The new Directive entered into force on 30 July 2018 and amended the original Directive 96/71/EC of 1996. The EU Member states have until 30 July 2020 to adopt and publish their national laws complying with the new Directive.
Purpose of the new directive
The main purpose of the original Directive of 1996 was to establish and implement the freedom to provide services. Besides this, another aim was to remove obstacles to the free movement of workers between Member States and to guarantee the protection of employment rights of individuals working temporarily in another EU Member State. Moreover, unfair competition between lower and higher-costing countries in the EU should be prevented. In order to ensure employers do not take advantage of subcontracting workers from low-wage countries, employers sending workers to another EU state were 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. With the enlargement of the EU (expansion to Eastern European countries), the labour market situation in the EU has changed considerably. The new Posted Workers Directive is intended to enforce the principle of equal pay for locally employed and posted workers and thus better protect posted workers.
Probably the most far-reaching adaptation of the Directive was made with regard to remuneration. The corresponding legislation has so far provided the term “minimum rates of pay”, which has been replaced by the term “remuneration” to enforce the principle of “equal pay for equal work at the same place” – instead of complying with the national minimum wage of the host country only. This means that posted workers are entitled to the same remuneration (e.g. bonuses, allowances, holiday pay and Christmas bonus) as locally employed workers from day one. This does not only apply to statutory provisions, but also to provisions in collective agreements that have been declared generally binding.
Host-country employment rights and protections after 12 / 18 months
In addition, almost all local working and employment conditions of the host country will apply to posted workers after 12 months (18 months at the latest). In Germany, for example, continued pay entitlements and statutory minimum leave need to be considered.
Social security issues
The Directive does not provide for a direct impact on the social security law applicable to assignments. However, the assessment of the applicable law with regard to employment and social security law has been largely parallel in many cases so far. The new Directive breaks this parallelism. Instead of the 12 / 18 month threshold mentioned above, the EC regulations on the coordination of social security systems (EC Regulation 883/2004 and EC Regulation 987/2009) provide provisions for remaining coverage under the home country’s social security scheme for a period of up to 24 months and, in case of a special agreement or a regular activity in several EU Member States, even longer or permanently.
Not only higher wage costs for intra-European assignments are to be expected in the future due to the equal pay approach. Additional effort caused by the Directive also appears to increase significantly in practice – especially for the HR departments.