- Observatory: EurWORK
- Fraudulent work,
- Posted workers,
- Date of Publication: 27 September 1999
The posted workers Directive, which came into force in December 1999, seeks to prevent free movement of labour within the EU from causing distortions of competition and bringing forms of "social dumping". The basic principle of the Directive is that working conditions and pay in effect in a Member State should be applicable both to workers from that State, and those from other EU countries posted to work there. This comparative study examines briefly: the extent of posting of workers within the EU (plus Norway); the current treatment of posted workers in law and agreements; the changes required to comply with the Directive; and the actions being taken in this area. Particular attention is paid to the specific situation of the construction sector. Alongside an absence of information on the extent of the posting phenomenon, we find an apparent general lack of interest among the social partners, except those in construction. The treatment of posted workers varies considerably from country to country, as do the routes taken to compliance with the Directive.
How can free movement of labour within the European Union be prevented from causing distortions of competition and bringing forms of "social dumping"? This question has been raised on a number of occasions, not least in the context of the "posting" of workers from countries with lower labour costs to countries with higher labour costs. Such situations bring a double risk: that workers will not be covered by the protective rules in the host country; and that companies will be faced with "unfair competition", notably in the areas of labour costs and the respect of rules governing working conditions.
The case law of the European Court of Justice (ECJ) began to deal with these matters in the early 1990s. The first notable ruling (issued in March 1990) involved Rush Portuguesa, a Portuguese-owned public works company which had been subcontracted to build a railway line in France, and arranged for Portuguese workers to come to France to carry out the work. The French National Immigration Board challenged the company's right to use its own workers on French soil without first obtaining authorisation to do so. The ECJ ruled (in case C-113/89) that the Portuguese company had the right - based on freedom to provide services guaranteed by the Treaty of Rome - to carry out the contract using its own workers. However, the Court also ruled that France had the right to force the company to comply with French social and labour legislation during the period of the contract.
It was essentially to clarify this principle that the European Commission subsequently issued a draft Directive on the posted workers issue. After a five-year process, on 16 December 1996, Directive 96/71/EC of the and Council, concerning the posting of workers in the framework of the provision of services, was adopted, through the co-decision procedure, based on the then Articles 59 and 60 of the EC Treaty (concerning provision of services). The objective is to avoid social dumping between companies from the various Member States and ensure that a minimum set of rights are guaranteed for workers posted by their employer to work in another country. The basic principle is that working conditions and pay in effect in a Member State should be applicable both to workers from that State, and those from other EU countries posted to work there. The Directive covers undertakings established in a Member State which, in the framework of the transnational provision of services, post workers to the territory of another Member State.
The Directive establishes a core of essential regulations aimed at ensuring employees' minimum protection in the country in which their work is performed. It guarantees the application of the host country's statutory and regulatory provisions relating to:
- maximum work periods and minimum rest periods;
- minimum paid annual holidays;
- the minimum rates of pay, including overtime rates (excluding supplementary occupational retirement pension schemes);
- the conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings;
- health, safety and hygiene at work;
- protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; and
- equality of treatment between men and women and other provisions on non-discrimination.
As well as these generally applicable statutory and regulatory provisions, a Member State's collectively agreed provisions on these issues must also be applied to workers in the construction sector (where these are based on "collective agreements or arbitration awards which have been declared universally applicable"). The Directive allows for a number of exceptions to all or some of these "minimum provisions" - for crew of merchant ships, staff involved in the initial assembly and/or first installation of equipment, postings lasting less than a month, and where "the amount of work to be done is not significant". The Member States must transpose the Directive by 16 December 1999.
The main aim of this comparative study - based on contributions from the national centres of the European Industrial Relations Observatory (EIRO- is to examine briefly: the extent of posting of workers within the EU; the current treatment of posted workers in law and agreements; the changes required to comply with the Directive, and any actions already taken in this area. Particular attention is paid to the specific situation of the construction sector.
How many posted workers?
Data on the number of workers posted to or from a particular country are almost impossible to find in any Member State, and no information whatsoever is available from the vast majority of States. This means that the scale of the posting phenomenon cannot be assessed with even the slightest degree of accuracy. Where national figures do exist, these are partial, for example: 124,000 posted workers were recorded as working in Belgium in 1994, while 160,000 posted workers are currently estimated to work in the German construction industry (with a shift from workers from central and eastern Europe to workers from elsewhere in the EU during the 1990s); and there are some 35,000 Portuguese posted workers in Germany.
Figures compiled by the Commission-sponsored Citizens First project indicated that, very broadly speaking, there were around half a million posted workers - temporary migrants dispatched abroad by their employer, but remaining in the social insurance schemes of their home Member State - within the EU in the early to mid-1990s.
In sectoral terms, the indications are that the posting of workers is most common in building/construction/public works and in engineering/metalworking.
Existing protection for posted workers
The current situation of posted workers, in terms of protection by law and collective agreements in the areas covered by the Directive, varies greatly from country to country. The concerns of countries which are "exporters" of posted workers tend to differ from those which "import" them - for example, attention in Portugal focuses more on the posting of national workers to other countries than on postings to Portugal. Furthermore, the approaches taken by the countries to which workers are posted are very different: some have no specific provisions on posted workers (Ireland, Italy, Spain, UK); others specifically include posted workers within some or all provisions covering their own nationals (Denmark, Finland, Luxembourg, Netherlands, Norway, Sweden); while still others have specific legislation for posted workers (Austria, Belgium, France, Germany). In some cases, the situation is unclear or unregulated. The roles played by collective bargaining and by legislation vary in line with the nature of each country's industrial relations system, and the option of extending agreements to non-signatory employers and employees plays an important role in countries like Finland and Germany. Brief details of the current situation, prior to implementation of the Directive, in each country are given in table 1 below.
It should noted that social security issues are not covered by the Directive. They are governed by Regulation (EEC) No. 1408/71, which provides that social security contributions are the responsibility of the employer which posts the workers abroad, and that that the level of contributions is set by the social security bodies in the country of origin
|Country||Protection of posted workers|
|Austria||1993 legislation provides that legal and collectively agreed minimum wage standards apply to workers posted to Austria (with some exemptions).|
|Belgium||Posting of workers, both national and transnational, is closely regulated by law. For example: those posted to Belgium remain under the authority of the posting employer, which pays wages and social contributions; the period of the posting is limited (normally 12 months); replacement of a posted worker by another is forbidden; and workers may not be recruited solely for posting, and existing employees only can be used.|
|Denmark||Collective agreements cover foreign workers as well as Danish nationals. In 1993, the DA employers' confederation and LO union confederation agreed that workers posted to Denmark should be covered by such agreements.|
|Finland||Collective agreements which are "generally valid" cover all workers in the sector concerned. Some agreements contain rules on the posting abroad of Finnish workers.|
|France||1993 legislation provides specifically that workers posted to France are covered by the provisions of French legislation and collective agreements in many areas of pay and working conditions.|
|Germany||1996 legislation provides that workers posted to Germany in the construction industry, other construction-related services and navigation-related services are covered by all collective agreements on minimum wages and holidays which have been declared "generally binding". Furthermore the law provides that posted workers should be protected by German statutory minimum standards in areas such as working time, paid leave, health and safety, maternity and equal treatment.|
|Greece||The issue has received little or no attention in Greek law or collective agreements.|
|Ireland||Workers posted to Ireland are covered by the general statutory rules on working time, minimum holidays and equality, plus, from 2000, the national minimum wage (minimum wages are currently applicable only to certain sectors).|
|Italy||No specific legislation covers posted workers, though case law has applied the central principle of equality of treatment where conditions are equal - posted workers are considered to be covered by the law of the country of the contracting parties. Most collective agreements, at both sectoral and company level, set out general rules applying to postings within Italy and abroad, covering transfer allowances and reimbursement of travel expenses, board and lodging and other expenses incurred.|
|Luxembourg||1995 legislation provides that all workers in the Luxembourg private sector, including posted workers, are covered by legal and collectively agreed provisions on minimum pay and indexation, working time, paid leave, maternity, equality, collective agreements etc.|
|Netherlands||Dutch law on working time, minimum pay and equal treatment applies to all employment in the Netherlands, regardless of the nationality of the employer or employee. Otherwise, the situation of workers posted to the Netherlands is covered by the law and collective agreements of the country of origin, not Dutch law and agreements. Dutch law and agreements apply to Dutch workers posted abroad.|
|Norway||Norwegian legislation on working time, equality, maternity etc (excluding holidays) applies to all employees, including posted workers. The entitlement of foreign employees to the same working and employment conditions as their Norwegian counterparts is also safeguarded by specific legislation on the universal application of collective agreements.|
|Portugal||Workers posted to Portugal from other countries are generally covered by Portuguese law and collective agreements. Legislation does not refer explicitly to Portuguese workers posted abroad, except in the areas of written details of the employment contract and industrial accidents. The issue is not thought to be dealt with to any great extent in collective agreements.|
|Spain||The law does not explicitly ensure that specific working conditions fixed by Spanish law and agreements apply to workers posted to Spain. It also makes no specific provisions on the posting of workers abroad, which is regulated only by company bargaining. Where company agreements exist, they generally cover the period of the posting, the regulation of holidays and trips home and the wage compensation. It is understood that in other areas the posted worker is subject to the same legal and collectively agreed regulations as the other workers in the company in Spain.|
|Sweden||Swedish laws on the work environment and working time apply to posted workers. Collective agreements also cover foreign employees and employers, as well as Swedish ones.|
|UK||There are no special legal provisions concerning posted workers. In general, workers posted to the UK by companies established in the EU are covered by existing UK employment legislation (except some equality provisions). Workers posted to the UK who are in jobs covered by collective agreements are unlikely to have terms and conditions of employment inferior to those set by the agreement. There are not thought to be collective agreements which specifically address the position of posted workers.|
The special case of temporary agency work
Problems may arise with regard to the posting of workers, where this concerns temporary work agencies. An example of this applies to social security. Some temporary agencies based in a particular country may open a subsidiary in another country, where social security contributions paid by employers are low, and then send temporary workers to work in a third country or the agency's country of origin. The agency thus benefits from the less favourable conditions for workers which apply in the country where the subsidiary is based. Such practices may be considered as contrary to the spirit of Community law.
A number of countries have adopted measures aimed at preventing abuses arising from the posting of temporary workers. In Germany, for example, the posting of foreign temporary workers in the construction sector is forbidden by the law on temporary work, unless the German collective agreement for this sector applies to them. The European Commission has recently brought a case against the German government to the ECJ, claiming that the requirements of the German law on temporary work as discriminatory and in violation of the right of establishment and the freedom to provide services. Belgium bans all temporary agency work in construction. Elsewhere, the use of posted temporary agency workers is restricted, as in Austria, France and Portugal. For example, the posting of such workers to Austria is permitted only when the employment of particularly qualified personnel is unavoidably necessary for labour market or economic reasons, when the required workers are available by no other means, and when their employment does not jeopardise the wages and working conditions of Austrian workers. Temporary agencies may operate in France only if they meet conditions such as a requirement to provide agency services also in their country of origin, and compliance with French statutory rules on matters such as the contents of temporary contracts and financial guarantees.
Dutch law allows temporary work agencies (like all other companies) to set up a company in, for instance, Portugal, which then functions under Portuguese law and arrangements. However, should employees be posted to the Netherlands, Dutch labour law must be applied.
However, in other countries, the general law applicable to temporary agency work applies to the posting of temporary workers, with no specific attention given to the issues arising from the existence of agencies with a transnational scope.
The construction industry
The posted workers Directive applies to all economic sectors, but pays particular attention to construction, building and public works. In most EEA countries, and at European level, trade unions and employers' organisations in these sectors have for some years been concerned to deal with the posted workers issue.
Much of the initial consultation over the Directive took place in the construction sector, involving the European Federation of Building and Woodworkers (EFBWW) and the European Construction Industry Federation (FIEC). In November 1993, the two organisations agreed a joint position, stating that transfrontier mobility is desirable as long as certain conditions are met in terms of: certainty as to the law applicable; respect of competition rules and of workers' rights; and prevention of fraud. The joint position favoured an approach whereby individual Member States, in agreement with the national social partners, should decide which provisions of legislation and collective agreements should apply to posted workers on their territory. In September 1997, EFBWW and FIEC issued a joint declaration, stating that the Directive's application should take into account the specific situation of the sector. In many countries, there are special systems of pay and conditions for construction, often managed by sectoral social funds. The declaration states that the Directive's provisions should cover contributions to and payments from such funds, where these do not constitute social security. EFBWW and FIEC want greater transnational coordination on the operation of such funds, effected through bilateral agreements between the relevant sectoral bodies in different countries. Such coordination should include a requirement to pay contributions to the host country's social security fund, waived where posted workers, through collective agreements and applicable regulations in their country of origin, have access to benefits which are equivalent in type and monetary value.
Shortly after the EFBWW-FIEC joint declaration, a bilateral agreement on contributions for posted workers was concluded in November 1997 between the joint funds managing paid holidays for construction workers in France (CNSBTP) and Germany (ULAK). All French construction and public works companies are required to join and pay contributions to a French holiday pay fund on behalf of employees posted to them. The same applies to German companies and German funds. Companies may be exempted from this requirement if they can demonstrate that they already pay contributions for the posted workers in question in their home country. According to CNSBTP, the 1997 agreement enables French and German companies to obtain this exemption and comply with holiday pay formalities by simply informing workers' usual holiday funds. This procedure is not mandatory. CNSBTP views this new procedure as "a considerable simplification", which could help prevent social dumping or non-declared employment.
Trade union coordination
As well as cooperation at European level within EFBWW, national trade union organisations have in a number of cases taken coordination initiatives related to posted workers in recent years. In 1995, given that numerous Portuguese workers are posted to Germany, an agreement was signed by the German union confederation DGB and its Portuguese counterparts CGTP and UGT, aimed at promoting cooperation and exchanges of information, and at harmonising working conditions. In 1996, construction unions from Denmark, Finland and Sweden, within the Nordic Federation of Building and Woodworkers (NBTF) signed an agreement on posted and cross-border workers, providing, for example, that workers should be members of the union in the country where they work. Danish and Swedish unions followed this up in 1998 with an agreement that at least the minimum contents of collective agreements in the two countries should be applied and that social protection should be guaranteed for posted workers. Discussions have also occurred on a similar agreement between Danish and German construction unions. In 1996, Italian and German building workers' unions signed a cooperation agreement intended to provide better protection for Italian workers posted to Germany.
In a number of countries, including Denmark, France and Germany, agreements have been signed in the construction sector on the specific issue of posted workers, in some cases prompted by the Directive's implementation. In Denmark, employers and unions have agreed to ensure that foreign-based construction companies using posted workers join the BYG employers' association and operate under conditions which avoid both the imposition of double costs on companies and the provision of worse conditions for employees than Danish legislation and collective agreements allow. In Germany, the 1996 posted workers law has made it necessary for the Minister of Labour to extend a wage agreement in construction to the whole sector in order to set a minimum wage for all construction workers, including posted workers. This extension procedure has since caused considerable controversy, given opposition from the BDA employers' confederation, especially as the Minister may now extend agreements without the agreement of a special bipartite committee.
In a number of countries, the posting of workers is bound up with general concerns about attempts to avoid legislation or collectively agreed provisions in construction, through subcontracting or, above all, undeclared clandestine work. Collective bargaining in countries such as Belgium, Ireland, Italy and Spain has focused on this problem, with differing results.
Transposing the Directive
Table 2 sets out the state of play with regard to transposition of the legislation, as at summer 1999. In a number of Member States, it is considered that existing national regimes meet or exceed the Directive's requirements and that no further changes (or only very minor ones) are required to comply with the Directive. This is the case in Belgium, France, Germany and Luxembourg. In most of these cases, provisions have been introduced in the years since the Directive was first proposed which have made further amendments largely unnecessary - notable examples are major items of legislation adopted in France and Germany. In a second group of countries - Austria, Denmark, Finland and Sweden - some amendments or new legislation aimed at transposition have already been approved and are due to come into effect by or on the deadline of 16 December 1999. Elsewhere, the transposition process, usually involving consultation of the social partners, is currently underway, though some countries (such as Greece and Portugal) are far behind others (such as the Netherlands and Spain). Where changes are, or have been, required to comply with the Directive, these have generally been relatively minor, with the Netherlands and Sweden perhaps having most to do.
|Country||Transposition state of play|
|Austria||A number of legal changes have been made in October 1999, with: the lifting of certain exemptions from the applicability to posted workers of legal and collectively agreed minimum wages; the application of collectively agreed working time rules (rather than just legal regulations) to posted workers; and entitlement for posted workers (except in construction) to additional holidays in proportion to the duration of their work in Austria, if Austrian law provides for more holidays than their home country law.|
|Belgium||Existing Belgian law is considered to be stricter and more extensive than the Directive's provisions.|
|Denmark||Agreements between the social partners are considered to provide for implementation of the Directive. A 1993 agreement between DA and LO provides that workers posted to Denmark should be covered by Danish agreements. The social partners have agreed that Danish provisions should apply to posted workers from day one of the posting.|
|Finland||Amendments to legislation on the universally binding effect of collective agreements were due to come into effect from late August 1999, adapting them to exemptions allowed for by the Directive.|
|France||Existing legislation is considered stronger than the Directive's provisions, though adjustments are required to permit exemptions allowed for by the Directive.|
|Germany||Existing legislation, adopted in 1996 and amended in 1998, is considered to meet the requirements of the Directive.|
|Greece||Transposition (probably through a special presidential decree ) is likely to be delayed. A Ministry of Labour and Social Security working group is working on the issue and a group with tripartite representation was expected to be set up in October 1999.|
|Ireland||The transposition process was still at an early stage in summer 1999, with the social partners being consulted by the government.|
|Italy||The transposition process is underway, though there is no precise information as to when it will be complete. The government is empowered to issue decree-laws to transpose recent EU Directives, including that on posted workers.|
|Luxembourg||No special transposition measures are thought to be required, unless the Commission' services advise to the contrary.|
|Netherlands||Legal changes are required to apply to posted workers Dutch rules on paid holidays, health and safety, prohibition of dismissal during pregnancy and equal treatment. A bill to this effect was sent to the State Council for advice in January 1999 and, following amendments, to parliament in June, where it was under consideration in summer 1999.|
|Norway||Some changes to legislation are required, mainly relating to holidays. An act to implement the Directive is to be put before parliament by the government in autumn 1999.|
|Portugal||Major legal changes are not thought to be required. The implementation process is still in its earliest stages - by summer 1999, no transposition proposal had been presented to parliament by the government.|
|Spain||Transposition is at quite an advanced stage. In mid-May 1999, the government sent to the advisory Economic and Social Council a bill explicitly ensuring that certain working conditions fixed by Spanish legislation be applied to workers posted in Spain (and including provisions on temporary work agencies). In June, the Council issued a favourable report.|
|Sweden||Legislation implementing the Directive was approved by Parliament in May 1999 and comes into force on 16 December 1999. The main changes involve the extension to posted workers of legislation on holiday pay, parental leave, maternity protection, non-discrimination on various grounds, the right of association and the right to bargain. The provisions of collective agreements are not covered by the new law, which is normal for pay agreements.|
|UK||Few legislative changes are thought necessary. Regulations are expected by 16 December 1999 to apply legislation concerning sex, race and disability discrimination to posted workers. Maternity protection rules have been extended to posted workers by a 1999 Act.|
The positions of governments and social partners
Long and complex debates accompanied the drawing up and passage of the Directive, dealing as it does with a complex matter, and given that it was the first attempt to prevent distortions of competition arising from the free movement of workers. The implementation of the Directive has also been the focus of considerable debate in some countries.
Most Member States were favourable to the adoption of measures to regulate the position of posted workers - indeed a number of them, such as France and Germany, adopted measures in this direction before the Directive was adopted. Only two countries opposed the Directive, which was adopted by qualified majority in the Council of Ministers. The UK Conservative government at the time opposed the Directive on the grounds that it could prove costly to UK business and was "anti-competitive and would impede the operation of the single market" (the present Labour government has made no official statement about the Directive but is making the limited amendments to UK legislation thought necessary to comply with it). Portugal is in a different position, as a major "exporter" of posted workers, and its government still seems to lack enthusiasm over transposing the Directive.
European employers' organisations have by no means been united in their positions on the Directive and its implementation. While most have seemed generally and broadly favourable to the Directive, some have been in favour of its restriction to the construction sector, such as the Dutch employers and German construction employers. Generally, it has been construction employers which have been most in favour of the Directive, as in Ireland and Italy, for example.
Outright opposition to the Directive has come from the UK and some Portuguese and German employers. The UK's CBI believed that the Directive was unlikely to improve competition or the free movement of labour and services, and that it could deter companies from supplying services to Member States where labour costs are significantly higher than their own. CBI also argued that the "essentially protectionist" approach of the Directive could disadvantage the UK compared with other, more regulated economies because of the absence of universally applicable collective agreements in the UK and, at that time, the absence of legal regulation in the key areas of pay, working time and holidays. Germany's BDA along with other export-oriented employers' associations stated that there was no need for any regulation of posted workers, as this would hinder free movement of labour and the development of free market forces. Portuguese construction employers have criticised various aspects of the Directive.
Virtually all major trade union organisations appear to be generally in favour of the Directive and its implementation, seeing it as a first step towards fighting social dumping. However, a number of unions would have preferred the Directive and national transposition measures to go further in areas such as monitoring of the activities of companies posting workers, or supplementary pension schemes. Specific areas where some unions called for stronger provisions included: pay and contributions to sectoral social funds (Italy, construction); the application of collective agreements to posted workers in industries other than construction (the Netherlands); and right to benefit from a sectoral pay agreement in preference to any national legal minimum wage (UK).
A striking feature of the reports from the EIRO national centres is the lack of interest that the posted workers Directive appears to have elicited among the social partners in most countries. Only those in construction seem to have involved themselves in any significant way in its drafting (through consultations) and in its implementation. Generally, there appears to be a distinct absence of enthusiasm and even awareness in some cases. How can this be explained?
One reason may be that the group affected by the Directive - workers posted from one country to another in the framework of the provision of services - seems to be relatively small (though there is a very marked absence of statistical data, which hinders considerably a comparative study of the issue). However, it might be thought that the objectives of the Directive - fighting unfair competition and social dumping - would make it attractive to those who believe that Europe has sacrificed the social dimension in favour of the monetary dimension.
The reason for the lack of enthusiasm may lie in the Directive's timidity - it is reported from many countries that the Directive is not regarded as being likely to make much difference to the current situation. While the Directive is clearly not a tool for harmonising social policy, given the scale of the differences between countries, it could probably have gone further in defining the rights of posted workers (social protection is omitted). It could also have placed more demands on countries whose current framework for regulating the posting of workers is not very restrictive.
However, it is another reason which probably goes furthest in explaining the social partners' attitudes. Throughout the discussions on this issue, employees and employers have seemed less interested in constructing a balanced social and economic and social Europe than in defending their own sector or own national economy. This attitude is legitimate, as it is one of the bases of collective action. However, it shows - as do the diverse ways in which the Directive is being implemented - how far there is to go in constructing a genuine European economic and social area. (Alexandre Bilous, IRES)