HR-Glossar

Leiharbeit (temporary agency work)

How German agency work operates, what equal treatment requires and what disguised hiring-out costs the client company.

1. What is Leiharbeit (temporary agency work)?

In Leiharbeit – in statutory terms the hiring-out of employees – a supplier places its own employees with a client to perform work. A triangular relationship arises: the employment contract is with the supplier, instructions come from the client, and between the two companies sits a hiring-out agreement.

The Temporary Employment Act (AÜG) makes this dependent on a licence. Section 1 AÜG is headed with the hiring-out of employees and the licence requirement – hiring out without a licence is unlawful, and the consequences hit both companies.

The second load-bearing principle is in Section 8 AÜG: equal treatment. Agency workers must be placed on the same essential working conditions, including pay, as comparable permanent staff of the client. Collective agreements in the temporary employment sector may depart from this, but only for a limited period and under conditions the statute names.

For a group buying resource through vendor framework agreements, the first paragraph is the one that decides exposure: what matters is who gives the instructions, not what the contract is called.

2. Origin and development

Hiring out employees was long prohibited in Germany. The thinking behind it: whoever employs people should also be the employer and carry the associated responsibility – not pass it on to third parties and act only as an intermediary.

Its later permission was tied to conditions meant to preserve that idea: an official licence, written form for the hiring-out agreement, and identification of the arrangement as what it is. After a phase of extensive liberalisation, two limits were reinstated that shape practice today: a maximum hiring-out period and equal pay after a period of deployment, from which collective agreements may depart only within limits.

The most effective innovation, however, was not a limit but a disclosure duty. The hiring-out must be expressly designated as such in the contract and the person concerned specified. That is directed against the widespread practice of disguising hiring-out as a contract for work while keeping a licence in the drawer as a precaution – that standby licence no longer protects anyone.

3. Core principles and how it works

The licence requirement

Anyone hiring out employees commercially needs a licence from the Federal Employment Agency. Section 1 AÜG governs it; hiring out without one is unlawful.

Equal treatment as a principle

Section 8 AÜG requires the same essential working conditions as comparable permanent staff – including pay. Departures are possible only by collective agreement and only for a limited period.

The maximum hiring-out period

Section 1(1b) AÜG limits the duration of hiring out to the same client. Collective agreements in the client's sector can depart from it. The period is counted per person and client, not per position.

Disclosure and specification

The contract must expressly designate the arrangement as hiring out and specify the person before it begins. A licence held merely as a precaution no longer protects.

A deemed employment relationship with the client

Where the licence is missing, or the disclosure or maximum period is breached, Sections 9 and 10 AÜG bring an employment relationship with the client into existence – unless the person concerned declares in time that they wish to keep their contract with the supplier.

Contributions and wage tax are owed by the supplier

It is the employer. Where hiring out is unlawful, however, the client is liable for the social security contributions as a guarantor waiving the defence of unexhausted remedies.

No use as strike replacements

Agency workers may not be deployed in a business subject to strike action so far as they take over the tasks of employees on strike.

4. Who is Leiharbeit (temporary agency work) relevant for?

- Client businesses – production, logistics, care, IT: wherever peaks in demand are absorbed. - Supplier companies – for them the licence is the basis of the business. - Agency workers – for them equal treatment decides a substantial part of their pay. - Procurement and specialist departments – they conclude the contracts, often without checking the employment law classification. - Payroll at the supplier – equal pay, sector supplements and deployment periods come together with them.

5. How it differs from related terms

- Agency work and a contract for work – under a contract for work the contractor owes a result and deploys its own staff under its own instructions. Authority to instruct and integration are the distinguishing features. A deployment labelled a contract for work but lived as hiring out is disguised agency work. - Agency work and a contract for services – a contract for services owes an activity, but likewise without subordination to the client's instructions. - Agency work and job placement – placement brings an employment contract between two parties into being and ends there; in hiring out the supplier remains the employer throughout. - Agency work and status determination – the status question under Section 7a SGB IV concerns employment versus self-employment; the AÜG question concerns who the employer is. Both questions often sit in the same set of facts. - Intra-group hiring out – within a group, exceptions apply under certain conditions; they are narrowly drawn and are frequently read too widely.

6. Variants and adaptations

The constellations that matter in practice:

- Classic temporary work – covering peaks in demand and absences through a staffing provider. - Deployment with a view to permanent hiring – hiring out with later employment in mind; placement fees are permissible only within limits. - Intra-group hiring out – between affiliated companies, with narrow exceptions from the licence requirement. - Disguised hiring out – labelled a contract for work or services but in fact a deployment under instruction. Legally the riskiest case. - Cross-border hiring out – posting rules, reporting duties and the social security allocation have to be settled in addition.

7. Advantages and challenges

Advantages

  • Covers peaks and absences without a permanent staffing commitment
  • The supplier carries employer duties and the risk of periods without a placement
  • Allows a trial before permanent hiring
  • For workers, a way into businesses that would not otherwise hire directly
  • Equal treatment limits the pay gap to the permanent workforce

Challenges

  • Disguised hiring out brings an employment relationship with the client into existence
  • Where hiring out is unlawful, the client is liable for the social security contributions
  • Equal pay makes longer deployments commercially unattractive — which is intended
  • The maximum period per person and client is demanding to monitor administratively
  • For agency workers the uncertainty of periods without a placement remains
  • The boundary with a contract for work is hard to maintain in day-to-day operations

8. Best practices for implementation

Examine the lived practice, not the contract heading

Who gives instructions, who sets working time, who is embedded in teams and shift plans: that is what decides the classification. A "contract for work" under which the specialist department allocates tasks daily is hiring out of employees.

Track hiring-out periods per person and client

The maximum period attaches to the person, not to the position. Interruptions and earlier deployments count towards it – which needs an overview reaching beyond individual assignments.

Require proof of the licence, do not assume it

The client should have the licence produced and monitor that it remains in force. Its lapse hits the client directly.

Budget for equal pay early

After the statutory deployment period, equal treatment on pay applies. Reckoning with it only when the invoice rises means planning deployments wrongly.

No agency work in a business subject to strike action

The prohibition is clear and is readily overlooked in tense situations.

9. Tips for employers and employees

For employers

  • **The contract heading does not protect you** – disguised hiring out creates an employment relationship with you
  • **Require proof of the licence and monitor it** – its lapse hits the client
  • **Track hiring-out periods per person** – not per position
  • **You are liable for the contributions** – as a guarantor, where hiring out is unlawful

For employees

  • **Check equal pay** – Section 8 AÜG gives a claim to the client's essential working conditions
  • **Document your deployment periods** – they decide the maximum period and the pay claim
  • **Breaches can create an employment relationship with the client** – Sections 9 and 10 AÜG
  • **You need not break a strike** – deployment in a business subject to strike action is limited

10. Conclusion

Agency work is a triangular relationship with a clear division of roles: the supplier is the employer, the client gives the instructions. So that this construction does not become a way of avoiding employer duties, the AÜG ties it to a licence and to the equal treatment principle in Section 8 AÜG.

The greatest risk lies not in temporary work itself but in its disguised form. A deployment labelled a contract for work in which the specialist department actually gives instructions is hiring out of employees – and the consequence hits the client: under Sections 9 and 10 AÜG an employment relationship with it can arise, and it is liable for the social security contributions. Since the arrangement must be expressly designated in the contract and the person specified, a licence held merely as a precaution no longer protects either.

For an international group two situations produce this almost by default. Resource bought through a vendor framework agreement – staff augmentation in IT above all – is contracted as a service and then managed as if the people were employees. And intra-group secondment is assumed to be free of the licence requirement, whereas the exceptions for it are narrow. Both belong checked against how the work is actually directed, before the deployment starts.

Operationally the maximum period is the underestimated part: it attaches to the person and the client, not to the position. Tracking it per assignment rather than per person counts wrongly.

A note on sources: there is no official English version of the AÜG (checked on 2026-09-27); its German text governs. The Civil Code has one, cited below.

Sources

Related terms

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