- 14 minute read
- Last updated: 20th November 2019
Under the Posted Workers Directive, an employer must follow some of the employment rules of the country they are posting the employee to. In this article, we look at the rules on posting workers in different EU member states under both the original and recently revised Posted Workers Directive, from what constitutes a posted worker to what employment rights a posted worker must be afforded whilst undertaking work in another member state.
This article covers:
- What is a posted worker?
- What is the Posted Workers Directive?
- Who does the Posted Workers Directive affect?
- What provisions do employers need to be aware of under the Directive?
- How is the Posted Workers Directive enforced?
- Changes to the Posted Workers Directive
A posted worker is a worker who, for a limited period, will be carrying out a service, in other words, his or her work, in a different EU member state to the one in which they normally undertake their work.
The posted worker could be assigned to another EU country to provide work under a contract of services under the direction of their employer, where that employer has secured an overseas contract in that country as a service provider.
It may also be that the posted worker is required to undertake work for a subsidiary company or other organisation closely linked to their employer’s business. Further, any worker hired by a temporary employment or placement agency in an EU member state to carry out work for a client in another EU member state falls within the definition of a “posted worker”.
Accordingly, posted workers are different from EU mobile workers in that they are not destined to integrate the local labour market of the host country, rather they remain in that country only temporarily in the context of either a contract of services for their domestic employer or, alternatively, an intra-group posting or a hiring out through an employment or placement agency.
In contrast, EU mobile citizens who seek and find work in another EU member state will be automatically entitled to equal treatment with nationals of the host country in the context of employment rights and working conditions.
The Posted Workers Directive (‘the Directive’) provides the framework of rules that govern the circumstances in which an employer can temporarily post a worker to another EU member state in order to provide a service.
In particular, it guarantees that the rights and working conditions of posted workers are protected across each member state by obliging employers to comply with a core set of labour law provisions in the host country – for example, maximum work periods and minimum rest periods, minimum rates of pay and minimum paid annual holidays – throughout the period of the posting.
The original Directive, dating back to 1996, was introduced to address concerns surrounding the use of cheap foreign labour as a means of undermining the minimum local labour laws. In other words, it sought to address the issue of “social dumping” arising from the free movement of workers in the EU, where foreign service providers were able to undercut local service providers because their labour standards were lower.
In particular, the provision that any worker hired by an employment agency in an EU member state to carry out work in another member state falls within the definition of a “posted worker” was introduced to stop foreign companies from hiring Eastern European workers at a cut-price rate to undertake work on a short-term basis in Western Europe.
The revised Posted Workers Directive adopted by the European Council on 21 June 2018, and brought about largely in response to changing mobility patterns in recent years, aims to strike an even greater balance between, on the one hand, the need to protect the rights of workers posted from one EU country to another and, on the other hand, the need to promote the free movement of services and fair competition between posting and local companies.
In particular, the 2018 Directive is designed to:
- Offer greater protection to the rights of posted workers by guaranteeing a common set of employment rights in order to prevent unfair treatment and the creation of a low-cost workforce, and
- Create a more level playing field for the cross-border provision of services between foreign and local service providers in a way that is as unrestricted as possible.
The new Posted Workers Directive affects any EU employer posting workers to another EU member state. That said, even though this revised version came into effect in 2018, the various member states have until 30 July 2020 to implement the new provisions and adapt their national laws.
Until then, the rules under the original 1996 Directive will continue to apply.
The 1996 Posted Workers Directive defines a set of mandatory rules regarding the terms and conditions of employment to be applied to posted workers. This is so as to guarantee that the rights and working conditions of posted workers are protected across all EU member states.
Under the directive, even though workers posted to another EU member state are still employed by the posting company and subject to the laws of their domestic country, they are additionally entitled to a set of core rights in force in the host member state.
More specifically, regardless of the domestic law applicable to the particular employment relationship in question, under the Directive all EU member states guarantee workers posted to another member state the terms and conditions of employment of that host country where the work is to be carried out in respect of the following matters:
- Maximum work periods and minimum rest periods
- Minimum paid annual holidays
- Minimum rates of pay, including overtime rates
- Conditions of hiring-out of workers, in particular, the supply of agency workers by temporary employment undertakings
- Health, safety and hygiene at work
- Protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, and of children and of young people
- Equality of treatment between men and women, as well as other rules to prevent discrimination.
As such, where the host EU member state affords the posted worker greater statutory rights than those to which that individual would otherwise be entitled to back home, their employer must meet those rights as an absolute minimum. It is always open to an employer to offer its posted workers greater employment rights, but, by law, the employer cannot offer less.
In the years following the adoption of the original Posted Workers Directive, the rapid growth in the number of posted workers since 1996, not to mention the increase in EU member states, created enforcement challenges at a national level. In particular, real concerns were raised as to whether the Posted Workers Directive provided a sufficiently strong legal framework.
As such, in a move to ensure better protection for the rights and working conditions of employees throughout the EU, and to fight circumvention and abuse of EU rules on posting of workers, the Posted Workers Enforcement Directive (‘the Enforcement Directive’) was introduced in 2014. The aim here was to enhance and harmonise the execution and enforcement of the original Posted Workers Directive, and to ensure that the rules on posting were applied uniformly by employers and national authorities throughout the EU.
The Enforcement Directive imposes strict practical requirements on employers, not least in relation to prior notification of new postings and the tracking of overseas postings, as well as the allocation of a liaison person for labour inspections and the retention of social documents, such as payslips, employment contracts and work schedules. Further, administrative penalties and fines imposed on service providers by one EU member state can now be enforced and recovered in another EU member state.
Overall, these general enforcement measures relating to better information exchange between authorities, efficient controls and stricter sanctioning of non-compliance, are now subjecting employers to greater scrutiny and the imposition of stricter penalties for any failure to comply with the rules on posting workers.
No doubt, employers will fall under even greater scrutiny still once the deadline has passed for the implementation of the revised Posted Workers Directive. The principal changes under the new Directive can be summarised as follows:
- The introduction of the principle of “equal pay for equal work” between posted and local workers from day one, and
- The full application of the host country’s mandatory labour law for assignments exceeding 12 months, extendable to 18 months on notification of the service provider.
The new Directive also includes the application of universally applicable collective labour agreements to posted workers across all sectors and the equal treatment of temporary agency workers and local workers.
Equal pay for equal work
The principle “equal pay for equal work” is based on the notion that the remuneration of posted workers should be at the same level to local workers, including bonuses or allowances. In other words, this is designed to ensure that the same work done at the same place should be remunerated in the same way.
While under the 1996 Directive employers are only required to pay “the minimum rates of pay” applicable in the host country, under the revised 2018 Directive employers will be required to guarantee equal “remuneration” to local workers. Broadly speaking, therefore, the core set-requirement to comply with the “minimum rates of pay” will be changed to the core set-requirement to comply with the “remuneration” rules of the host country.
Although this doesn’t necessarily mean that a posted worker will be entitled to an identical salary and benefits package as a local worker – rather equal pay refers to the wage scales and specific allowances applicable due to local legislation or generally binding collective labour agreements – this could include, for example, bonuses, allowances or salary increases according to seniority level, in addition to the minimum rate of pay.
Full application of the host country’s law
The full application of the host country’s labour law means that after 12 months of working in the host country, or in some cases 18 months, the posted worker will benefit from the full mandatory labour law provisions of that country, rather than just the core provisions. The only exceptions here are the rules relating to the conclusion or termination of employment contracts, as well as supplementary occupational retirement pension schemes.
Although the 1996 Directive defines a posting as temporary in nature, ie; for the limited period of time necessary for a worker to carry out in another member state the work for which they have been posted, there is no limit to its duration. In contrast, the 2018 Directive introduces a time limit of 12 months, extendable only by a further 6 months on the basis of justification by the service provider.
This means that for long-terms postings, ie; beyond 12 or 18 months, the posted worker will become entitled to the same rights and working conditions afforded to local workers where these are more favourable. As such, to avoid these more onerous provisions under the new rules providing the long-term posted worker with an enhanced level of employment protection, employers will need to restrict the length of the overseas posting to an absolute maximum of 18 months.
The UK’s impending exit from the EU inevitably brings into question the extent to which the new Posted Workers Directive will apply. That said, employers who would be affected by the new Directive should still start to assess how it could impact on their business operations and cost base.
In particular, employers who are heavily reliant on a mobile workforce should carefully consider how the new Directive is likely to affect their business when the 12-18 month restriction period is implemented, as well as the extent to which enhanced remuneration packages payable from day one for posted workers will affect their overall profit margins.
In seeking to strike a balance between fair competition and the protection of the rights of posted workers, the new Directive may, at least for some UK employers, provide a further costly blow to the cross-border provision of services.
DavidsonMorris are specialist employment lawyers and global mobility advisers. We advise employers on the implications of overseas assignments, from employment law compliance and risk management to the provision of support services for employees to help ensure a successful assignment.
If you have a question or need advice on any aspect of the Posted Workers Directive or deploying personnel overseas, contact us.