Labour leasing or contract for work: which applies when?

The law draws the line itself. Under § 1 Abs. 1 Satz 2 AÜG, workers are leased when they are integrated into the hirer's work organisation and follow its instructions. The Entleiher (the hirer, i.e. you) is the company where they work. Under a contract for work under § 631 BGB (the German Civil Code), the contractor instead owes the production of the promised work, meaning a result. The contractor organises its own people.

What the contract says only counts as long as practice matches it. If the contract and its actual performance contradict each other, the performance decides (§ 12 Abs. 1 Satz 2 AÜG). The same applies to the question of whether an employment relationship exists at all (§ 611a Abs. 1 BGB).

Registration with German customs (Zoll) is mandatory where mandatory working conditions apply under the AEntG. It is also mandatory where the sector is listed in § 2a SchwarzArbG (the Act to Combat Undeclared Work), which includes construction. In construction, every worker must also carry an identity document and show it to customs on request (§ 2a SchwarzArbG). The A1 certificate is the form that proves the worker stays covered by Slovenian social security during the posting. Within the EU, this applies to postings of up to 24 months (IHK Köln).

Leasing fits when the workers are meant to work as part of your team. Your foreman assigns them, they follow your shift plan, and you want to move individual workers at short notice. Typical settings are production, workshops, maintenance and assembly in an industrial plant. The duties start before the first working day:

Our page Labour leasing explained describes how leasing works with us, from the contract to the first shift.

A contract for work fits when you are buying a defined result. One example is a pipeline section installed, welded and tested to your drawings, then handed over ready for acceptance. The contractor plans who works when, runs the crew under its own foreman and is liable for defects. You pay for the result, for example as a lump sum or by measured quantities.

Whether a contract for work stays a contract for work shows in daily practice. The Industrie- und Handelskammer Köln (Cologne Chamber of Industry and Commerce, IHK Köln) names five criteria. They are the contractor's freedom to make business decisions, its entrepreneurial risk, a specifically defined work result, pay for that result, and no integration of the workers into your operation. Test your project with these questions:

Under a contract for work, you may specify the result, check progress, accept the work and report defects. Your requests go to the contractor's foreman, not to the individual worker. If the honest answers to the questions above are “you”, “yes” and “hours”, it is labour leasing, whatever the contract says.

A foreign contractor brings further duties. It registers the employment with customs before work starts (§ 18 Abs. 1 AEntG, § 16 MiLoG). It must grant at least the mandatory working conditions, such as the minimum wage and minimum leave. In construction, it registers its workers with SOKA-BAU (the construction industry's holiday fund). If the work belongs to a licensed trade in Annex A of the Handwerksordnung (Crafts Code), it notifies the competent Handwerkskammer (chamber of crafts) of the cross-border service in advance (IHK Köln).

Two duties fall on you directly. First, you are liable for the net minimum wage of the workers of your contractor, its subcontractors and their agencies. You are liable like a guarantor who has waived the right to insist that the debtor is sued first (§ 14 AEntG, § 13 MiLoG). The workers can therefore claim directly from you without first suing the contractor.

Second, for construction services you withhold 15% of the invoice as Bauabzugsteuer (construction withholding tax) and pay it to the tax office. This does not apply if the contractor presents a valid Freistellungsbescheinigung (exemption certificate, a certificate from the tax office that waives the deduction) under § 48b EStG (the Income Tax Act). Without a certificate, you can skip the deduction only if your payments to that contractor are expected to stay below €5,000 in the year (§ 48 Abs. 1 and 2 EStG).

The law has a separate rule for the construction industry. Labour leasing into construction businesses for work usually done by manual workers is not permitted (§ 1b Satz 1 AÜG). This covers manual trade work such as welding, assembly or pipe laying. It does not cover salaried staff such as site management.

The law provides three exceptions. Leasing is allowed if collective agreements declared generally binding (collective agreements the state has made binding for the whole industry) provide for it between the businesses involved. It is allowed between construction businesses if the leasing business has been covered by the same framework and social fund collective agreements for at least three years. These are the construction industry's collective agreements, including the one that makes SOKA-BAU contributions compulsory (§ 1b Satz 2 AÜG).

A construction business from another EEA state may also lease workers. The condition: for at least three years it has mainly done work that falls under the same framework and social fund collective agreements as your business (§ 1b Satz 3 AÜG).

For your decision, this means the following. If your business is a construction business and the workers are to do manual work alongside your staff, a contract for work with a contractor under its own supervision is usually the permitted route. Leasing is only an option if the provider can prove one of the exceptions.

If your business is instead an industrial business, such as a plant, a shipyard or a plant engineering firm outside construction, § 1b does not apply. Both models are then open to you. A breach of § 1b can cost the agency and the hirer a fine of up to €30,000 each (§ 16 Abs. 1 Nr. 1f and Abs. 2 AÜG).

A Scheinwerkvertrag (a sham contract for work) is a contract for work that operates as labour leasing in practice. The consequences fall mainly on you as the client. The contract was not expressly labelled as labour leasing, and the workers were not specified in advance. As a result, the employment contract between the provider and the worker is void (§ 9 Abs. 1 Nr. 1a AÜG). By law, an employment relationship between you and the worker is then deemed to exist (§ 10 Abs. 1 AÜG).

This also applies if the provider holds an AÜG licence. A licence held “just in case” does not rescue a wrongly labelled contract, because the labelling duty exists alongside the licence requirement. If there is no licence at all, the contract is void for that reason alone (§ 9 Abs. 1 Nr. 1 AÜG). In both cases, the worker can choose to keep the contract with the provider. To do so, the worker must submit a written Festhaltenserklärung (a declaration of intent to stay with the provider) within one month. The worker must first present it in person at an employment agency (§ 9 Abs. 1 and 2 AÜG).

Fines come on top. Each of three breaches can cost you up to €30,000: letting a worker from an unlicensed agency work for you, failing to label the leasing, or failing to specify the person (§ 16 Abs. 1 Nr. 1a, 1c, 1d and Abs. 2 AÜG). The customs administration handles these cases (§ 16 Abs. 3 AÜG).

In labour leasing, our workers stay employed by Evroproces d.o.o., are insured in Slovenia with an A1 certificate and are paid by us. We do not place anyone into direct employment with you.

For labour leasing, your contracting partner is Evroproces d.o.o. It is entered in the Slovenian register of temporary work agencies under number 111. The company holds a labour leasing licence from the Bundesagentur für Arbeit, Agentur für Arbeit Nürnberg, valid until 29 April 2027. We also lease workers to construction businesses in Germany, where § 1b AÜG allows it.

For a contract for work, your contracting partner is EP Montaža d.o.o. It carries out the work as a subcontractor under its own supervision and is registered with SOKA-BAU. For construction services it holds an exemption certificate under § 48b EStG, valid until 9 March 2027. The German leasing licence and the exemption certificate are published on our company documents page.

Each company files the customs registration itself: Evroproces d.o.o. for labour leasing, EP Montaža d.o.o. for contracts for work. If the work belongs to a licensed trade in Annex A, EP Montaža notifies the competent Handwerkskammer of the cross-border service before work starts.

For assembly assignments in Germany and Austria, we provide and pay for accommodation. Our checklist of licences and documents lists what you should ask any provider for in advance. Our article on labour leasing from Slovenia explains how leasing works under Slovenian law.

May I give instructions to a worker under a contract for work? The health and safety rules of your site apply to everyone who works there. Under a contract for work, the contractor decides how, when and by whom the work is done. You send your requirements for the result to the contractor's foreman.

Can we switch models during the project? Yes, if the work actually changes. For leasing, the contract, the label and the list of names must be in place before the workers start working for you in the new form. Renaming the contract without changing the practice does not help, because actual performance is what counts.

Describe the work to us, not just the headcount. Should the workers work within your team, or do you need a defined result? Also give us the trade, the number of workers, the location, the start date and the duration, and tell us whether your business is in the construction industry. With these details, send your enquiry on our Request workers page. We usually reply within 24 hours.