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European Commission

MEMO

Brussels, 13 May 2014

Posting of workers: EU safeguards against social dumping

The EU's Council of Ministers definitely adopted the new Enforcement Directive to increase the protection of workers temporarily posted abroad and enhance legal certainty on 13 May 2014 (see IP/14/542). The European Parliament approved the proposal on 16 April 2014 (STATEMENT/14/127). The European Commission had proposed new rules on 21 March 2012 (see IP/12/267).

What is a 'posted worker'?

A posted worker is a person who, on behalf of his or her employer, is sent for a limited period of time to carry out his or her work in the territory of an EU Member State other than the State in which he or she normally works. This sending of a worker takes place as a result of the employer exercising the freedom to provide cross-border services foreseen by Article 56 of the Treaty on the Functioning of the European Union (TFEU). The number of posted workers in the EU is estimated to be 1.2 million (less than 1% of the EU working age population). The sector that most commonly uses posted workers is construction (25%), in particular small and medium businesses. Other sectors include services, financial and business sectors, transport and communication and agriculture.

What are EU rules on the posting of workers?

The right of companies to offer services in another EU Member State, and to temporarily post workers to supply those services, is based on Article 56 of the Treaty on the Functioning of the European Union (TFEU). The freedom to provide services has been an integral part of the EU since the creation of the European Economic Community in 1957 and is a cornerstone of the EU's Single Market.

The Posting of Workers Directive (Directive 96/71/EC), adopted in 1996 and in force since December 1999, puts in place a number of safeguards to protect the social rights of posted workers and to prevent social dumping when companies use this freedom to provide services.

In order to do so the Directive requires Member States to ensure that posted workers are subject to the host country's laws, regulations or administrative provisions concerning:

  1. maximum work periods and minimum rest periods

  2. minimum paid annual holidays

  3. minimum rates of pay, including overtime rates

  4. conditions of hiring out workers, in particular the supply of workers by temporary employment undertakings

  5. health, safety and hygiene at work

  6. protective measures in the terms and conditions of employment of pregnant women or those who have recently given birth, of children and of young people

  7. equal treatment between men and women and other provisions on non-discrimination

In the construction sector, where the core conditions of employment listed above are laid down by collective agreements or arbitration awards that have been declared universally applicable, Member States are also obliged to ensure the application of these conditions to posted workers.

For activities other than construction, Member States are left the choice of imposing terms and conditions of employment laid down by collective agreements or arbitration awards which have been declared universally applicable.

Collective agreements or arbitration awards which have been declared universally applicable must be observed by all undertakings in the geographical area and in the profession or industry concerned.

The obligation to respect the minimum rates of pay does not oblige Member States to set or introduce minimum wages if they do not exist in the Member State in question.

As regards social security, Regulation 883/2004 (Article 12) stipulates that as an exemption to the general rule that workers pay contributions in the Member State where they are actually working, posted workers continue, for up to two years, to pay their contributions in the Member State where they are normally based and not in the Member State to which they are temporarily posted. Posted workers must prove that they have paid their social security in the Member State where they are normally based by producing a so-called 'A1’ certificate (previously known as E101).

When does the Posting of Workers Directive apply?

Directive 96/71/EC covers three cross border situations:

  1. posting under a contract concluded between the business making the posting and the party for whom the services are intended (‘contracting/subcontracting’)

  2. posting to an establishment or business owned by the same business group in the territory of another Member State (‘intra-corporate transfers’)

  3. hiring out by a temporary employment firm or placement agency to a user business established in another Member State

For a posting to fall under the Directive:

  1. The employment relationship must remain with the undertaking making the posting

  2. The posting must be for a limited period

What is the objective of the Enforcement Directive?

The Commission's close monitoring of the implementation of the 1996 Directive found that the rules laid down by the Directive were not always correctly applied in practice by Member States. Therefore, in order to better ensure adequate protection of workers' rights, fair competition and a level playing field between all service providers the Commission decided to propose measures to further facilitate implementation of the 1996 Directive and improve cooperation and coordination between Member States' authorities.

The Enforcement Directive adopted today by the EU's Council of Ministers therefore aims to improve and facilitate the implementation, monitoring and enforcement in practice of the rules laid down in the 1996 Directive on Posting of Workers (see IP/12/267).

The new Enforcement Directive will in particular:

  1. set more ambitious standards to raise the awareness of workers and companies about their rights and obligations as regards the terms and conditions of employment

  2. improve cooperation between national authorities in charge of posting (obligation to respond to requests for assistance from competent authorities of other Member States; a two working day time limit to respond to urgent requests for information and a 25 working day time limit for non-urgent requests)

  3. clarify the definition of posting increasing legal certainty for posted workers and service providers, while at the same time avoiding the multiplication of "letter-box" companies that do not exercise any genuine economic activity in the Member State of origin but rather use posting to circumvent the law

  4. define Member States responsibilities to verify compliance with the rules laid down in the 1996 Directive (Member States will have to designate specific enforcement authorities responsible for verifying compliance; obligation of Member States where service providers are established to take necessary supervisory and enforcement measures)

  5. establish a list of national control measures that the Member States may apply in order to monitor the compliance of Directive 96/71/EC and the Enforcement Directive itself, such as;

  6. requiring posting companies:

  • to declare their identity, the number of workers to be posted, the starting and ending dates of the posting and its duration, the address of the workplace and the nature of the services

  • to keep basic documents available such as employment contracts, payslips and time sheets of posted workers

  1. improve the enforcement of rights, and the handling of complaints, by requiring both host and home Member States to ensure that posted workers, with the support of trade unions and other interested third parties, can lodge complaints and take legal and/or administrative action against their employers if their rights are not respected

  2. ensure that administrative penalties and fines imposed on service providers by one Member State's enforcement authorities for failure to respect the requirements of the 1996 Directive can be enforced and recovered in another Member State. Sanctions for failure to respect the Directive must be effective, proportionate and dissuasive.

  3. provide for measures ensuring that posted workers in the construction sector can hold the contractor in a direct subcontractor relationship liable for any outstanding net remuneration corresponding to the minimum rates of pay, in addition to or in place of the employer. Alternatively, Member States may take other appropriate enforcement measures, in accordance with EU and national law, which enable in a direct subcontracting relationship, effective and proportionate sanctions against the contractor.

Why does the Directive include a provision on subcontracting liability?

The new Directive will oblige Member States to introduce subcontracting liability, or other appropriate enforcement measures, in the construction sector as part of a comprehensive approach to better enforcement. The liability will be limited to the direct subcontractor.

The text adopted today will oblige Member States to ensure effective and proportionate measures against contractors in the construction sector as a safeguard against fraud and abuse either in the form of subcontracting liability or other appropriate measures.

The protection of posted workers' rights in situations of subcontracting is a matter of particular concern. There is evidence that, in a number of cases, posted workers have been exploited and left without payment of wages or part of the wages they are entitled. There have also been situations where posted workers were unable to enforce their wage claims against their employer because the company had disappeared or never really existed.

This evidence comes from studies carried out for the Commission, reports from labour inspectors, employers and trade unions, cases reported in the media and parliamentary questions and hearings. According to this evidence, abuses, exploitation and unfair competition seem to be concentrated in the construction sector which also represents the highest number of the postings (about 25%).

In the Member States that already have a system of subcontracting liability (Austria, Germany, Spain, Finland, France, Italy, The Netherlands and Belgium), it is considered an effective enforcement tool in combination with state enforcement.

Subcontracting liability also deters exploitation, by giving a disincentive to contractors in the host Member State that could otherwise be tempted to indirectly derive an economic benefit from cheap prices offered by the subcontractor.

Subcontracting liability has a preventive and deterrent effect by giving a strong incentive to contractors to choose subcontractors more carefully and to verify that subcontractors comply in full with their obligations under the host country's rules. .

Will the Enforcement Directive increase administrative costs for companies?

No. Overall the Directive will reduce administrative costs for companies by clarifying the requirements Member States could impose on companies and will increase legal certainty and transparency.

The only additional costs for companies will stem from the rules on subcontracting liability and will be very limited. These costs correspond to the preventive measures to be undertaken by contractors in those Member States where a system of subcontracting liability does not yet exist, in order to ensure that contractors are selecting subcontractors that respect their obligations. These costs are justified in the interests of the protection of posted workers. Furthermore, Member States may provide that a contractor that has undertaken due diligence obligations shall not be liable.

Will the Enforcement Directive limit the national control measures Member States could impose on service providers?

The new Directive establishes a list of national control measures that are considered justified and proportionate which the Member States may apply in order to monitor the compliance of Directive 96/71/EC and the Enforcement Directive itself. This list is based on the case law of the Court of Justice. The text as adopted will allow Member States to impose additional measures over and above those listed on condition that these additional measures are justified and proportionate, notified to the Commission and that service providers are informed.

Who is responsible for controlling posting companies and the correct application of the minimum working conditions?

The new Enforcement Directive will clarify the role of the host Member State for ensuring that the host country's rules on working conditions are applied to posted workers and for fighting against abuses. The text also underlines the importance of national control measures and inspections.

As certain information about the posting company is mainly available in the Member State of establishment, the Enforcement Directive also provides for more effective and efficient cooperation between Member States, including through the use of the existing Internal Market Information System (IMI) for administrative cooperation between Member States established by Regulation (EU) 1024/2012.

Does the Enforcement Directive respect Member States' different social models and industrial relation systems?

In accordance with Article 152 of the Treaty on the Functioning of the EU (TFEU), the new Enforcement Directive respects differences in national industrial relations systems. It provides for flexible solutions respecting the role of employer and employee representatives in Member States.

Member States can for example require a designated contact person to negotiate on behalf of the posting company with the relevant social partners or delegate monitoring the applicable working conditions set by collective agreements to social partners.

When will the Directive enter into force?

The Enforcement Directive will enter into force on the twentieth day following publication in the Official Journal of the European Union, and provides Member States with a two year deadline for transposition.

Why not revise the 1996 Directive on the posting of workers?

The 1996 Directive already provides very clear safeguards to protect the social rights of posted workers and to prevent social dumping and strikes an appropriate balance between the protection of workers' rights and the freedom to provide services. The Directive already provides for the host Member States to ensure that posted workers on their territory enjoy the protection of the host country's laws, regulations or administrative provisions on the most important working conditions, and in particular minimum rates of pay, working time and provisions regarding health and safety at work.

How many workers are posted in the EU?

The only harmonised method of measuring how many workers are posted from one Member State to another is based on the number of social security certificates issued for postings to another country. When a worker is posted for up to 24 months to another country, and subject to additional conditions being fulfilled, a ‘portable document A1’ (PDA1, previously known as E101) is issued to certify which social security legislation applies to the holder. The last data available is for 2011.

Based on the number of PDA1 issued, in 2011, the main sending countries of posted workers were Poland, Germany and France followed by Romania, Hungary, Belgium and Portugal.

The main receiving countries were Germany and France followed by the Netherlands, Belgium, Spain, Italy and Austria.

PD A1 issued for posting from the top 3 sending countries:

  • Poland 228,000

  • Germany 227,000

  • France 144,000.

Four other countries (BE, RO, HU and PT) recorded a number higher than 50,000 and six others (ES, SI, SK, LU, IT, UK) issued between 30,000 and 50,000 PD A1 for postings. Numbers in most other countries were substantially lower.

Number of PD A1 issued by sending country, 2011 (in 1,000)

Source: Administrative data from EU Member States, IS, LI and NO on PD A1 issued according to Council Regulation (EC) No 883/2004 on the coordination of social security system.

Countries receiving the highest number of posted workers in 2011:

  • Germany 311,000

  • France 162,000

  • Belgium 125,000

  • Netherlands 106,000

Other countries which have received a substantial number (30,000-80,000) of posted workers in 2011 were Austria, Italy, Switzerland, Spain, UK and Norway.

Postings by destination country, 2011 (in 1,000)

Source: Administrative data from EU Member States, IS, LI and NO on PD A1 issued according to Council Regulation (EC) No 883/2004 on the coordination of social security system.

For more information:

DG Employment website

Further information on the posting of workers: http://ec.europa.eu/social/posted-workers

More detailed statistics on posted workers:

http://ec.europa.eu/social/BlobServlet?docId=9675&langId=en

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