The AÜG 18-Month Rule: How Long You Can Use an EOR in Germany

Germany is one of Europe’s most attractive markets to hire in — and one of the most tightly regulated. Companies routinely use an Employer of Record in Germany to onboard talent fast without setting up a local entity, but many discover, often too late, that this route has a legal expiry date. Under the Arbeitnehmerüberlassungsgesetz (AÜG), most EOR arrangements count as employee leasing, and employee leasing to the same client is capped at 18 months. This guide explains exactly how the rule works, the related nine-month equal-pay trigger, the licence your provider must hold, what happens if you breach the limit, and the options you have when the clock runs out.

The Arbeitnehmerüberlassungsgesetz (AÜG), or Temporary Employment Act, is the German law that governs Arbeitnehmerüberlassung — the leasing or hiring-out of workers. It applies whenever one company (the lender, or Verleiher) supplies a worker to another company (the hirer, or Entleiher) who then directs that worker’s day-to-day activity and integrates them into their operations. A major 2017 reform tightened the regime, introducing the 18-month cap, the nine-month equal-pay rule, and strict disclosure obligations. Because an EOR employs a worker on paper while the client controls the actual work, German authorities generally treat the EOR relationship as employee leasing — which pulls it squarely under the AÜG.

The core limit — the Überlassungshöchstdauer — is straightforward: a lender may not assign the same worker to the same hirer for more than 18 consecutive months, and the hirer may not use that worker beyond that period. Two details decide most real cases:

• The clock is per worker, per hirer. It tracks a specific individual placed at a specific company, not your overall use of an EOR. Swapping providers does not reset it.
• Prior assignments count. Earlier periods with the same hirer are added together unless there is a break of more than three months between them. A gap of three months or less does not reset the count; a longer gap starts it over.

Sector-level collective agreements (Tarifverträge) that apply in the hirer’s industry can lengthen or shorten the 18-month ceiling, so the exact limit can differ where a binding collective agreement is in force.

Running alongside the duration cap is a pay obligation, and it is widely misunderstood. The statutory default under §8 AÜG is that a leased worker is entitled to equal pay from the first day of the assignment — the same essential working and pay conditions as a comparable permanent employee of the hirer. An applicable collective agreement (Tarifvertrag) in the temporary-work sector can deviate from this and delay full equal pay for up to nine months (extendable to 15 months under certain branch surcharge agreements). Because most agency work is covered by such an agreement, equal pay commonly takes effect by the nine-month mark in practice — but the baseline entitlement is immediate. Either way, an EOR placement in Germany tends to get more expensive over time as pay rises toward parity, well before the 18-month ceiling.

Employee leasing is not something any company may do freely. The lender must hold a valid licence to lease workers — the Erlaubnis zur Arbeitnehmerüberlassung — issued and supervised by Germany’s Federal Employment Agency (Bundesagentur für Arbeit). If your EOR provider operates as a leasing arrangement without this licence, the placement is unlawful from day one, regardless of the 18-month clock. Before engaging any EOR in Germany, confirm it holds a current AÜG licence — this is a basic, non-negotiable due-diligence check.

Breaching the limit is not a minor technicality — the consequences fall largely on the hirer, i.e. your company:

• A statutory employment relationship is created with you. By law, the worker is deemed to have become the direct employee of the hirer once the limit is exceeded (a fingiertes Arbeitsverhältnis). The worker can choose to stay with the lender by filing a declaration, but the default outcome is that they become your employee — exactly the local liability an EOR was meant to avoid.
• Fines. Authorities can impose penalties of up to €30,000 per violation on both the lender and the hirer; missing or defective licensing and disclosure can escalate exposure substantially.
• Retroactive obligations. If a direct employment relationship is deemed to exist, you can become liable for back social-security contributions, wage tax and other employment costs, plus the ordinary protections of German employment law (including dismissal protection).
• Loss of the licence. Repeated breaches can cost the provider its AÜG licence, disrupting every placement it runs.

Reaching 18 months does not mean losing a valued team member — it means making a deliberate decision about the employment model. There are four realistic paths.

The most common long-term answer is to move the worker into direct employment via a German subsidiary or branch. An entity lets you employ staff directly, removes the leasing cap entirely, and signals long-term commitment to the market — at the cost of incorporation, ongoing accounting, and payroll administration. This is the right route once you have several German hires or a permanent presence in mind.

If you set up (or already have) a German entity but don’t want to build an in-house payroll function, managed payroll in Germany handles wage tax, social-security filings and compliant payslips while you employ the worker directly. This pairs naturally with the entity route above.

In limited cases you can restructure the relationship so it no longer counts as employee leasing — for example a genuine service or project contract (Werkvertrag) where the worker stays independent of your day-to-day direction. This must reflect reality: German authorities scrutinise “disguised” leasing and false self-employment (Scheinselbstständigkeit) closely, and a contract that says one thing while the work looks like leasing will be treated as leasing.

For genuinely short-term or project-based roles, the cleanest compliant choice may simply be to conclude the engagement at the 18-month mark. Note the three-month reset: after a break of more than three months the same worker could, in principle, be assigned again — but this should be a real gap, not a paper reset.

German labour authorities are increasingly active in reviewing cross-border staffing, and the costs of getting caught out land on the hirer. Companies that start planning around month 12 — deciding whether to incorporate, restructure or exit — keep every option open and avoid a rushed, expensive scramble at month 17. Leaving it until the deadline usually forces the most disruptive outcome. Treat the EOR as a bridge into the German market, not a permanent home for the role.

An EOR is an excellent way to enter Germany quickly, test a market, or cover the months before an entity is ready — but the AÜG 18-month rule means it is designed to be temporary for any given person. The winning approach is to map each German hire against the clock from the start: know the assignment’s start date, the nine-month equal-pay point, and the 18-month ceiling, and decide early which long-term model fits. Talk to our Germany team to plan an EOR-to-entity transition, confirm licensing, or set up compliant German payroll before the deadline forces your hand.