With an EOR, the provider is the legal employer while your company directs the employee's day-to-day work. German authorities generally treat that split as employee leasing (Arbeitnehmerüberlassung), which is governed by the Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG).
That doesn't make an EOR unlawful in Germany. It means the provider must operate as a licensed leasing company, and the arrangement is subject to the AÜG's limits.
| Rule | What it means | Source |
|---|---|---|
| Licence | The provider needs an employee leasing licence from the Federal Employment Agency (Bundesagentur für Arbeit). | AÜG § 1(1) |
| 18-month limit | The same worker can generally be placed with the same client for no more than 18 consecutive months. Collective agreements can vary the limit. | AÜG § 1(1b) |
| Equal pay | The worker is entitled to the same pay as comparable permanent staff from the start. A temporary-work collective agreement can defer this for the first nine months (up to 15 under strict conditions). | AÜG § 8 |
Non-compliance is costly. Consequences can include the employment relationship transferring to your company by law, fines, and back-payment of social contributions. That is why the licence and the 18-month clock are the first things to check with any German EOR.
In practice, an EOR in Germany works as a bridge: ideal for first hires and for testing the market, but something to plan beyond from day one. Track each employee's start date and decide early which route you will take:
- Set up a GmbH and move the employee onto your own payroll. See the Germany guide for what a GmbH involves and our EOR vs local entity guide for the break-even point.
- Hire directly through an entity you already have in Germany.
- End the arrangement before the limit. Simply switching the person to a contractor agreement is not a safe alternative if they still work under your direction; see EOR vs contractors.
- Can you share your current AÜG licence from the Bundesagentur für Arbeit?
- Do you employ through your own German entity or a partner, and who holds the licence?
- How do you track the 18-month limit, and what do you do as it approaches?
- Do you apply a temporary-work collective agreement, and how do you handle equal pay?
- Who bears the cost if an arrangement is found to breach the AÜG?
Is an Employer of Record legal in Germany?
What is the 18-month rule for EOR in Germany?
Does an EOR need an AÜG licence?
What happens if an EOR breaches the AÜG?
Does equal pay apply to EOR employees in Germany?
- 1Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG)
Federal Ministry of Justice (gesetze-im-internet.de)
§ 1(1): leasing requires a licence; § 1(1b): no more than 18 consecutive months with the same client; § 8: equal pay from the start, which a collective agreement may defer for the first nine months.
- 2Employee leasing licence (Arbeitnehmerüberlassung)
Bundesagentur für Arbeit
The authority that issues and supervises AÜG licences.