The new EU Posting of Workers Directive – implications for employers

A new European Union directive on the posting of workers (“the new Directive”) was published in the EU Official Journal in July. This amended the original 1996 Posting of Workers Directive (“the 1996 Directive”). Member states have until 30 July 2020 to adopt and publish their national laws complying with the new Directive. Until then, the rules under the 1996 Directive will continue to apply.

Background

The 1996 Directive was introduced to address issues of “social dumping” arising from the free movement of workers in the EU. It had the primary objectives of protecting the employment rights of individuals working temporarily in another European member state, and preventing unfair competition between lower and higher-costing countries in the EU. In order to ensure employers do not take advantage of subcontracting workers from low-wage countries, employers sending workers to another EU state are obliged to comply with the host country’s “core set” of labour law provisions, including minimum wage, working hours, minimum paid annual leave and protection against discrimination.

EU laws on posting of workers affect employers in some countries and industries more than others. According to the European Commission in 2015, countries including Poland, Germany, France, and Slovenia have the highest numbers of posted workers, with the UK, Luxembourg and Austria sitting on the lower end of the spectrum. EU employers in blue-collar industries are generally impacted more than others (such as where employees are remunerated at the national minimum wage and the employer has to apply the host country rate).

The new Directive promotes the principle of “equal pay for equal work at the same place” – i.e. aiming to ensure that the same work done at the same place should be remunerated in the same way. It also seeks to address the shortcomings of the 1996 Directive and discrepancies between countries in relation to the level of their minimum wage and how well developed their employment laws are. Finally, the new Directive takes into account the increase of posted workers since the 1996 Directive was introduced over two decades ago, and the expansion of the EU member states from 15 to 28.

Impact on employers

What does “equal” mean?

Under the 1996 Directive, employers are obliged to comply with the national minimum wage of the host country. Under the new Directive, however, the scope of employment rights and benefits available to a posted worker will be expanded to include the same remuneration and elements of salary such as bonuses, where applicable.

This does not mean that employees will have to be remunerated on the basis of the market salary, or benchmarked against an employee in the host country. Rather, an employee would be subject to the same wage scales and specific allowances available to a local employee in the host country, as provided for in the host country’s legislation or provisions in an applicable collective bargaining agreement (“CBA”).

Restriction of 12 months’ posting

One of the key changes under the new Directive is the duration of the period before which a posted worker becomes entitled to all the employment rights in force in the host country, including those provided by CBAs (i.e. as opposed to merely the “core set” of employment laws). To avoid this, employers will have to restrict the length of the posting to 12 months, with a possible six-month extension. After that, the posted worker will be entitled to all host-country employment rights and protections, with the exception of termination provisions.

Employers with global mobility programmes who depend heavily on a mobile workforce will need carefully to consider how the new Directive will affect their businesses when the 12-month restriction period is implemented. They will have to consider the circumstances of each case individually to determine whether a posted worker has acquired the enhanced level of protection.

No impact for social security

The social security of posted workers is regulated by different EU legislation (Regulation 883/2004), which regulates the coordination of social security systems between the home and host countries of the posted worker. Under the Regulation, a posted worker continues to pay social security contributions in the home country if the posting does not exceed two years. After that, it becomes discretionary and dependent on the agreement of the home and host-country authorities. This incentivises employers to limit the length of the posting to two years.

Implications of Brexit

The UK’s impending exit from the EU on 29 March 2019 inevitably casts significant doubt over the extent to which the new Directive will apply in the UK. In particular, there is huge uncertainty over whether the UK and the EU will successfully conclude a withdrawal agreement, so as to enable a transitional period until 31 December 2020.

As mentioned above, the deadline for implementing the Directive through UK legislation is 30 July 2020. If there is a withdrawal agreement and transitional period, the status quo would apply and the UK would presumably legislate to transpose the Directive into national law by the deadline, in the normal way.

However, if the UK leaves the EU on 29 March with no deal and no transitional period, its obligation to comply with EU law would fall away and there would be no requirement to implement the new Directive. In this scenario it is not clear what the UK would do, but it is possible that it could choose to adopt similar laws in any event. A government white paper published in July 2018 suggested a framework agreement with the EU, including reciprocal provisions on intra-corporate transfers to allow companies to train staff and move them between office locations and deploy expertise where required.

Employers who would be affected by the new Directive should start to assess how it could impact on their business operations and cost base, while closely following the Brexit negotiations as they unfold.