Under an Employer of Record model a provider formally employs a person and supplies their work to a client company, which exercises day-to-day direction. In Germany this arrangement is generally seen as meeting the criteria of Arbeitnehmerüberlassung and therefore requires a licence under the AÜG. Without a licence, an employment relationship with the client company can be deemed to exist, alongside fines and social-security back payments.
At a glance
- The EoR provider is the formal employer while the client company gives day-to-day direction
- That exact split is the defining feature of Arbeitnehmerüberlassung (employee leasing)
- In Germany, Arbeitnehmerüberlassung requires a licence under § 1 AÜG
- Without a licence, § 10 AÜG can deem an employment relationship to exist with the client company
- An EoR is not a way around German employment law: where the work is performed in Germany, mandatory protective rules apply regardless of the contract model chosen
Distinguishing the models
- Arbeitnehmerüberlassung: the provider employs, the client directs. Licensed, with a maximum assignment period and an equal-pay principle
- Werk- or Dienstvertrag: the provider owes a result or a service and directs its own people. If in practice the client directs them, this is disguised employee leasing
- Freelancer: a direct contract with a self-employed person. Where self-employment is not real, Scheinselbstständigkeit follows
- Own entity: the client company employs directly. More work to set up, but without the AÜG risks
Risks for the client company
- A deemed employment relationship with the client company where the licence is missing
- Fines for both provider and client
- Back payment of social security contributions, potentially with criminal exposure under § 266a StGB
- Equal-pay claims by the assigned person
FAQ
Is an EoR lawful in Germany?
On the prevailing view, only where the provider holds a licence for Arbeitnehmerüberlassung. Anyone using an EoR model in Germany should ask to see the licence and check whether it is open-ended.
Does the maximum assignment period apply?
Where the arrangement is classified as Arbeitnehmerüberlassung, yes. The maximum is generally 18 months, with deviations possible under a collective agreement.
What applies to employment outside Germany?
The AÜG attaches to the supply of workers into Germany. Cross-border arrangements need a separate assessment of territorial scope, alongside permanent-establishment and tax questions.
Last updated: August 2026
This article provides general information and is not a substitute for legal advice in individual cases.
Jonas Stoffel
