Structuring Live-in Care Agencies in Compliance with German Law

The chain of contracts must make it clear what services are due

Broadly speaking, there are three basic models under which a care worker is employed on a salaried basis. They may be employed either directly by the person receiving care or their family, or they may be employed by a service provider based abroad or in Germany.  

The so-called ‘posting model’ is particularly common in practice. In this case, the following legal relationships generally co-exist: a foreign service provider employs the carer and provides a care service to the family. To this end, a service contract is concluded between the foreign service provider and the family of the person receiving care, either directly or via a coordinated chain of contracts. The German agency can only act as an intermediary and assist with the organisation. However, it may also undertake to ensure a certain standard of care, select staff, provide cover for absences or handle complaints on its own responsibility. Caution is advised at this stage, however, as the more such service obligations the agency assumes, the less it can be classified as a mere intermediary.

The agency’s contract with the family should therefore not only describe its own services, but also identify the other parties involved and their respective roles. In any case, it should be clearly set out where appropriate who the contractual partner for the care arrangement is, who pays the wages, who organises working hours and holiday entitlement, who is authorised to issue professional or personal instructions, and who the family must contact in the event of absence or poor performance. Remuneration and invoicing must also be consistent with the division of roles. A standard flat-rate fee charged by the agency, a specific performance guarantee or an unrestricted right to replace the carer can, to an external observer, reinforce the impression that the agency itself is liable for the service. Conversely, an agency must not absolve itself of its duties to advise, provide information and arrange placements.

If the household employs the carer directly, it is the employer and has the corresponding obligations regarding registration, social security contributions and working hours. The simplified ‘Haushaltsscheck’ procedure under Section 28a(7) of Book IV of the Social Code (SGB IV) is only available as long as the remuneration does not exceed the marginal earnings threshold set out in Section 8a of SGB IV. However, continuous live-in care does not usually meet this requirement. In the agency model, the foreign service provider remains the employer and is obliged to provide a service to the household. If the agency employs the carer itself, it assumes the role of employer directly. Which model applies should be clear from the contract and the invoice, and not determined by a retrospective interpretation.

The issue of remuneration must be kept separate from the question of roles. If the agency acts as an intermediary in an employment relationship between the household and the care worker, it is a private employment agency. The contract with the jobseeker must then be concluded in writing and must specify the remuneration (Section 296(1) of SGB III). Advances are not permitted, and remuneration may only be charged if an employment contract has been concluded as a result of the placement (Section 296(2) of Book III of the Social Code). Remuneration is limited to 2,000 euros, including VAT. Exceeding this limit or failing to comply with formal requirements renders the remuneration agreement invalid. In the case of placement in marginal employment, any remuneration agreement with the jobseeker is entirely invalid. In the case of cross-border placement, the worker must also be informed in writing, in a language they can understand, before the employment contract is concluded, of the employer, the place of work, the job description, working hours, remuneration (including deductions), annual leave and notice periods (Section 299 of SGB III). These limits do not apply to the fee agreed between the agency and the household.

Employment status, working hours and the minimum wage in the care sector

A care worker does not necessarily have to be employed; it is also possible for them to work on a self-employed basis. Which applies depends on the actual nature of the work. Under Section 611a of the German Civil Code (BGB), being subject to instructions and personal dependence are key indicators of an employment relationship. For the purposes of social security, Section 7 of Book IV of the Social Code (SGB IV) additionally focuses on integration and instructions. Fixed working hours, constant presence in the household, detailed instructions and a lack of entrepreneurial freedom of decision-making cannot therefore be negated by the term ‘self-employed care’.

Nor can the potential employer status be reduced to a single contractual clause. Instructions from the family may arise from the day-to-day organisation of the household without this immediately establishing an employment relationship. However, if the agency takes on responsibility for duty rosters, holiday approvals, ongoing monitoring, sanctions or binding work instructions, its risk of being regarded as an employer increases. Where there are serious doubts, a status determination procedure under Section 7a of Book IV of the Social Code (SGB IV) before or during the assignment can provide legal certainty.

In addition, it must be examined whether, from an economic perspective, the model constitutes temporary agency work. Under Section 1 of the Temporary Employment Act (AÜG), temporary agency work occurs when employees are assigned to perform work, are integrated into the hiring organisation’s work structure and are subject to its instructions. Whether this is the case in a specific care provision chain depends on how it is structured. An assessment must therefore not wait until a public authority or a social security body raises the issue.

The economic core of the model lies in working hours. The Working Hours Act limits the working day on weekdays to eight hours and permits an extension to ten hours only if the average does not exceed eight hours over a period of six calendar months or 24 weeks (Section 3 of the ArbZG). Once the daily working hours have ended, an uninterrupted rest period of at least eleven hours must be observed (Section 5(1) of the Working Hours Act). An extension beyond ten hours is only permitted if on-call duty or standby duty occurs regularly and to a significant extent, and if a collective agreement permits this (Section 7(1)(1)(a) of the Working Hours Act) – a possibility that is not usually available in private households. Furthermore, the exception under Section 18(1)(3) of the ArbZG applies only to employees who live in the same household as the person being cared for and who look after them on their own responsibility. Anyone who dictates duty rosters, procedures and attendance times from outside the household cannot invoke this exception.

The right to the minimum wage exists independently of working time legislation. Employers based in Germany, as well as employers based abroad who employ staff in Germany, must pay them at least the statutory minimum wage (Section 20 of the Minimum Wage Act (MiLoG)). Since 1 January 2026, this has been 13.90 euros gross per hour and will rise to 14.60 euros on 1 January 2027 (Section 1(2) of the Minimum Wage Act (MiLoG) in conjunction with the Fifth Minimum Wage Adjustment Ordinance). The Federal Labour Court has ruled that foreign care workers posted to private households in Germany are entitled to the statutory minimum wage not only for full-time work but also for on-call duty, provided that the scope of application of the Ordinance on Mandatory Working Conditions for the Care Sector does not apply (BAG, judgment of 24 June 2021 – 5 AZR 505/20). The case was referred back to the lower court to determine the actual extent of the on-call periods, meaning that the amount of any potential back pay depends on the evidence in the individual case. A contractual limit of 30 hours per week is of no help, as agreements which fall short of the minimum wage entitlement or restrict its assertion are invalid. A waiver is only possible through a court-approved settlement, and forfeiture is excluded (Section 3 MiLoG). However, it must be assumed that an agreement providing for ‘24-hour care’ may be interpreted as an indication that on-call periods are envisaged – and possibly to an extent that is already unlawful. The drafting of the contract and, above all, its actual implementation in practice must therefore be carried out with due care.

For posted workers, the provisions of the Posted Workers Act also apply. Whether the Ordinance on Mandatory Working Conditions for the Care Sector applies depends on whether the foreign employer is a care provider within the meaning of Section 10 of the German Posting of Workers Act (AEntG), i.e. whether it predominantly provides care services. Purely care and domestic services are generally not covered by this, meaning that in such cases the general minimum wage applies. Where the Regulation applies, the employer based abroad must submit a written notification in German to the competent customs authority before the start of each service (§ 18(1) AEntG). Furthermore, the employer must record the start, end and duration of the daily working hours by the end of the seventh calendar day following the day on which the work was performed at the latest (Section 19(1) of the AEntG). By contrast, the notification and record-keeping obligations under Sections 16 and 17 of the Minimum Wage Act (MiLoG) apply only to the sectors listed in Section 2a of the Act to Combat Illegal Employment. Domestic care is not included among these. 

Of greater economic significance is the client’s liability: Anyone who commissions another contractor to carry out work or provide services is liable for that contractor’s minimum wage obligations in the same way as a guarantor who has waived the defence of prior legal action (Section 14 of the AEntG; for the statutory minimum wage, see Section 13 of the MiLoG). An agency that commissions the foreign service provider itself is therefore part of the joint liability scheme. By contrast, an agency that merely establishes contact between the household and the service provider is generally not part of the joint liability scheme. 

Consumer Contracts, Price Information and Liability

Private households generally act as consumers. If the contract is concluded online, by telephone or outside business premises, the pre-contractual information obligations under Section 312d of the German Civil Code (BGB) in conjunction with Article 246a of the Introductory Act to the German Civil Code (EGBGB) therefore apply. Furthermore, there is generally a right of withdrawal in accordance with Section 312g of the German Civil Code (BGB). Before the contract is concluded, the identity and address of the contracting party, the total price, the scope of services, the term, the conditions of termination and the existence of a right of withdrawal must therefore be clearly communicated, amongst other things. If the service is to commence during the withdrawal period, a legally sound process for the consumer’s express request, as well as information on the possible financial consequences, is required.

Standard terms and conditions must be transparent and must not place families at an unreasonable disadvantage. Section 307 of the German Civil Code (BGB) sets limits, in particular, on blanket exclusions of liability, unilateral changes to services and unclear pricing or renewal clauses. An agency cannot absolve itself of liability by shifting all risks associated with the foreign service provider or care worker onto the household. Rather, a nuanced arrangement is tenable: the agency is liable for its duties regarding selection, advice, information and organisation. Responsibility for the actual care provision is attributed to the contracting party actually providing the service, insofar as this is consistent with the agency’s public image and business practice.

The allocation of liability follows the allocation of services. If the agency is itself liable for the care, it must accept liability for the fault of the foreign service provider and the care worker deployed as vicarious agents (Section 278 of the German Civil Code (BGB)). There is then no possibility of exoneration, as exists in the case of liability for vicarious agents under Section 831 of the German Civil Code (BGB). If the agency acts as an intermediary, it is liable for its own breaches of duty, for example in relation to the selection and vetting of the service provider, the accuracy of its information regarding qualifications, language skills and the scope of work, as well as the handling of complaints. In addition, tortious claims under Section 823 of the German Civil Code (BGB) may arise if an inadequately vetted carer causes harm to the person in their care. This cannot be excluded in standard terms and conditions. The exclusion or limitation of liability for damages resulting from injury to life, limb or health is invalid (Section 309(7)(a) of the BGB) – this is, in practice, the most important scenario in home care.

Errors at the consumer level have long-term consequences. If the information on the right of withdrawal is not provided correctly, the withdrawal period does not commence (Section 356(3) of the German Civil Code (BGB)). The right of withdrawal only expires twelve months and 14 days after the start of the standard withdrawal period (Section 356(4) of the German Civil Code (BGB)). The agency may only claim compensation for services already provided if the consumer has expressly requested the service to commence early and has been duly informed (Section 357a(2) of the German Civil Code (BGB)). In the case of an ongoing support assignment, this means that a procedural error at the outset can lead, months later, to the full reversal of the remuneration paid.

How agency services work – and what the costs of breaches can be

In a pure placement arrangement, the agency brings the household and the service provider together, explains the model and assists with communication or the conclusion of the contract. However, it is under no obligation to ensure the placement is successful. This does, however, require that the family is able to identify the actual service provider and that the agency does not give the impression, either on its website or in conversation, that it provides a comprehensive service of its own. Even after the contract has been concluded, it must not take over the management of the staff.

With regard to foreign service providers, however, the agency must verify which documents relating to employment, posting and social security are plausible. This includes the A1 certificate. This certificate proves that, for a temporary posting, the social security legislation of the sending state continues to apply (Article 12 of Regulation (EC) No 883/2004). It is binding on German institutions and courts as long as it has not been withdrawn or declared invalid by the issuing institution. With regard to the predecessor certificate, the E 101, the Court of Justice of the European Union has ruled that a national court may disregard it only if it was obtained or relied upon fraudulently and the issuing institution failed to take the evidence submitted into account despite a corresponding application (ECJ, judgment of 6 February 2018 – C-359/16, Altun). However, the A1 certificate says nothing about the employer’s status under employment law, the admissibility of the actual working hours or the amount of remuneration due.

The consequences of an incorrect classification can be quantified. Anyone who fails to pay the minimum wage, or fails to pay it on time, or engages a subcontractor who also fails to do so, is committing an administrative offence. The range of fines for this offence extends up to 500,000 euros (Section 21(2) and (3) of the Minimum Wage Act (MiLoG)). If an agency supplies workers without the licence required under Section 1 of the Temporary Employment Act (AÜG), fines of up to 30,000 euros may be imposed (Section 16(1)(1) and (2) AÜG). Furthermore, both the supply contract and the employment contract are invalid (Section 9(1)(1) of the AÜG) and an employment relationship between the hirer and the agency worker is deemed to have been established (Section 10(1) of the AÜG). In the care model, the hirer would typically be the private household. Furthermore, the maximum duration of the assignment of 18 consecutive months (Section 1(1b) of the AÜG) is not suitable for a long-term assignment. Social security contributions become time-barred four years after the end of the calendar year in which they fell due; in the case of wilful withholding, a limitation period of thirty years applies (Section 25(1) SGB IV). The withholding of employees’ contributions is even a criminal offence under Section 266a of the German Criminal Code (StGB).

Consistent documentation is therefore essential for operational implementation. The agency contract, the service contract, the website, the interview guidelines, the invoices and the complaints procedure should all reflect the same allocation of roles. The agency’s staff must know what support is permissible and at what point an instruction, deployment directive or service commitment alters the chosen structure. In this area in particular, legal certainty depends not only on the wording of the contract, but also on day-to-day communication with the family, service providers and carers.