Equal Pay for Equal Work: What Changes Are Coming for EU Posted Workers After 30 July?

Introduction

The rules on posted workers have always been a much-debated topic and are at the forefront again as the deadline for the implementation of the Revised Posted Workers Directive approaches. From 30 July 2020, there will be more stringent requirements for employers temporary seconding staff to an EU member state, applying the principle “equal pay for equal work”.

Background

As discussed in our previous blog, EU member states must implement the provisions of the Revised Posted Workers Directive 2018/957 (the ‘Revised PWD’) by 30 July 2020.

The main goal of the Revised PWD, approved by the European Council on 21 June 2018, is to facilitate the provision of services within the EU, while ensuring fair competition and respecting rights of posted workers. More specifically, the revision aims to strike the right balance between safeguarding the freedom to provide cross-border services—while ensuring a level playing field in the host country between posting and local companies—and enhancing the posted workers’ rights.

To achieve this goal, the Revised PWD introduced various amendments to the Posted Workers Directive of 1996 (Directive 96/71/EC), including the following key changes:

• The principle of “equal pay for equal work”: Posted workers are entitled to the same remuneration as local employees for the same work at the same place
• Assignments exceeding 12 months (extendable to 18 months in case of reasoned notification): Posted workers are entitled to all mandatory applicable working conditions of the host state, with the exception of the rules on conclusion and termination of employment contracts and the supplementary occupational pension schemes

In this blog, we outline how these changes will affect company operations. In addition, we examine the state of play of the Revised PWD implementation across member states and conclude what employers may expect in terms of compliance enforcement by national authorities.

Equal Pay for Equal Work

The Posted Workers Directive of 1996 already requires EU member states to ensure companies comply with the minimum rates of pay applicable in the host country with respect to posted workers. However, the Revised PWD requires member states to enact legislation that guarantees compliance with the same remuneration rules applicable to peers who hold the same job in the posted country, which is known as the principle of “equal pay for equal work.”

The concept of remuneration is to be determined by the national legislation of each  member state, and must include all mandatory wage elements provided by the host country’s national legislation, regulation or administrative provision, and/or applicable collective labour agreements (CLA), which have been declared universally binding.

In practice, this means:

• Employers will need to offer, as a minimum from day one of the posting, the same benefits, as set out in laws and generally binding CLA, such as overtime or holiday pay, bonuses, allowances or all type of salary increases to posted workers as to local hires
• Travel, boarding and lodging allowances (including per diem) cannot be considered as part of the remuneration if they are paid as a cost allowance in compensation for actually incurred expenses, and therefore generally exempted from personal taxes. Equal remuneration does not apply, though, to premiums paid by the employer to supplementary occupational retirement pension schemes

In addition, equal pay does not apply to the benefits offered to local hires by company policies or company collective labour agreements. It is expected that the Revised PWD will have a significant cost impact on companies with posted workers. Moreover, they will be required to become familiar with the local core mandatory elements of remuneration, which vary across the EU.   

Long Term Postings

The Revised PWD introduces a limit of 12 months (which can be extended to 18 months based on a reasoned notification), during which time a posted worker can remain under home country labour laws. After this period, posted workers become entitled to all mandatory applicable working conditions of the host EU Member State, if they are more favourable than the home country’s employment laws. An exception applies for the rules on conclusion and termination of employment contracts and the supplementary occupational pension schemes.

In practice, this means that:

• Employers posting their employees to a Member State for a period exceeding 12 months (18 months in case of motivated notification) need to revise their international mobility policies and assignment letters in order to ensure protection by most of the employment conditions in force in the host country based on law, regulation or administrative provision, and/or generally binding collective agreements
• Employers sending multiple employees to cover the same role in the same workplace should take into account that the calculation of the 12-month stay period (18 months in case of motivated extension) is based on the cumulative duration of the individual posting period. Employers should monitor and track the duration of both the individual and cumulative postings to ensure compliance and/or to submit a motivated notification

Implementation of the Revised Posted Workers Directive: State of Play

At the end of July 2020, only a limited number of member states have transposed the revised PWD. The delay in implementation is likely due to the COVID-19 pandemic, which required particular attention from the national authorities over the past few months. Belgium, the Netherlands, Czech Republic, France, Malta, Slovakia and Sweden have implemented the Revised PWD, although the new rules will only apply from 30 July 2020.

While concerns have been raised to the European Commission by both lobbyists and by members of the European Parliament with respect to a late implementation of the Revised PWD, the European Commission merely confirmed that member states have been working intensely to meet the deadline of transposition, and that the European Labour Authority was asked to urge member states to step up the activities required to update the information on the single official national posting websites, making the required information regarding the new rules widely available.

Although only a handful of member states have implemented the Revised PWD, Italy, Luxembourg and Poland are already on course to enact the required legislation. Sweden is revising its administrative requirements related to posted worker notifications to ensure that posted workers will have the possibility of safeguarding their rights to the extended working conditions and terms of employment.

Member states should also update their national portals to make it clearer and easier for companies to provide the right information to the host state authorities, as well as to the posted workers. This is in line with the future duty of the European Labour Authority to facilitate access to information on rights and obligations regarding labour mobility across the EU, as well as with the future obligation of employers to complete information on the assignment, in writing, to their employees prior to any temporary secondment. This is in line with the Transparent and Predictable Working Conditions Directive (to be implemented by 2022).

What to Expect Further

Companies employing posted workers are obliged to notify the relevant authorities prior to the start of the employment and to keep on file certain employment-related documents to show compliance with minimum pay and core employment law protection of the host member state. The Revised PWD requires companies to ensure host labour law protection for long-term postings and equal remuneration from day one.

The cost of these new measures can be significant to companies that may moreover be confronted with increased enforcement measures, both in the country and at the border, and certainly in the context of COVID-19 remobilisation. Although the Revised PWD does not impact the possibility for posted workers to remain exclusively under their home social security scheme by virtue of a social security agreement (even if less favourable and even if the posting lasts for more than 12 months), the question is whether these rules will survive in the current enforcement and COVID-19 context.

As the situation remains fluid, please feel free to reach out to Sara Fekete, [email protected] or Ana Correia Horta at [email protected] or your Fragomen immigration professional for additional guidance.

This blog was released on 29 July 2020, and due to the circumstances, there are frequent changes. To keep up to date with all the latest updates on global immigration, please visit our  COVID-19 microsite, subscribe to our alerts and follow us on LinkedIn.