months do not apply to it. If an arrangement is agency work in practice and runs past the cap, section 9(1) number 1b makes the worker's contract with the lender invalid, with the same objection right.

Does it matter where the provider is based?

It can. Section 3(2) says a permit must be refused if the establishments intended for agency work lie outside the EU and the European Economic Area. The BA guidance reads this as a ban on agency work from outside the EU or EEA without exception and says the permit must be refused where the decisions needed for the supply are taken there.

The guidance also covers a case with too little link to Germany. If the lender is in the EU/EEA or a third country, the client is in Germany, and the worker stays abroad and works only online without ever travelling to Germany to work, the permit requirement does not extend to that case, it says. It adds that no supreme court ruling on these cases exists. That is the BA's view and does not bind a court.

What should a buyer check? (our addition)

This list is our addition. It turns the text above into questions for a provider and a lawyer, and it does not produce a legal result.

1. Who assigns daily tasks to individual people, and who decides how, when and in what order they work? Instructions about the deliverable point towards a work or service contract. Instructions about the person's working methods point towards agency work.

2. Does the contract owe a result, or an activity, or the availability of named people? Who carries the risk if the result is wrong?

3. Who decides team size and substitutions, and do the provider's people work in your processes and report to your managers?

4. Is each person an employee of the provider? The BA guidance says people who appear self-employed but are in fact dependent are employees in law, and it names the status procedure under section 7a SGB IV for doubtful cases.

5. If any part is agency work, does the contract say so and name the person, and does the provider hold a valid permit?

6. If any part is agency work, when did each person start with you, and when do the 18 months end? Count earlier assignments with gaps of up to three months.

7. Where does the provider take its decisions and keep its employment contracts?

Where does that leave a dedicated team?

On our site we describe two ways of working. In a managed project we take ownership of delivery against an agreed scope. In a dedicated team, your product owner sets the goals and the order of the backlog, and our team lead plans and assigns the work and runs the team. The steps are on how we work.

We do not assess here which side of the AÜG line a given set-up falls on. The sources say that depends on the contract and on how the work is run, weighed case by case.

What we could not confirm

We found no statute, court ruling or BA text that defines or names "staff augmentation", so our mapping of it to the AÜG test is our reading. The BAG ruling of 5 July 2022 turns on the evidence in one automotive case and applied the AÜG version from 2010. We did not survey later case law, so newer decisions may refine the line for software projects.

The BA guidance says no supreme court ruling exists for workers who work only online from abroad, and we found none either. We saw no bill to amend the AÜG in our searches, which is not proof that none is pending. We did not cover tax, social insurance, equal pay under section 8, works council rights or freelancers beyond what is cited.