Posting of workers – quo vadis?

On April 28th, 2017 the KU Leuven Research Institute for Work and Society (HIVA) organised a conference on intra-EU posting with the title “Posting of workers – quo vadis?” for and in collaboration with the European Centre for Workers’ Questions (EZA) and with the support of the European Union. Despite the heated debate on the negative consequences of intra-EU posting, the size, the profile and impact of the phenomenon has not yet been mapped out in detail. A more informed and nuanced debate on the pros and cons of intra-EU posting is needed. In contributing to this debate, the focus of the conference was on obtaining a better view and understanding of the real size and impact of intra-EU posting and on actions to fight social dumping and fraud. It was the first time that economic, political and legal viewpoints were brought together.

What is intra-EU posting?

An employee may be sent to another Member State by his employer to work there for a certain period of time. This is called intra-EU posting. Also self-employed persons can post themselves. The posted person remains subject to the social security system of the Member State of origin for a period of up to 24 months. This principle is established in EU legislation on social security coordination (Regulation (EC) No 883/2004). In addition, a ‘hard core’ of terms and conditions of employment, including minimum wages, set out in the host Member State should be respected. These provisions are defined in the Posting of Workers Directive (Directive 96/71/EC). It is important to note that posted self-employed persons are not covered by the Directive.

Measuring the size of intra-EU posting

Main findings

One of the major problems in truly understanding more about intra-EU posting, is the absence of adequate data. For quite some time the mantra has been ‘no statistics, no problems’. However, the need for more and better statistics is growing. Statistical evidence is essential for a good impact analysis. Facts are necessary to hold a debate on, to assess the impact of policies and to revise EU rules.

Data collected at European level by the so-called ‘PD A1 Questionnaire’[1] give an indication of the flow of posted workers among sending and receiving Member States, of posting in  a specific sector of activity, etc. But further consolidation of the data collection at EU level is needed. Despite the fact that data collection at EU level is growing to maturity, it is still incomplete (in terms of the collected data as well as additional indicators that could be defined).

The data on posting reveal substantial differences between Member States and sectors of activity. Although posting is a marginal phenomenon in general employment (i.e. represents 0.4% of the total employment in the EU), it represents  a substantial part of employment  in certain Member States and in certain sectors of activity (e.g. construction, transport, meat industry). For instance, the number of posted workers amounts up to 30% of total employment in the Belgian construction sector.

In addition, it is useful to compare the results of the collection of data at EU level to existing national registration tools. For instance, ‘LIMOSA’ and ‘GOTOT-IN’ in Belgium, ‘Déclaration préalable de détachement’ in France, ‘Communication de détachement de salariés’ in Luxembourg, the ‘Notificatieplicht’ in the Netherlands, the ‘Meldepflicht’ (Notification to the Central Coordination Office ‘ZKO’) in Austria and the ‘RUT’ in Denmark. These national figures show a higher number of postings/posted workers and as a result also a higher impact on receiving Member States, and in particular on the construction sector. In terms of Member States’ reporting, the annual report published by the ‘Direction Générale du Travail’ on the national data for France can be considered as a ‘good practice’.[2]

Conclusions and recommendations

Member States were required to incorporate provisions that safeguard compliance with the Posting of Workers Directive (Directive 96/71/EC) in their national legislation by mid-2016 at the latest. These provisions were established in the Enforcement Directive (Directive 2014/67/EU). The transposition and subsequent monitoring of the Enforcement Directive constitutes a welcome opportunity to enhance the quantitative data infrastructure with regard to posting. Especially the provision of Article 9 of the Enforcement Directive, framing the use of administrative requirements and control measures, and listing a series of a priori legitimate measures, opens up possibilities in this respect. The declaration obligation, which Member States can impose upon incoming service providers, has the potential to open up a wealth of information on posting flows, duration, activities etc. 

At EU level, over the past few years, some new questions were included in the PD A1 questionnaire. However, at the moment only data on the number of PDs A1 issued according to Article 12 of Regulation (EC) No 883/2004 are available from a receiving perspective., this is an underestimation of the total number of PDs A1 received as also the PDs A1 issued for other activities such as an activity pursued in two or more Member States according to Article 13 of Regulation (EC) No 883/2004 should be taken into account. Participants of the conference agreed that in the future, it might be useful to include a new variable in the PD A1 questionnaire that collects the total number of PDs A1 received by the reporting Member State.

Above all, a detailed estimate of the average posting period is vitally important for gauging the actual volume of labour represented by posting. This could also be useful for the tax administration if people stay longer than 183 days a year working as posted workers, since posted workers will pay personal income taxes in the host Member State as of this period.

The motives and impact of intra-EU posting

Main findings

What makes certain Member States and sectors of activity so appealing for foreign employers that contract their services out via posting? Or is it the opposite; is posting more demand-driven? A number of push and pull factors can be established. From a receiving perspective possible reasons could be labour costs (in terms of the level of wages and social security contributions), the shortage of workers and the demand for more labour flexibility. From a sending perspective, higher profits and wages for both employers and their posted workers as well as differences in employment opportunities between sending and receiving Member States are possible reasons.

Differences in labour costs between Member States is frequently considered as the main reason for the use of posting. Based on the Posting of Workers Directive (Directive 96/71/EC) a nucleus of terms and conditions of employment that apply in the host Member State must be respected by foreign employers that contract their services out via intra-EU posting. However, these (minimum) wages will in most cases be lower compared to the average wage domestic workers are earning. As a result, the existing Directive has an in-built structural wage gap between posted and local workers. Furthermore, the posted worker (and his/her employer) is exempt to pay social security contributions in the host Member State during a posting period of a maximum of 24 months. Therefore the posted person is not subject to the social security system of the host Member State, but to that of the Member State of origin. This also means that (s)he pays social security contributions in the Member State of origin. Host Member States that are characterised by a tax wedge (i.e. the difference between the wage cost for the employer and the employee’s net wage) that is higher than in the Member State of origin will have in case of intra-EU posting a tax and competitive disadvantage in this area. However, labour costs constitute just one aspect that will determine domestic and foreign companies’ competitive advantage or disadvantage. Other aspects are differences in corporation taxes as well as differences in the knowledge and skills possessed by companies and their workers.

To what extent job displacement by intra-EU posting is a real risk is discussable. The fact that intra-EU posting makes up less than 1% of the total employment in Member States makes it highly questionable if job displacement is a real threat for the host Member States. Also because the provision of services through posting is only temporarily. However, domestic workers employed in labour-intensive sectors, such as the construction sector, the meat industry and the transport sector, could be considered to be sensitive to displacement effects. The fact that labour-intensive sectors are also price sensitive results even in an additional pressure on labour costs. Nonetheless, displacement of formal domestic jobs by undeclared work is probably much higher than by posting. But the displacement through posting is of course much more visible by the available statistics.

Recent figures for Belgium reveal a picture of a dual employer market in the construction sector, in which large Belgian contractors benefit from the use of posting on the one hand, through their profits and operating surplus, whereas Belgian subcontractors (read smaller SMEs) are out-bid in the market on the other. Furthermore, despite the significant increase of the number of posted workers in absolute terms and the displacement effects in some Member States, the turnover and the value added of the local building companies in the ‘main’ host Member States have still increased as well as the collected social security contributions, mainly influenced by the positive evolution of the investments in construction.

Finally, posting should not only be seen as problematic. It has also advantages. It can be considered as a complement to the jobs performed by domestic workers in case of a higher labour demand than supply (i.e. labour shortages). From a sending perspective, posting could be a useful tool to increase trade, employment and higher household incomes.

Motives and impact of posting: conclusions and recommendations

The order of importance of the push and pull factors of intra-EU posing is a research question in itself that should be examined further. Is posting  indeed primarily used because of  the cost of labour or is it also a way to increase labour flexibility or a demand for available workers, or do other reasons perhaps play a role? In any case, it should be acknowledged that the use of posting also frequently presumes a demand from contractors located in the host Member State.

Actions to fight social dumping and fraud

Main findings

A clear differentiation should be made between the terms social dumping and social fraud. The term dumping, as well as social dumping, originally referred to the dismantling or undermining of the rules but not to evading them. The term has since been ‘contaminated’ by using it to refer to social fraud as well. It makes sense to differentiate between the two terms. The recent Enforcement Directive that had to be transposed into national legislation by mid-2016 could be a useful tool in the fight against social fraud via posting. The debate on social dumping through posting relates to the application of Regulation (EC) No 883/2004 on the coordination of social security systems and the Posting of Workers Directive (Directive 96/71/EC) and their possible reform.

The fact that differences in wages and social security contributions might lead to social dumping as a result of a ‘too soft EU coordination’ could also be solved at national level. For instance, France introduced some (disproportionate) measures by the ‘Loi Macron’[3] and the ‘molière clause’[4]. Belgian stakeholders of the construction sector (in 2015) and the transport sector (in 2016) concluded a plan for ‘fair competition’. Moreover, differences in the tax wedge between sending and receiving Member States of posted workers could lead to the conclusion  that the solution of a potential competitive disadvantage lies in reducing social security contributions. This reduction could lead to a better competitive position compared with foreign employers, but at the same time, could equally lead to a race to the bottom/’tariff war’, or one could even call it social dumping organised by the government that poses a risk to social security funding.

Actions to fight social dumping and fraud: conclusions and recommendations

Social partners have a major role to play in avoiding further segregation and informing posted employees about their social rights and obligations. Moreover social dialogue at firm, sectoral, national and European level should avoid and tackle possible risks of social dumping, social fraud and job displacement.

Legislation at all levels should be made more consistent, applicable, less complex and better enforceable to fight those companies who use posting as a means of unfair competition. This is a vital condition to keep reaping the benefits posting has to offer and to fight the minority who plays the game dirty.

Overall conclusions and recommendations: the impact of intra-EU posting on freight transport by road is still a blind spot.

The multidisciplinary approach of the conference, bringing together economic, political and legal viewpoints, has proved its added value by obtaining a better view and understanding of the real size and impact of intra-EU posting. Moreover, it became clear that the validation of data on posting collected at both European and national level as well as the wide dissemination of it to experts and practitioners should become a priority in the near future.

With regard to freight transport by road, figures indicate an important job reallocation towards the ‘new’ Member States. These Member States took over a significant part of international freight transport, which is less the case for national transport. However, some national transport markets are significantly confronted with ‘cabotage’ (i.e. meaning situations where a foreign truck makes national deliveries on the territory of an EU Member State right after an international trip from another Member State or from a country outside the EU). The cabotage penetration rate (i.e. share of cabotage transport in total national transport, where total national transport is the sum of national transport (for hire and reward) and cabotage transport) is an interesting indicator to measure the risk of displacement of domestic workers. The cabotage penetration rate for hire and reward transport for the EU-28 accounted for 3.1 % in 2015. Belgium (10%), Austria (7.6%), France (7.1%) and Luxembourg (7.1%). These countries are the most penetrated Member States. It is still an open whether  these results can be explained by an increased number of posted workers employed in the transport sector.

Presentations from the legal experts and stakeholders at the conference made clear that due to the highly mobile nature of work in the road transport sector, the implementation of the Posting of Workers Directive raises particular legal questions and difficulties. Moreover, it is not always clear which truck drivers should be considered as posted workers. This makes it very difficult to quantify the number of posted truck drivers. It shows that there is a clear need to adjust the application of the posting rules to the specificities of the road transport sector through the road transport legislation. Seminar participants concluded that  a follow-up seminar on intra-posting with a exclusive focus on the transport sector would be very useful in order to further discuss the available figures as well as the legislative framework.

A month after our conference, a proposal by the European Commission was presented to change a number of European provisions which also have important implications on the posting of workers (see Proposal for amending Directive 2006/22/EC as regards enforcement requirements and laying down specific rules with respect to Directive 96/71/EC and Directive 2014/67/EU for posting drivers in the road transport sector). For international transport, the European Commission is proposing that drivers are considered as posted workers if they spend at least 3 days in a given calendar month on the territory of a Member State. All cabotage operations will be considered as posting of workers from day 1, regardless of their duration.With regard to cabotage, current EU rules allow for 3 cabotage operations within 7 days of the international delivery. The proposal of the Commission proposes unlimited cabotage operations within 5 days of the international delivery. The fact that the European Commission has launched this proposal confirms our conviction that a follow-up seminar would have its merits. 

 

 

 



[1]The Portable Document (PD) A1 is a formal statement on the applicable social security legislation.

[3]This law concerns the application of the French minimum wage to the transport sector and applies also to cabotage and all international transport operations (transit excluded). It sets strict enforcement and administrative requirements, including an obligation to establish a representative on the French territory, responsible for keeping the working records and payslips of the posted worker for the purpose of controls, for 18 months following the date of the last posting situation. The law entered into force on 1 July 2016.

[4]Recently, some French regions and cities introduced a clause under which workers on publicly funded construction sites must be able to speak French. It is known as the Molière clause and requires workers to understand and speak French so that they can learn the rules on safety at the workplace.

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