Ryanair is to stop using self-employed agency pilots in Germany, and will instead offer direct employment contracts to all pilots based there.

For some time, the German tax authorities have been investigating employment practices involving two employment agencies hiring pilots to Ryanair as self-employed workers.

The authorities argue that this recruitment model may have resulted in underpayments of tax and social security contributions.

Earlier today one of the agencies, McGinley Aviation, wrote to contractor pilots hired out to Ryanair by the agency informing them that it had decided to cease the supply of contractor pilots to Ryanair in Germany from 31 October.

The Managing Director of McGinley Aviation, Elizabeth Cusack, said that Ryanair will be offering contracts for direct employment to all McGinley Aviation contractors in Germany - which Ryanair has also confirmed to RTÉ.

In the email to McGinley pilots contracted to Ryanair, Ms Cusack also stated: "It is important that you liaise with your accountancy providers to ensure that outstanding limited company/tax/social insurance matters are dealt with appropriately."

Ms Cusack told RTÉ News that McGinley Aviation will continue to supply contractor pilots to all other countries across Ryanair's growing European network.

In a statement, Ryanair confirmed that McGinley Aviation has decided to withdraw from supplying contractor pilots for Ryanair in the German market, and that the airline has now begin the process of offering those contractors direct employment.

It confirmed that McGinley Aviation would continue to supply contractor pilots in all other jurisdictions in the Ryanair network.

Ryanair added that "... like most airlines, Ryanair uses a mix of directly employed and contractor pilots across its network which will continue."

Asked about the status of the German tax authorities' investigation, Ryanair said is was not the subject of this investigation by the Koblenz Prosecutor's Office and therefore cannot comment on its status.

Unions oppose the contractor model arguing that it gives workers no security of employment, but delivers significant savings for airlines on payroll costs.

Goodbody analysts said the move to offer direct contracts in Germany should help to ease relations between Ryanair management and the German pilots union.