Legal Limits of Personnel Leasing in EU Countries

For growing companies in the EU, “personnel leasing” (temporary agency work) provides flexible capacity management; however, this same flexibility can turn into costly compliance risks if misconfigured. Although there is a framework across the EU (equal treatment, transparency, prohibition of discrimination), the actual “legal limits” are determined on a country-by-country basis through duration, renewal, licensing, collective agreement tariffs, and auditing practices.

In this article, we address the basic rules across the EU and the updates that stand out during the 2025–2028 period, particularly through examples from Germany, the Netherlands, and Sweden. Our aim is to help companies that send teams abroad, take on projects in the EU, or plan cost optimization through payroll/EOR or posted worker models to clarify the legal limits and structure correctly.

Why does personnel leasing become a “legal limit” issue?

Personnel leasing is a model where a worker is hired by an employment agency and temporarily assigned to a “user company”. In this model, the risks are generally grouped under three headings:

• Risk of misclassification: Even if the contract states “freelance/contractor”, the actual working relationship may be considered “employment”. This situation leads to retroactive tax, social security, penalties, and claims for rights.
• Equal treatment and wage parity: Agency workers cannot be employed at lower wages/leave/benefits compared to permanent staff doing the same job (exceptions and transition periods vary by country).
• Duration limits, justification, and licensing requirements: Some countries limit personnel leasing to specific durations, impose restrictions on renewals, or require licenses/registration for agencies.

In summary, if the “temporary workforce” operation is not set up correctly, the compliance cost may exceed the operational benefit.

EU Framework: What does the Temporary Agency Work Directive (2008/104/EC) bring?

The fundamental legal basis for personnel leasing in the EU is established by the Temporary Agency Work Directive (2008/104/EC). The directive has been transposed into the national legislation of member states; however, differences can be seen in the details of implementation.

The backbone of the directive is based on three main principles:

• Equal treatment: Agency workers must have conditions equivalent to those of comparable workers in the user company regarding pay, working hours, overtime, holidays, and especially “basic working conditions”. In some countries, a short “waiting/qualifying period” or regulation through collective agreements is possible.
• Transparency and access to work: Agencies are prohibited from charging workers a fee for finding jobs. Additionally, the user company must inform agency workers about open positions when appropriate.
• Invalidity of clauses preventing direct employment: Contractual provisions that prevent the user company from directly employing agency workers are deemed invalid. This aims to maintain mobility in the market.

The directive also states: Member states may restrict personnel leasing; however, these restrictions must be limited to reasons such as protecting workers or preventing labor market abuses and should be regularly reviewed.

For the official framework on the subject, you can check the European Commission’s page: Temporary agency workers (European Commission).

Where do “legal limits” start on a country basis?

The EU directive sets the minimum standard; the actual limits mostly emerge at the following points:

• Duration and renewal policy: Maximum assignment duration, conditions for extension, and rules for “reassignment to the same position”.
• Collective agreement tariffs: The wage scale applicable to agency workers, additional payments, rights similar to seniority.
• Agency’s licensing/registration obligation: Heavy administrative fines and risks of contract invalidity in case of unlicensed activity.
• Equal pay exceptions: In some countries, if the agency worker is on the agency’s permanent payroll and receives pay between assignments, “equal pay” may be applied differently.
• Transparent working conditions: Standard information obligations regarding trial periods, working hours, and restrictions on secondary jobs.

2025–2028 period: Trends affecting personnel leasing in the EU

In the upcoming period, even some EU regulations that appear outside the direct “personnel leasing” legislation are influencing the model. This is because areas such as pay, advertisement transparency, mobility, auditing, and digital document portability are becoming increasingly visible in agency relationships.

Pay Transparency Directive: Making “Equal Treatment” measurable

Practices such as including pay bands in advertisements and clarifying pay determination criteria are gradually being implemented on a country basis during the 2025–2026 period. This approach makes discussions about “comparable pay” between agencies/user companies more concrete.

ESSPASS: Digital portability for mobile workers (2026+)

Initiatives like the European Social Security Pass (ESSPASS) aim to digitize documentation/evidence of eligibility in cross-border work. The acceleration of audits in posted worker or short-term assignments may indirectly make the documentation aspect of compliance more critical.

AI Act (August 2026): Transparency in recruitment and monitoring processes

If agencies and user companies use artificial intelligence in candidate evaluation, recruitment, performance monitoring, or shift planning, transparency and compliance obligations increase. This situation particularly affects process design in large-scale temporary workforce management.

Germany: Collective agreement updates and operational impacts by 2026

Germany is one of the countries where the temporary workforce market is most closely monitored. As of January 2026, DGB/GVP collective agreements (tariff framework) will be updated to replace the previous structure. These updates create a direct compliance burden for agencies allocating personnel to Germany and the companies using these workers.

Highlighted points

• Fixed-term contracts: Possibility of fixed-term contracts for up to 2 years without objective justification (under certain conditions); an exception period extending until December 31, 2027, with specific transition provisions (for former BAP member structures).
• Notice periods: 1 week for the first 3 months; 2 weeks for 4–6 months; thereafter approaching the general legal regime.
• Contract form: Standardizing provisions such as contracting in text form and automatic termination upon retirement.

What does this mean in practice? Companies planning to lease personnel in Germany must answer not only the question of “Can I get the job done?” but also which tariff, which contract set, which notification/notice structure they will go with. Otherwise, incorrect tariff application or incomplete contract architecture may trigger “equal treatment” non-compliance.

The Netherlands: Pressure on the wrong freelancer structure and the 2028 licensing period

One of the most critical risks in personnel supply in the Netherlands is the blurring of the boundary between agency models and freelance/ZZP structures. As of 2025, “deemed employment” (actual labor) audits have become more visible.

Wet VBAR: Approach to clarify classification

Although project-based work is common, for those whose hourly earnings are below certain thresholds or who are actually dependent workers, the assumption of “employment” may come into play. This approach makes models that “start as contractors but actually work” risky.

2028: Licensing requirement for agencies

The Netherlands also plans to introduce a licensing requirement for agencies starting from January 1, 2028. The process includes stages such as registration by the end of 2026–beginning of 2027 and application by July 2027. In case of unlicensed activity, administrative sanctions and contractual risks may arise.

The conclusion specific to the Netherlands is this: If you want to manage the workforce “flexibly”, you need to structure it with the right tools like agency/EOR/posted worker without relying on misclassification (looking like a freelancer but working like an employee).

Sweden: Right to permanent employment after 2 years and equal pay exceptions

Regulations regarding agency workers in Sweden are shaped with a perspective of job security and transition to permanent employment. With changes made in 2022, a strong mechanism such as the right to permanent employment for temporary agency workers after 2 years has come to the forefront.

Additionally, in some models, since the agency worker is on the agency’s “permanent payroll” and receives pay between assignments, exceptions in equal pay application may be observed. These types of exceptions directly affect the contract structure, pay model, and the user’s cost calculation.

Highlighted differences in practices in other countries (selected topics)

Across the EU, countries update under the same directive framework but with different priorities. Some notable examples during the 2025–2026 period include:

• Denmark: In 2025, time registration obligations; in 2026, strengthening of RUT documentation for foreign contractors, particularly increases compliance burdens in short-term mobile teams.
• Italy: More flexible work organization approaches (simplification of termination processes, flexibility within certain limits) will come to the fore as of early 2025.
• Czech Republic: Changes such as extending the trial period and starting the notice period with “delivery of notification” will affect contract management as of 2025.
• France/Spain/Portugal: While a framework compatible with EU directives continues; updates in areas such as posted worker housing conditions in Portugal in 2025 stand out.

6 critical checklists determining “legal limits”

When planning personnel leasing in EU countries, it is necessary to clarify the following 6 items for each country. These often constitute the root cause of most non-compliance:

• 1) Type of relationship: Is it temporary agency work, posted worker, EOR/Payroll, or a true independent contractor?
• 2) Scope of equal treatment: How will pay, benefits, leave, working hours, and definition of comparable be structured? Is there a qualifying period?
• 3) Duration/renewal limits: Is there a maximum assignment duration for the same position or “chain” limits?
• 4) Licensing/registration: Is a license required for the agency? What are the registration and reporting obligations?
• 5) Collective agreement/tariff: Is there a binding tariff in the user sector or on the agency side? Tariffs play a critical role in countries like Germany.
• 6) Auditing and documentation: How will working conditions notification, time registration, pay transparency, digital documents (like ESSPASS), and data/AI compliance be ensured?

Cost and tax dimension: Why can a seemingly cheap model turn expensive?

Personnel leasing initially converts fixed costs into variable ones. However, if legal limits are ignored, costs can grow rapidly:

• Retroactive pay differences: Violations of equal treatment may lead to retroactive claims for comparable pay/benefits.
• Tax and social security risk: In case of misclassification (especially if structured as a contractor but dependent worker), retroactive social security/premium and tax liabilities may arise.
• Administrative fines and cessation of activity: Unlicensed activity, incomplete registration/reporting, or violations of national obligations trigger sanctions.
• Operational disruption: Stopping the project in case of audits or disputes may lead to penalties for delays in customer contracts.

Therefore, although personnel leasing is seen as a tool for “cost optimization”, the foundation of optimization is compliance. Optimization done without compliance is often unsustainable.

How does Corpenza add value in this process?

Personnel leasing and mobile team management in the EU simultaneously affect the layers of law, payroll, social security, immigration/residency, and incorporation. Corpenza’s approach focuses on integrating these layers into a single operational plan:

• Country-based model selection: Is temporary agency work, posted worker model, or EOR/payroll organization more appropriate; evaluates together in terms of risk and cost.
• Compliant contract and process architecture: Creates operational “checklists” for equal treatment, transparent conditions, notifications, and necessary documentation.
• Integration of international payroll, accounting, and reporting: Structures payroll/EOR, accounting, and labor costs in compliance with national requirements.
• Mobility and residency processes: In cross-border work and long-term assignments within the EU, immigration/residency becomes part of the main plan, not a secondary risk.

Especially in countries with high tariffs and process discipline like Germany or in markets where licensing/classification pressure is increasing like the Netherlands, professional support often turns into a security layer that prevents disputes and delays rather than an “additional cost”.

Conclusion: Personnel leasing in the EU is not a “single model” but a “system tailored to the country”

The Temporary Agency Work Directive provides basic protections across the EU; however, the real determinants of legal limits are national legislation, collective agreements, and auditing practices. Steps like pay transparency, digital social security portability, and agency licensing during the 2025–2028 period will make personnel leasing more measurable and auditable.

Therefore, while companies grow their flexible workforce in the EU, they must invest in “compliance architecture” as much as “speed”. A correctly structured model makes both costs predictable and sustains growth.

Disclaimer

This content is for general informational purposes; it does not constitute legal, financial, or tax advice. Legislation and practices may vary by country, sector, and specific case; also, updates during the 2025–2028 period may come into effect on different dates. We always recommend checking the official sources of the relevant country and current regulations, as well as obtaining professional support suitable for your specific situation.