Revision of the Posting of Workers Directive frequently asked questions

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1 European Commission Fact Sheet Revision of the Posting of Workers Directive frequently asked questions Strasbourg, 8 March 2016 What is posting of workers? A "posted" worker is an employee who is sent by his employer to carry out a service in another Member State for a temporary period. Posted workers are different from EU mobile workers. EU mobile workers move to another Member State to integrate in the labour market on a longterm or permanent basis. The presence of posted workers in another Member State, on the other hand, is strictly related to the execution of the service. Posted workers remain employed by the sending company and their stay is temporary. EU mobile workers who move on a longterm or permanent basis to another country are covered by the social security of the host country, whereas posted workers (if less than two years) remain covered by the social security of the home country. Why is posting necessary? The freedom to provide services across EU Member States is one of the cornerstones of the Single Market. In concrete terms, 'free movement of services' means that companies can provide a service in another Member State without needing to establish themselves in that country. To do that, they must be able to send their employees to another Member State to carry out the tasks required. Regulating the working conditions applicable to those workers is therefore necessary for the smooth functioning of the Single Market. How many posted workers are there in the European Union? Where do they work? According to EU figures, the number of posted workers in the EU has increased by almost 45% between 2010 and In 2014 there were 1.9 million postings in the EU, up from 1.3 million in 2010 and 1.7 million in The average duration of posting is four months. Overall, posted workers represent only 0.7% of total EU employment. However, there is a strong concentration of postings in some sectors and Member States. The construction sector alone accounts for 43.7% of the total number of postings, although posting is also significant in the manufacturing industry (21.8%), education, health and social work services (13.5%) and in business services (10.3%). Germany, France and Belgium are the three Member States that attract the highest number of posted workers, making up together about 50% of total received posted workers. In turn, Poland, Germany and France are the three largest senders of posted workers. What does the current Posting of Workers Directive (from 1996) provide for? Currently, EU law defines a set of mandatory rules regarding the terms and conditions of employment to be applied to posted workers. These rules are defined under Directive 96/71/EC, approved in This Directive establishes that, even though workers posted to another Member State are still employed by the sending company and therefore subject to the law of that Member State, they are entitled by law to a set of core rights in force in the host Member State in which the task is carried out. In the case of the construction sector, as well as for other sectors if Member States so chose, the rules of universally applicable collective agreements by the social partners apply as well. This set of rights consists of: minimum rates of pay; maximum work periods and minimum rest periods; minimum paid annual leave; the conditions of hiring out workers through temporary work agencies; health, safety and hygiene at work; equal treatment between men and women.

2 These represent the minimum conditions to which posted workers are entitled. Employers can choose to apply more favourable working conditions to workers. The Posting of Workers Directive does not touch upon social security aspects. Those are laid down in Regulation 883/2004 on the coordination of social security systems. What is the role of the 2014 Enforcement Directive on the Posting of Workers? In 2014, Directive 2014/67/EU (the socalled 'Enforcement Directive') was approved. Its aim is to strengthen the practical application of the rules on posting of workers by addressing issues related to fraud, circumvention of rules, and exchange of information between the Member States. In particular, the Enforcement Directive: increases the awareness of posted workers and companies about their rights and obligations; improves cooperation between national authorities in charge of posting; addresses 'letterbox' companies that use posting to circumvent the law; defines Member States' responsibilities to verify compliance with the rules on posting of workers; sets requirements for posting companies to facilitate transparency of information and inspections; empowers trade unions and other parties to lodge complaints and take legal and/or administrative action against the employers of posted workers, if their rights are not respected; ensures the effective application and collection of administrative penalties and fines across the Member States if the requirements of EU law on posting are not respected. The Enforcement Directive provides national authorities with effective tools to distinguish genuine posting from abuses and circumvention. For example, the authorities of a receiving Member State can request the authorities in the sending Member State to verify that the posting company genuinely performs substantial activities, other than pure administrative activities, in that country. Whether posted workers are recruited in that country is one of the relevant criteria to be taken into account. The Enforcement Directive will need to be transposed by the Member States into national law by 18 June Why is the European Commission proposing to revise the 1996 Directive? In its political guidelines, the Commission committed to a targeted review of the 1996 Directive to ensure that social dumping has no place in the European Union. On the basis of the review, including stakeholder consultation and impact assessment, the Commission announced in its Work Programme 2016 a targeted legislative revision of the Posting of Workers Directiveto address unfair practices. The announced legislative initiative has been delivered upon today. Since 1996, the economic and labour market situation in the European Union has changed considerably. In the last two decades, the Single Market has grown and wage differences have increased, thereby creating unwanted incentives to use posting as a means to exploit these differences. The legislative framework put in place by the 1996 Directive no longer fully replies to these new realities. In addition, since posting companies must comply only with the minimum rates of pay of the host Member State, this frequently leads to stark wage differences between posted and local workers, especially in Member States with relatively high wage levels. Posted workers are reported to earn up to 50% less than local workers in some sectors and Member States. Significant wage differences distort the levelplaying field between companies, thus undermining the smooth functioning of the Single Market. Updating the rules on posting of workers to current economic and social conditions is therefore necessary both from an economic and social point of view. Moreover, the revision will be an opportunity to create better coherence with other pieces of EU legislation that were adopted after the 1996 Directive. There is a certain mismatch between the existing Directive and other pieces of EU law, such as Regulation 883/2004 on the coordination of social security systems and the Temporary Agency Work directive. By aligning relevant provisions, the rules will become much clearer for companies, enforcement bodies and workers. With the initiative, the Commission aims at a stronger framework for posting in the EU, contributing to a fairer and deeper Single Market. What is the European Commission proposing? The Commission is proposing a targeted revision of the 1996 Directive. Remuneration of posted workers

3 1. The main change concerns the rates of pay a posted worker is entitled to. The current Directive only requires that posted workers are subject to the minimum rates of pay. The new proposal foresees that the same rules on remuneration of the host Member State apply, as laid down by law or by universally applicable collective agreements. Posted and local workers will therefore be subject to the same rules when it comes to remuneration. What is the difference? Often, remuneration not only includes the minimum rates of pay, but also other elements such as bonuses or allowances (e.g. Christmas bonus) or pay increases according to seniority. Member States will have to specify in a transparent way the different elements of how remuneration is composed on their territory. These elements, if laid down by law or universally applicable collective agreements, will now have to be taken into account when paying a posted worker. The proposal does not interfere in any way with the wage setting mechanisms of the Member States, but ensures that posted workers are treated according to the same rules as a local worker when it comes to remuneration. A worker posted to the construction sector in Belgium must be granted, in addition to minimum wage according to his/her category (ranging from to /hour), elements of remuneration provided for in the universallyapplicable collective agreement for the construction sector: allowance for bad weather; mobility allowance; pay supplement for special works; allowance for tools wear, etc. 2) The Commission proposes that the rules set by universally applicable collective agreements become mandatory for posted workers in all economic sectors. What is the difference? Currently, this is only applicable to the construction sector and Member States can choose whether to apply universally applicable collective agreements to posted workers to other sectors. Member States remain free to decide whether they make collective agreements universallyapplicable or not. However, if they do, the respective agreement becomes applicable also to posted workers. Some Member States already have rendered binding for posted workers universally applicable agreements in all sectors (AT, BE, ES, FR, EL, FI, IT, NL, PT, SI). For these countries, this new rule will not bring any change. Other Member States, such as DE, IE and LU, have made use of this option in their legislation only in selected sectors. 3) In the context of subcontracting chains, Member States will have the option to apply to posted workers the same rules on remuneration that are binding on the main contractor and this also if these rules result from collective agreements that are not universally applicable. What is the difference? Very often and especially for big projects, companies work with numerous subcontractors. Member States can oblige the main contractor to accept subcontractors only where the latter abide by certain rules of remuneration, e.g. those resulting from collective agreements (universally applicable or not). Should such a rule be enacted at national level, Member States may also apply it to subcontractors that post workers to their territory. A French construction firm (the contractor) wants to subcontract with a local French construction firm and a Spanish construction firm. If French law stipulates that the contractor can only subcontract to companies that respect its company level agreements on remuneration France can apply the same rule also to the Spanish subcontractor. Rules on temporary work agencies The principle of equal treatment with local temporary agency workers will also be applied to posted temporary agency workers, thereby aligning the current legislation on domestic temporary agency work. What is the difference? EU legislation already establishes that in a domestic context, workers hired out by a temporary work agency must be subject to the same employment and working conditions as their colleagues in the company they work in. So far, this principle did not necessarily apply to workers posted by a temporary agency from another Member State. The proposal would therefore ensure equal treatment on remuneration also for posted temporary agency workers. Currently, half of the Member States have implemented the option of the current Directive in their law. For those Member States, no change will be needed.

4 AT, CY, EE, EL, FI, HR, HU, IE, LV, PT, SI and SK will need to modify their national law to integrate this principle. If a temporary worker is posted to a company bound by a collective agreement not universallyapplicable (for instance a company level collective agreement), the more favourable terms and conditions will now have to be applied to the temporary agency workers posted by an agency established in another Member State. Long term posting The Commission also proposes that workers posted for longer than two years (longterm postings) are at least covered by the mandatory rules of protection of the labour law of the host Member State. A comparable 24 monthsrule already exists in the social security coordination legislation. What is the difference? Currently, all posted workers are already covered by a number of important labour law provisions of the host Member State, such as on health, safety and hygiene or equal treatment between men and women. However, for other matters such as protection against unfair dismissal the labour law of the home Member State applies. With the proposed change, longterm posted workers would be treated exactly the same as a local worker in the host Member State on most aspects of labour law. This will apply from day one where it can be anticipated that the worker will be posted for more than 24 months. In all other cases, it will apply as soon as the duration of posting exceeds 24 months. Workers posted to Germany for more than two years will benefit from the German rules granting protection against unfair dismissal, even if the labour law of their home country does not provide for such protection. Does this proposal implement the principle of equal pay for equal work in the context of posting? Yes, taking into account the diversity of national situations and the need to preserve a level playing field for all service providers. In each Member State different rules can be in place to guarantee fair remuneration for workers. The proposal ensures that these rules benefit to local and posted workers in an equal manner. All rules on remuneration will generally need to be respected by domestic undertakings and undertakings posting workers alike. In the context of subcontracting this can even extend to rules laid down in any collective agreement or arbitration award regardless of its universal applicability and its scope or importance at national level. When it comes to posted temporary agency workers the proposal ensures equal treatment with regard to all basic working and employment conditions. Will the Commission decide which wage a company needs to pay to its posted workers? No, this is a matter of contractual freedom. The Commission proposal aims at setting a levelplaying field between posting and domestic companies, to ensure that rules applicable to domestic companies are also applicable to posting companies. This will ensure protection for workers and fair competition between companies. Different companies will still be able to grant different conditions of work and remuneration provided that they offer more favourable conditions than required under the rules of the host Member State. Will the proposed revision change the situation for Member States that do not have a system for declaring collective agreements universally applicable? The rules allowing Member States that do not have a system for declaring collective agreements universally applicable to base themselves on certain other collective agreements or arbitration awards (Article 3(8)) remain unchanged. Will the revision of the Posting of Workers Directive impact on posting of workers/service provision from third countries? Third country service providers and workers benefit from access to the EU market only where an international trade agreement provides for such access on a reciprocal basis. When third country service providers have access to the EU market, they are generally bound by the labour law rules of the Member State to whose territory they post workers. The revised Posting of Workers Directive will continue to provide that "undertakings established in a nonmember State must not be given more favourable treatment than undertakings established in a Member State". Hence, Member States must apply to companies established in a nonmember State and posting workers to their territory at least the same requirements as they apply to companies posting workers from another Member State. MEMO/16/467

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