19 Dec New EU rules on posting of workes: who will benefit and who will lose after changes
WHO ARE THE “POSTED WORKERS“?
At the beginning it’s worth starting with explaining who the “posted worker” actually is. A “posted worker” is defined as ‘a person who, for a limited period of time, carries out his or her work in the territory of an EU Member State other than the state in which he or she normally works’ (Council Directive 96/71/EC). In other words a “posted worker” is an employee who is sent by his employer to carry out a service in another EU Member State on temporary basis. This is the case, for instance, when the service provider wins contract in another EU Member State and sends his employee to carry out a contract there. Frequently, posted workers are confused with EU mobile workers. The basic difference is that posted workers stay in the host country only temporarily and do not integrate completely with the host country’s labor market. Meanwhile, EU mobile workers are entitled to equal treatment with the members of the host country in access to employment
or working conditions.
Despite the fact that the posted workers market represents only 0.7% of total EU employment, the role of posted employees is vital on the European labor market. The posting of workers supports the cross-border provision of services across the Internal Market, particularly in the construction and some personal and business services sectors. In 2014 posting of workers involved 1.9 million European employees. The revision of the Directive 96/71/EC (which regulates the legal status of posted workers within EU) will be particularly unfavorable for the countries that send a large number of employees to work in another EU Member State, like Poland, which sends the largest number of employees throughout the European Union (in 2016 about 430 thousand employees; mainly babysitters sent to another country by polish employment agencies and construction workers).
The EU Council states that the main aim of the revision of the Directive is to facilitate the provision of services across the EU whilst respecting fair competition as well as the rights of workers who are employed in one Member State and sent by their employer to work temporarily in another.
In July 2016 Italy’s government implemented the EU Directive concerning secondments of employees in the European Union in order to transpose the EU Directive on posted workers into domestic law. The abovementioned regulation is the direct consequence of the “Posting of Workers Directive“ which was approved by EU authorities in 1996 and “Enforcement Directive“ from 2014, which was transposed into Italian legal system in 2016.
On 23th October 2017 in Luxembourg, took place a meeting of EU Council, during which EU Ministers of Labor decided to modify the EU Directive 96/71/EC which regulates the issues of posted employees. Poland, Hungary, Lithuania and Latvia voted against. Great Britain, Ireland and Croatia abstained from voting. However, the works on the Directive has not yet been completed. The agreement that EU Council has reached allows to begin negotiations with the European Parliament, which should express a position in this matter. Presumably, the final shape of the Directive will be similar to the version that the EU Council has approved. In practice, this means – increasing the costs of work of posted employees and shortening the time of secondment. The approved revision of the rules on sending workers brings also new responsibilities for companies (home and host) posting employees to other EU Member State. Under existing rules, sending companies need to comply with a core set of employment rights of the host country. For instance, there is a new obligation of notification to authorities of hosting country and other administrative requirements that sending employers are obliged to fulfill.
THE CHANGES IN BRIEF
One of the most important changes adopted in the Directive is the issue of remuneration of posted workers. Until now posted workers were guaranteed to receive at least the minimum wage set in the host country. After the revision, the employer of sending company will be obliged to pay remuneration to posted employees in accordance with host Member State law and its practices. All rules on remuneration which apply to local workers will also have to apply to posted workers. In other words – the posted worker has the right to the same remuneration as a local employee receives, including all the allowances and bonuses. This basically means that the sending companies must thoroughly familiarize themselves with the regulations which are valid in particular region, industry and profession. The economic reason of the proposed change is to raise the cost of employing posted workers over the current level in the name of protecting the interests of local employees. Theoretically, the change could lead to the granting of salary supplements characteristic of the host country, which in the current legal system is not present. This, however, will increase the final price of the service, which will then become unavailable to a foreign clients. Additional service costs of sending companies (service providers) associated only with the fact that the service is provided in another Member State reaches currently 29% of the total cost of work. Therefore, further increase of direct labor costs instead of pay rises (payment of allowances) will lead to the loss of orders from abroad.
Another important change that has been adopted in the Directive and which has been
the subject of lively discussions is the question of the period of posting. New rules introduce stricter regulations concerning the maximum period of posting of employees. It is established that long-term posting can reach 12 months with the possible extension for another 6 months (18 months in total) if the service provider motivate it properly. It should be recalled that before the Directive was amended, the period was 24 months.
Subsequent changes are associated with additional obligations that sending companies will have to perform if they send an employee to work to another EU Member State. There are two the most significant obligations: 1. obligation to notify the Minister of Labour of the host country about the secondment and 2. the obligation to nominate a referee. According to the new regulations
the employer must give notice of the secondment to the Ministry of Labour at least 24 hours before the secondment begins and any subsequent changes must be noted within 5 days of the event. When it comes to referee – the sending company must establish a referee domiciled in host country,
in order to keeping the secondment documentation ( e.g. employment contract, pay-slips, working hours details) and a second referee for the communication reasons, if required. What’s more all the documentation must be kept for at least two years from the end of the assignment and secondment letters must be also translated into the language of hosting country. In practice, employers may encounter practical problems in fulfilling all of these requirements.
WHO WILL BENEFIT AND WHO WILL LOSE AFTER CHANGES
It seems that the new regulations will affect particularly small companies and micro-enterprises, which are the most mobile from all the companies and which undeniably dominate on the labor market. They may encounter practical problems related to the numerous and complicated provisions of host country (local law) and collective agreements regulating the principles of remuneration. They will not be able to get know with all the necessary regulations, and also it seems that they cannot afford it financially. The new legislation and accompanying regulations strengthen also checks and controls if the secondments are lawful and according to the new Directive. This may cause that the micro-enterprises, who get lost among the current provisions, will be easily “caught” by national labour inspection bodies e.g. on incorrectly calculated components of remuneration and then get fined (in extreme cases a large number of fines can lead even to their bankruptcy). Does this mean that some posted workers may lose their jobs due to business inefficiencies and legal difficulties for sending companies? Not necessarily. Qualifications of posted employees are usually high, which means they are needed on the labor markets of other countries of the EU. However, after changes, there is a risk that they will have to look for an employer on their own.
Who will then benefit from the proposed changes? Maybe countries that have been fighting to enter into force new rules like France, Belgium and Denmark? Unfortunately not.
The labor markets of the rich host countries are flooded with cheap workers – it is worth emphasizing that none of these employees belong to the group of ‘posted workers’. Also the report of the French government Tresor-Eco indicates that the genuine source of social dumping (which was one of the reasons of the proposed changes) are not posted workers, but self-employed workers and unregistered (working on ‘grey market’). Even in the current legal system there is no obligation to pay them the minimum wage rates, and because they come from poorer countries, they are ready to work at lower rates. It seems, therefore, that the problem of Western labor markets has been mistakenly diagnosed at the very beginning of the legislative process. Posted workers were blamed for causing social dumping, meanwhile the problem of unregistered employment was completely ignored.
In summary, the amendment of the Directive on posted workers provides many controversial changes that have became the subject of a lively discussions on the European scene. The changes that have been made definitely tighten up the provisions related to the posted workers and they call into question profitability of secondment for the countries that have benefited from this procedure the most, particularly the countries of Central and Eastern Europe.
Avv. Giuseppe Colucci