Revision of EU's Posting of Workers Directive: Blessing or Curse to Business?

30 July 2018 marked the start of the transition period in the implementation of the new EU legislation amending the Posting of Workers Directive 96/71/EC. Member States—and with them, all companies— now have two years to adapt to the new provisions that will take effect on 30 July 2020.

Background

The main aim of the revision of the Posting of Workers Directive, approved by the European Council on 21 June 2018, is ‘to facilitate the transnational provision of services whilst ensuring fair competition and respect for the rights of those workers who are employed in one Member State and sent to work temporarily in another by their employer (i.e. posted workers)’. The revision introduced a set of requirements to both companies posting their employees to another Member State to provide services and the local labour authorities.

Despite the adoption and subsequent implementation of the Enforcement Directive 2014/67/EU, some of the Member States highlighted that the current rules regulating the posting of workers do not take into consideration the new trends observed in the labour markets across the EU following the various enlargements of the European Union with new Member States, as well as the economic crisis affecting the Single Market.

A closer look at the Posting of Workers Directive

The main objective of the revision of the Posting of Workers Directive is to strike the right balance between, on the one hand, the need to promote the freedom to provide services and ensure a level playing field, and on the other hand, the need to protect the rights of posted workers.

In order to achieve this goal, the revised directive introduced various amendments to the current regulation of posted workers, including new rules applying to temporary work agencies and the road transport sector.

This blog focuses on the two main areas affecting companies’ operations when providing services by posting workers: the remuneration of posted workers and the labour law protection in case of long-term posting.

1. Calculation of remuneration

While under the 1996/71/EC directive currently in force, Member States were only obliged to impose on companies with respect to posted workers the ‘minimum rates of pay’ applicable in the host country. The revised Directive will require companies to guarantee equal remuneration to local workers.

The revised Directive is therefore codifying the previous case-law of the Court of Justice of the European Union (CJEU) regarding the interpretation of the constituent elements of remuneration: irrespective of which law applies to the employment relationship, Member States will need to ensure that, on the basis of equality of treatment, companies guarantee posted workers certain terms and conditions of employment in force in the host country as regulated by law, regulation or administrative provision, and/or generally binding collective labour agreements (CLA), including, amongst others, the gross remuneration applicable.

As elaborated by the revised Directive, ‘gross remuneration’ means that overtime rates and posting-related allowances should be considered part of the posted worker’s remuneration, unless the purpose of the allowance is to reimburse the employee for the expenses made for travel, board and lodging related to the posting.

In practice, this means that:

• employers will need to offer the same benefits, set out in laws and generally binding CLA, such as bonuses, allowances or salary increases according to seniority level, to posted workers as to local ones; and
• employers will not be able to include travel, boarding and accommodation expenses in the amount of wage/salary the posted worker is entitled to for the period of their assignment in order to reach the minimum remuneration level required in the host country.

Equal remuneration does not apply though to supplementary occupational retirement pension schemes.

1. Long term postings

The 96/71/EC Posting of Workers Directive currently in force defines the nature of posting as having a temporary character, for the ‘limited period of time’ necessary for a worker to carry out in another Member State the work for which he or she has been posted. However, this Directive does not provide any temporary limitation to the posting of workers or any limitation to the assumption that they do not integrate into the labour market of the host Member State.

In order to align the regulation of posting of workers with the rules on coordination of social security systems (which limits the duration of postings under home social security to the maximum duration of 24 months- extendable in common consent of home and host authorities), the revised Directive introduces a limit of 12 months to the duration of postings (which can be extended to 18 months on the basis of a justification by the service provider), after which the employment conditions of the host EU Member State, as regulated by law, regulation or administrative provision, and/or generally binding CLA, will apply to the posted workers as well, if they are more favourable than the home country’s employment laws.

The two exemptions from the requirement to apply the host EU Member State’s employment conditions are the following:

• procedures, formalities and conditions of the conclusion and termination of the employment contract, including non-competition clauses; and
• supplementary occupational retirement pension schemes.

In practice, this means that:

• employers posting their employees to another Member State for a period exceeding 12 months (18 months in case of motivated notification) need to be prepared to offer most of the employment conditions in force in the host country based on law, regulation or administrative provision, and/or generally binding collective agreements to posted workers as to local ones; and
• employers sending multiple employees to cover the same role in the same workplace should be aware that the calculation of the 12-month stay period (18 months with an extension) is based on the cumulative duration of the individual posting period.

The revision of the Posting of Workers Directive, on one hand, finally clarifies certain questions that were amiss from its original version, e.g., the definition of ‘remuneration’ and ‘temporariness of services’, in order to ensure its content is in line with other EU legislation applicable to posted workers. On the other hand, it introduces stricter requirements to all service providers active in transnational business, with the intent to ‘create a social Europe that protects workers and stops companies from engaging in a race to the bottom’.

The question therefore remains: will the revision of the Posting of Workers Directive be able to ensure the compromise between fair competition and the right of workers, or will it just burden transnational businesses and limit the cross-border provision of services altogether?