The number of posted workers in the EU is currently estimated to be 1.2 million which amounts to less than 1% of the EU working age population. The sector that most commonly uses posted workers is the construction industry. Other sectors include businesses and financial services, transport, communication and agriculture.
Moreover, according to the last data available, which is that for 2011, the main “sending” countries of posted workers were Poland, Germany and France followed by Romania, Hungary, Belgium and Portugal. The main host countries on the other hand were Germany and France followed by the Netherlands, Belgium, Spain, Italy and Austria.
The limited amount of people who in fact participate in posting is due to many factors such as unawareness, bureaucracy and a general unwillingness to relocate. Another major hurdle is also the fact that there is no homogenous system applied throughout the EU which facilitates posting, and each Member State has different departments to deal with the matters, and there might be at times a language barrier.
Typical Posted Workers Scenarios
- an employee is employed in Malta with a local company (it is crucial that the employee is already employed before posting commences);
- the company decides to post the employee to another Member State and an agreement is reached in this regard;
- the authorities (labour, immigration, tax and social security, amongst other) of the host Member State are informed of the posting – these may be the same department and may sometimes require separate notifications;
- the posted worker will apply/receive his/her authorisation to work in the EU Member State (depending on the Member State and the nationality of the posted worker) as well as tax details. The authority to issue these authorisations varies in different Member States and the procedure may be quite time consuming and complex;
- the posted worker can commence work.
What is a posted worker?
According to the Posting of Workers Directive 96/71/EC, which was adopted in 1996 and has been in force since December 1999, a posted worker is a person who, on behalf of the employer, is sent for a limited period of time to carry out his/her work in the territory of an EU Member State other than the State in which s/he normally works.
Posted workers do not include migrant workers who go to another EU Member State to seek work and are employed there but it includes those employees who are normally employed in one Member State (“the Posting State”, that is the State of employment) and decide to work temporarily in another Member State (“the host State”), irrespective of how their activity is categorized in the State of employment, that is whether it is designated as employment or self-employment.
Areas and rules
The mentioned EU Directive covers employees being sent to another Member State in three situations:
- when an employer posts a worker to another Member States on his/her own account and under his/her direction, under a contract which the employer has concluded with the party in the State for whom the services are intended;
- when an employer posts a worker to an establishment or to an undertaking owned by the same group of companies, but which is based in the territory of an EU Member State;
- when a worker is posted through an agreement between an employer and a recruitment agency.
What is essential to bear in mind is that the employment relationship between the employer and the posted worker must be maintained during the whole period of posting. Thus, the posted worker must remain employed by the same employer, under the same contract of employment and failure to do so would terminate the posting. In addition, the posting must be for a limited set period of time.
Additionally, the posting company has to perform substantial activities, other than purely internal management activities, in the territory of the Member State in which it is established.
In order to determine whether the above requirement is satisfied, the following criteria may be, amongst other, taken into account:
- the place where the posting undertaking has its registered office and its administration;
- the number of administrative staff of the posting undertaking present in the posting State and in the State of employment – the presence of only administrative staff in the posting State rules out per se the applicability to the undertaking of the provisions governing posting;
- the place of recruitment of the posted worker;
- the place where the majority of contracts with clients are concluded;
- the las applicable to the contracts signed by the posting undertaking with its clients and with its workers;
- the number of contracts executed in the posting State and the State of employment;
- the turnover achieved by the posting undertaking in the posting State and in the State of employment during an appropriate typical period;
- the length of time an undertaking is established in the posting Member State.
Posted workers’ rights
The Directive establishes a core of mandatory rules regarding the terms and conditions of employment which must be applied to posted employees which includes guarantying that their rights and working conditions are protected throughout the European Union and avoiding “social dumping” where foreign service providers can undercut local service providers because their labor standards are lower.
In particular, the core of mandatory rules on posting covers a wide range of issues such as:
- maximum work periods and minimum rest periods;
- minimum paid annual leave;
- minimum rates of pay, including overtime rates;
- health, safety and hygiene at work;
- protection at the workplace for pregnant women or those who have recently given birth, of children and of young people;
- conditions of hiring out workers, the supply of workers by temporary employment undertakings;
- equal treatment between men and women.
Furthermore, the Directive lays down the obligation for Member States to cooperate among themselves and to grant public access to information on national employment conditions.
The idea is that where a Member State has certain minimum terms and conditions of employment, these must also apply to workers posted to that State. Thus, an employee working for a Maltese enterprise, posted to work in Germany, must be given the same rights as any worker in Germany in the same sector. However, the employer is not prevented from applying working conditions better than the ones applied in the host State.
It is a common tax principle that tax on employment income is paid in the country in which the income is earned.
However, remuneration derived by a resident of an EU Member State in respect of employment exercised in another EU Member State shall be taxable only in the former State if:
- the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the fiscal year concerned, and;
- the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and;
- the remuneration is not borne by a permanent establishment which the employer has in the other State.
It is a general rule that workers moving within the European Union must be subject to a single social security legislation. Broadly speaking, under EU Legislation, the social security scheme applicable to posted workers is that established by the legislation of the EU Member State of new employment (that is the host State).
The EU Legislation allows posted workers (employed or self-employed) to continue – for up to two years – to pay social security contribution in the “home” EU Member State by asking for the issuance of the so-called A1 certificate (previously known as E101).
This is done in order to give as much encouragement as possible to the freedom of movement of workers and services, to avoid unnecessary and costly administrative and other complications which would not be in the interest of workers, companies and administrators collectively.
This certificate has to be submitted to the authority of the host EU Member State in order for the posted worker to be able to avail of the social security benefits in the host EU Member State without directly contributing to the social welfare system of the State.
It is also important to note that, regardless of the A1 certificate, some countries have obligatory employers’ liability insurance which the employer must undertake to. Thus, by way of example, a Maltese enterprise posting workers to the UK is obliged to obtain an Employers’ Liability insurance policy, regardless of the fact that the employee has previously obtained the A1 form.
Where to now?
The posting of workers takes place as a result of the employer exercising the freedom to provide cross-border services enshrined within the Treaty on the Functioning of the European Union (TFEU). However, as outlined above, this may be as simple as may initially appear and careful analysis should be undertaken to ensure compliance throughout the posting period, from an employment law, tax and social security perspective. The EU is currently in negotiations in order to facilitate movement of employees. This is being done through on-going efforts for national authorities in separate Member States to co-operate in a more structured manner.
Additionally, in May 2014, the EU Council of Ministers has adopted the new Enforcement Directive to increase the protection of workers temporarily posted abroad by, amongst other:
- increasing the awareness of workers and companies about their rights and obligations as regards the terms and conditions of employment;
- improving cooperation between national authorities in charge of posting;
- clarifying the definition of posting so as to increase legal certainty for posted workers and service providers, whilst simultaneously tackling ‘letter-box’ companies that use posting to circumvent the law;
- requiring posting companies to:
– designate a contact person for liaison with the enforcement authorities in the host country;
– declare their identity, the number of workers to be posted, the starting and ending dates of the posting, the address of the workplace and the nature of the services;
- keeping basic documents available such as employment contracts, pay slips and time sheets of posted workers;
- improving the enforcement of rights, and the handling of complaints, by requiring both host and home Member States to ensure 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;
- ensuring that administrative penalties and fines imposed on service providers by one Member State for failure to respect the requirements of the 1996 Directive;
Workers’ postings have not yet had the effect intended for it by the EU. However, through the Enforcement Directive, it may be possible that the initial objectives of this Directive will be reached. More employers need to start seeing the benefit of posting their employees abroad, and more employees need to be aware of their rights in such circumstances. However, none of this is possible if the national authorities in all Member States do not simplify matters for employers and employees.
Only time will tell if the Enforcement Directive achieves its purpose.