Temporary employment agreements for startups and scale-ups: where is the legal room for maneuver?

For young growth companies, flexibility is often not a luxury but a prerequisite for growth. New clients, product launches, implementations, support spikes, or temporary projects can create an immediate need for extra capacity, without there being room or a need for a permanent employment contract. In that landscape, the temporary employment agreement quickly comes into play.

However, the legal framework is less straightforward than it sometimes appears in practice. A temporary staffing arrangement is not a standard two-party relationship between employer and employee, but a triangular one. As a result, the roles of legal employer and actual supervisor are separated. This makes the structure attractive, but also legally sensitive.

At Startup-Recht, we see that startups and scale-ups often focus primarily on speed, scalability, and operational convenience. That is understandable. But especially with temporary staffing, it is wise to first clearly define the nature of the relationship being established, the rules that apply, and where the line is drawn regarding payroll or other forms of external hiring.

Why temporary staffing is attractive for growth companies

Temporary staff are often brought in to cover personnel shortages, manage temporary surges in workload, or keep the workforce flexible. For young tech companies, there is an additional factor. Teams change rapidly, funding comes in rounds, product roadmaps shift, and the need for capacity is not always structural.

This is why temporary staffing can be attractive when a company quickly needs someone for operations, customer support, logistics, back-office, or other executive roles. A staffing agency can also assist with recruitment and selection, giving a company faster access to candidates without having to set up the entire process themselves.

These practical advantages explain why temporary staffing plays an important role in the labor market. At the same time, the legal value of temporary staffing lies in the specific regime that applies to this type of contract. That regime offers more flexibility than a regular employment contract, but only if the relationship truly qualifies as a temporary employment agreement.

When is there legally a temporary employment agreement?

The core of a temporary employment agreement is that an employee is made available by their employer to a third party to perform work under the supervision and direction of that third party. That sounds technical, but in practice, it comes down to three basic elements.

First, the employee actually works at the client's location, i.e., the hirer. Second, this happens under the supervision and direction of that client. Third, the agreement between the staffing agency and the client essentially aims to provide labor, not to deliver a specific result.

That last distinction is important. If an external party commits to delivering a concrete result, such as a defined software project, an implementation, or a specialized service with its own management, you are legally more in the realm of service provision, contracting, or work-for-hire. If it is primarily about deploying people who work within your organization and under your direction, the temporary staffing classification is much more likely to apply.

For startups and scale-ups, this point is often particularly relevant. Especially in tech environments, terms like staffing, secondment, contracting, consultancy, and project hiring are easily conflated. But the name on the contract is not decisive. The actual structure of the collaboration carries significant weight.

Temporary staffing is broader than many entrepreneurs think

Many entrepreneurs still associate temporary staffing with the classic image of temporary replacement: someone filling in during illness, vacation, or a short peak. Legally, the concept is broader.

The legal definition of a temporary employment agreement is not limited to that classic temporary situation. Other triangular relationships can also fall under this framework, as long as the employee works under the direction and supervision of the client and the agreement between the employer and the client is about providing labor, not about the supplier delivering their own result.

This is relevant for scale-ups that work structurally with a flexible layer of staff. The fact that a role lasts longer or that multiple assignments follow one another does not automatically mean the structure falls outside the temporary staffing regime. Conversely, it also does not mean that every external hire is automatically temporary staffing. This is precisely why careful classification beforehand is wise.

The difference between temporary staffing, payroll, and contracting

For entrepreneurs, the distinction from payroll is particularly important. Payroll is not a separate alternative outside of temporary staffing law, but a specific form of it. Nevertheless, payroll has a different legal profile, and that difference has direct consequences for the level of flexibility.

In essence, the allocation function of the employer is missing in payroll. In other words: the payroll employer does not truly bring supply and demand together in the labor market. Furthermore, the employee is placed exclusively with one client. In such a situation, the relationship shifts toward payroll.

Why does that matter? Because certain flexibility tools that are characteristic of temporary employment contracts do not apply to payroll. Think of the temporary agency clause and the special leeway regarding the chain regulation. For companies that assume they maintain the same flexibility "simply by using an external employer," this can be an expensive misconception.

The distinction from contracting or consultancy also deserves attention. If a supplier remains responsible for the result of the work and the people do not primarily work under your direction, that is a fundamentally different structure. In practice, we see that the line sometimes blurs, especially at tech companies, for example with development teams, implementation partners, or managed services. In those cases, it is smart to look not only at the commercial agreements but also at who is actually managing the work and exactly what is being paid for.

Why the temporary employment contract has a special regime

Since 1999, the temporary employment contract has been anchored in law as an employment contract. At the same time, this form of contract has a number of special rules that deviate from the standard starting point of employment law. That is precisely where the appeal lies for entrepreneurs, but also the need to work with legal precision.

The temporary agency clause as a flexibility tool

A well-known element is the temporary agency clause. This is a special clause that can appear in the temporary employment relationship and increases the flexibility of the structure. For companies that want to be able to scale up and down quickly, this is obviously attractive.

But that flexibility is inherent to the temporary employment contract and not automatically to other structures. As soon as the relationship should actually be viewed as payroll, this tool is out of reach. That is precisely why the classification of the relationship is not a theoretical exercise, but directly affects the company's operational room for maneuver.

Temporary employment offers extra leeway regarding the chain regulation

The temporary employment regime also offers special leeway regarding the chain regulation. In practice, this makes temporary employment extra flexible for employers, especially when it comes to temporary work or a need for rapid deployment.

This is attractive for startups and scale-ups, but the same applies here: that leeway belongs to the temporary employment regime and not automatically to payroll. Anyone who thinks they can combine the benefits of temporary employment with a structure that is actually payroll runs the risk that the legal justification will not hold up later.

Collective labor agreements (CLAs) play a bigger role than many companies think

In addition to statutory rules, CLAs for temporary workers are very decisive in practice. These CLAs provide further detail on both the flexibility of the contractual relationship and the terms of employment. For hirers, this means they must look not only at the contract with the agency but also at the CLA context in which the temporary worker operates.

This is all the more true because terms of employment in the temporary employment sector are not just a matter for the agency. The way work is organized at the hirer's site, which functions are comparable, and which remuneration components are relevant can also have practical significance for the client.

The Waadi: rules that you as a hirer cannot afford to overlook

Anyone working with temporary workers has to deal with more than just the Civil Code. The Allocation of Labor by Intermediaries Act (Waadi) also sets important ground rules for practice.

A first important point is registration. Companies that make labor available must register as such. This obligation is linked to supervision and control of the sector. For hirers, this means it is wise to look at an agency not only from a commercial perspective but also from a compliance perspective.

In addition, the principle of equal pay is of great importance. Temporary workers may not simply be deployed as a cheaper parallel layer in this regard. For scale-ups that build teams quickly and keep a close eye on costs, this is a point that often deserves more attention upfront.

Furthermore, a temporary worker may not be prevented from entering into employment with the client after the assignment has ended. This is also relevant for startups. After all, many young companies use temporary employment partly as a way to get to know talent and hire them themselves later. It is good to realize that not every contractual restriction is legally enforceable.

What does this mean in concrete terms for startups and scale-ups?

For growth companies, the core question is usually not about the name of the structure, but about the practical outcome. Can you scale up quickly? Who manages the employee? Which risks lie with the agency and which with your company? And how free are you to hire someone yourself later?

A few questions can help you assess this early on:

• Will the external worker actually be working under the direction and supervision of your team?
• Are you essentially paying for capacity, or for a clearly defined result?
• Did the supplier recruit and select the candidates themselves, or are you effectively providing the person?
• Do you want the option to hire the employee later on?

If the answers point toward the provision of labor, it is wise to treat the arrangement as such. This prevents commercial agreements on paper from suggesting something that is not legally sustainable.

At Startup-Recht, we see this occurring primarily in companies that are growing quickly and taking a pragmatic approach to contracting. A hiring manager wants speed, a founder wants flexibility, and finance wants predictable costs. These are legitimate interests. However, it is precisely then that it is wise to verify in advance whether you are working with temporary staffing, payroll, or another form of external engagement. The difference determines which rules apply, how much flexibility is available, and where the legal sensitivities lie.

Finally: flexibility only works if the classification is correct

The temporary employment agreement is a useful tool for startups and scale-ups, precisely because it offers a combination of speed, scalability, and a specific legal framework. But that advantage only exists as long as the arrangement truly remains within the boundaries of temporary employment law.

Therefore, the most important lesson is not that temporary staffing is risky, but that precision pays off. Do not just look at the label of the collaboration, but at the actual structure: who recruits, who manages, where the work is performed, and what is being paid for. Anyone who has a clear grasp of this can use temporary staffing strategically without being unpleasantly surprised later by an incorrect classification.

For tech companies that are building, testing, and scaling rapidly, this is not a formality, but a part of sound growth management.

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