We present basic information on the posting of workers under the freedom to provide services in the EU market. Mastering a few basic concepts and principles will allow posted workers to go abroad to work safely on a temporary basis and their employers to benefit from the freedom to provide services in the EU without risking a conflict with the law.
Each Member State shapes its labour law system, social security system and taxation system. Therefore, each time a person crosses a border for professional purposes, it is necessary to establish whether and how the conditions of employment will change while working abroad, where to pay social security contributions and where to pay income tax. EU law approaches each of these areas in a different way: in labour law, it imposes minimum standards; in social security, it introduces anti-collision standards so that only one legislation applies at a time; and in tax matters, Member States use bilateral double taxation agreements. This Encyclopaedia on the Posting of Workers is only the first step in being able to navigate freely through the maze of EU and national legislation applicable during the posting of workers.
A practical guide to the legislation applicable to social security LINK
ZUS Guide – How to obtain an A1 certificate LINK
European Commission guide on posting of workers LINK
Websites Social Insurance Institution and National Labour Inspectorate.
This is one of the four economic pillars of the EU single market. It consists of the freedom to provide services in any Member State other than the one in which the service provider is established (or resident). It is also the freedom from the obligation to establish an establishment, branch, subsidiary or company in the country where the service is provided. The freedom of movement of services is also the right of the consumer or recipient of services to make use of the services of an entity established in another Member State.
Article 56 TFEU – (…)restrictions on the freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the recipient of the service.
Article 57 TFEU in fine – Subject to the provisions of the Chapter on the right of establishment, the provider of a service may, in order to provide a service, temporarily pursue his activity in the Member State of provision under the same conditions as that State imposes on its own nationals.
The limit of this freedom is the exercise of the freedom of establishment. The EU rules do not allow a clear indication of this limit and require a detailed assessment of the situation in each case. The case law of the Court of Justice of the European Union is then helpful. These freedoms are not mutually exclusive, i.e. a service provider who has a branch in the host country may provide services both through that branch and cross-border.
The Treaty – the Treaty on the Functioning of the European Union – is where we find the prohibition on Member States imposing barriers to the provision of services by service providers established in a Member State other than that of the recipient of the service and the obligation to treat them as their own service providers.
Services Directive – facilitates the exercise of freedom of establishment by service providers and the free movement of services. The Directive prohibits requirements that are contrary to the following principles:
In the event of a conflict of laws, the Services Directive gives way to the Posting of Workers Directive. Similarly, in the event of a conflict with the provisions of the Regulations on the coordination of social security systems.
Posting of workers is the temporary movement of workers abroad, in particular to other Member States of the European Union, in order to perform a contracted service. From the employee’s point of view, it is a type of temporary labour migration. Unlike labour migration, the posting of workers is not based on the freedom of movement of persons, but on the freedom to provide services within the single market of the European Union. A service provider established in one Member State, in order to perform a service in another Member State, must be able to send its worker to perform that service. Such a worker, working temporarily for his or her employer in the territory of another Member State, is called a posted worker.
The posting of workers allows employees who go temporarily to work abroad to maintain family, social and economic ties with the country in which they are employed. Unlike a labour migrant, a posted worker does not lose economic ties with his or her country of origin – he or she remains insured in the country where he or she also spends most of his or her earnings. Most often, but not always, he or she also pays taxes there. One of the benefits is the possibility of earning higher wages for the same work performed elsewhere, with a lower cost of living in the sending country. Naturally, this benefit occurs when there is a difference in earnings between the sending and receiving state. From the point of view of the receiving country, the posting of workers contributes to temporarily filling gaps in the local labour market, so that residents of these countries have access to services not provided by local service providers. Posting protects the economies of sending countries from a drain of workers; they remain employed in the sending country. At the same time, it protects receiving countries from competing on the price of labour due to the guarantee of paying higher wages. With differences in the economic potential of the Member States, the posting of workers under the freedom to provide services contributes to the convergence of the economies of the receiving and sending state and, on a sufficiently large scale, to the convergence of the European Union as a whole. Despite the advantages mentioned, the posting of workers is controversial and in some Member States is even systematically fought against. The reason for this is the failure to distinguish between the posting of workers and undeclared work. As a result, it is the service providers who are accused of social dumping, even though all the studies devoted to this phenomenon clearly show that it is impossible to compete on the price of labour when workers are posted correctly.
Colloquial term (no legal definition). It is the EU Member State where the posted worker actually performs the work and where the service is actually provided. It does not have to be the country in which the recipient of the service is established or resident, although this is most often the case.
The host country is also the country whose selected employment legislation we will have to apply, regardless of the law the parties have chosen for their contract (employment, assignment…) In particular: provisions on maximum working time and minimum rest periods, annual paid leave, remuneration (its amount and components), temporary work, health and safety, protection of pregnant workers and parental entitlements, equal treatment in employment, business travel expenses and allowances. Watch out for changes from 29 July 2020.
The host country is also the country according to whose legislation we will assess whether a person is a worker. This is why Polish contractors are also covered by the provisions of the Posted Workers Directive.
The host state is also the state to which the posting of workers directive is exclusively addressed.
According to the basic directive (under labour law), a posted worker is a person employed in Poland (by a service provider established in Poland) under a contract of employment, a contract of mandate or a contract for the provision of services, who is temporarily assigned to perform work or a task in another Member State in the framework of a contracted service. This concept has a legal definition:
“Posted worker” means a worker who, for a limited period of time, carries out his or her work on the territory of a Member State other than the one in which he or she normally works.
There are two legal definitions – for the purposes of labour law (above) and for the purposes of coordination of social security systems (below). The personal scope of these definitions differs.
A posted worker in the rules on the coordination of social security systems is a person who pursues an activity as an employee in a Member State on behalf of an employer which normally carries out its activities there, and who is posted by that employer to another Member State to perform work on behalf of that employer.
The definition of a posted worker for social security purposes is broader – it also includes people who perform work abroad for their employer, but not necessarily as part of a service provided by that employer. This definition will include, in addition to employees posted in the context of the provision of services, all employees who are on a business trip abroad (at a conference, training course, business negotiation, trade fair, etc.), but not necessarily in the context of the provision of services. – when there is no recipient of the service in the host country). The practical meaning of these two definitions is, for example, that the wage or maximum working time rules of the host country do not apply to persons on a business trip. These workers do not even temporarily occupy jobs in the local labour market of the host state. In December 2016, the European Commission proposed to clarify this difference in the draft revision of the Regulation on the coordination of social security systems. A more detailed analysis of these definitions and the proposed amendment can be found here.
Colloquial term (no legal definition). It is the EU Member State where the posted worker actually performs the work and where the service is actually provided. It does not have to be the country in which the recipient of the service is established or resident, although this is most often the case.
The host country is also the country whose selected employment legislation will apply regardless of which law the parties have chosen for their contract (employment, assignment…) In particular: provisions on maximum working hours and minimum rest periods, annual paid leave, remuneration (its amount and components), temporary work, health and safety, protection of pregnant workers and parental rights, equal treatment in employment, costs and allowances for business travel within the host country.
The host country is also the country according to whose legislation we will assess whether a person is a worker. It is for this reason that polish contractors may be covered by the provisions of the posted workers directive.
The host country is also the country to which the Posting of Workers Directive is exclusively addressed. If we want to know the conditions for posting workers from Poland to Germany, we check the German Posting of Workers Regulations. Service providers posting their employees to Poland should consult the Polish Posting of Workers Act.
Colloquial term (no legal definition). It is the EU Member State where the worker habitually performs his/her work, to which he/she returns after having performed work in the host country. It does not have to be the country where the service provider employing the worker is based, although this is most often the case. In defining the sending state, the point of reference is the posted worker and his/her habitual place of work and the state to which he/she returns after performing the task or service. It does not matter how much time he or she spends in each country or how often he or she crosses the border, but with which country he or she identifies his or her centre of vital interests.
Review questions:
Which country is the receiving country and which is the sending country in the case where:
– a company based in Poland contracts another Polish company to provide a service in Germany?
– a French company contracts a Polish-based company to provide a service in Belgium?
– a company based in the Netherlands contracts a company based in Poland to recruit workers who it will then employ to provide a service in Belgium?
The Rome I Regulation allows parties to a contract in a cross-border situation to choose which law will apply to their contract. This freedom of choice is subject to two limitations. Firstly, the choice of law may not deprive the employee of the protection to which he is entitled under the laws of that country whose rules would apply in the absence of the choice of law, and which the employee may not waive by contract. Secondly, there are 9 areas of labour law where the rules of the host State compel their application regardless of the choice of law made by the parties.
Basic Directive – restricts choice of law by identifying 9 areas of host country labour law that enforce their application if they are not less favourable to the worker. Protects the local labour market from wage undercutting by equalising the chosen terms and conditions of employment for posted and local workers.
Implementation Directive – reinforcing the enforcement of the basic Directive by indicating the characteristics of a correct posting, the control measures allowed, the cross-border enforcement of penalties and fines, as well as imposing the obligation to post information about the conditions of posting to a Member State on a single website.
Revision Directive – amends the basic directive by, inter alia, introducing the concept of long-term posting and converting the obligation to pay minimum rates of pay into an obligation to pay wages.
A term used in legislation but without a legal definition. The country whose labour law order we apply when the parties have not made a choice of law in the contract. It is also the country to which the employee returns after a period of posting.
This is otherwise known as the “hard core” of the host country’s labour laws, which apply regardless of which law the parties have chosen for their employment relationship, provided that this does not prevent the application of laws more favourable to the employee. These are:
Regardless of which law the parties have chosen for their contract, we always apply the concept of employee according to the laws of the host state. A Polish contract of mandate concluded with an individual, depending on the degree of autonomy of the contractor, may be treated in the host countries as partly subordinated, not fully autonomous, work co-organised by the service company. Therefore, the provisions of the Posting of Workers Directive will often also apply to the contractor. This will depend on the degree of subordination or autonomy in the performance of the assignment and the degree of risk on the part of the contractor (employee, contractor). The treatment of the Polish contractor as an employee does not affect the correctness of the choice of this form of employment under the Polish law chosen by the parties. Under the law of the host state, it will be an employee, and under the law of the sending state – a contractor.
The posted worker is entitled to remuneration determined in accordance with the laws of the host State. The concept of remuneration itself shall be determined in accordance with the national legislation and/or practice of the host State and shall mean all components of remuneration which are mandatory under national laws, regulations or administrative provisions, or under collective agreements or arbitration awards which have been declared universally applicable in that Member State or which are otherwise applicable.
When comparing the remuneration paid to the posted worker and the remuneration payable under the national legislation and/or practice of the host Member State, the gross amount of remuneration should be taken into account. It is the total gross amount of remuneration that should be compared (outcome approach) and not the individual components of remuneration (component approach) that are mandatory under this Directive. However, in order to ensure transparency and facilitate control by the competent authorities and operators, it is necessary that all components of remuneration can be identified in sufficient detail according to the national legislation and/or practice of the Member State from which the worker has been posted.
As a general rule, posting allowances must be considered as part of the remuneration and taken into account when comparing gross salary amounts. They must not be included in the remuneration when they are paid to cover (by way of reimbursement) expenses actually incurred in connection with the posting, such as travel, board and lodging expenses. If neither the regulations nor the contract clearly define the function of the posting allowance, the entire allowance is deemed to be due for reimbursement. It cannot then be included in wages. This distinction between reimbursement allowances and posting allowance will have its tax consequences in the sending country. It will depend on the nature of the allowance whether it will be considered as income of the employee (on a par with salary) or as an expense related to the employee’s posting (on a par with, for example, a business travel allowance).
Whatever the law applicable to the employment relationship, the host country shall ensure that the posting employer applies the following terms and conditions of employment in force in the host country resulting from legislation, from recognised universally applicable collective agreements or from arbitration awards:
stawki dodatków lub zwrot wydatków na pokrycie kosztów podróży, wyżywienia i zakwaterowania dla pracowników znajdujących się daleko od domu z powodów zawodowych (dotyczy podróży, które zaczynają się na terenie państwa przyjmującego).
When the actual period of posting exceeds 12 months (or 18 if the employer submits a reasoned notice of extension), in addition to the nine areas of the so-called hard core of labour law, any applicable terms and conditions of employment of the host country determined by laws, regulations or administrative provisions, collective agreements or arbitration awards recognised as generally applicable in that country shall apply.
The period of secondment shall be calculated separately for each secondment. The termination of the posting shall end the period of posting. In the event that a worker is posted again by the same employer to perform a service for a different service recipient or for the same service recipient in the same host country but at a different location, the period of posting shall be recalculated.
– cumulative. The period of posting is calculated cumulatively for employees posted by the same employer, to the same place to perform the same task.
– individual. The calculation of the individual posting period of a posted worker poses many problems. In most Member States, no rules have been established for suspending or interrupting the posting period for the purpose of determining long-term posting. Particular problems relate to the counting or deduction of interruptions of posting due to their length and nature (holidays, illness, work in another country).
It is worth noting that long-term posting does not require the application of all labour law, but only of all applicable terms and conditions of employment. The extended catalogue of terms and conditions of employment applicable after 12 (18) months of posting varies from one Member State to another. It may include, for example, rules on the employee’s material liability, rules on disciplinary sanctions, or rules on the payment of travel, food or accommodation costs also for travel from and to the sending country. The rules on the establishment and termination of contracts, participation in occupational pension schemes and non-competition always apply to the rules of the country chosen by the parties or, in the absence of choice, the law of the country of habitual residence.
The Basic Regulation and the Implementing Regulation on the coordination of social security systems are two important sources of EU law introducing, as the main conflict rule, the principle of applying the legislation of only one Member State in cross-border situations. The single legislation rule concerns both contributions (conditions for coverage, calculation and payment of social security contributions) and benefits (conditions for entitlement to benefits, their amount, rules for their provision or payment).
The principle that insurance cover is available in the country of work. It is the main rule for persons benefiting from the principle of freedom of movement of workers who move their working life to another Member State. In the case of posted workers who, after carrying out work, leave the host state and return to the sending state, the application of this principle is excluded as it leads to an unnecessary fragmentation of insurance periods, which would create administrative difficulties and limit access to benefits. This is even more so in the case of highly mobile workers performing work on the territory of two or more Member States.
A1 is an official confirmation of the legislation of one Member State that applies to a worker in a cross-border situation. Under Polish law, it has the character of a declaratory (not constitutive) administrative decision. This means that it does not confer rights and obligations, but only confirms their existence according to specific legislation. Document A1 is issued by a competent institution (in Poland – Zakład Ubezpieczeń Społecznych (Social Insurance Institution)). A1 remains in force until it is withdrawn by the institution which issued it. The institutions of the host country are obliged to respect the A1 document issued in another Member State. The A1 document is not proof of the correct posting of an employee on the grounds of labour law and is only relevant in terms of social insurance. It protects against the payment of double social security contributions, it prevents the granting of double benefits from several social security systems but, above all, it protects the posted worker from losing his or her protection just because he or she is temporarily working in a Member State other than his or her usual one.
Decision A1 – Sets out a procedure for conciliation and dialogue between the institutions competent for social security when there is doubt or dispute about the correct determination of the legislation applicable to workers temporarily working in a Member State other than their usual one or alternating between two or more Member States. This procedure helps to implement the principle of loyal cooperation between the social security institutions of different Member States.
Decision A2 – Introduces an interpretation of Article 12 of the Basic Regulation, which protects insured persons against unnecessary changes of legislation in the event of temporary work in another country. The interpretation clarifies, inter alia, the concept of normal activities, work for the posting employer, previous subjection. It also establishes a two-month period after which a new period of posting can be confirmed.
Decisions A1 and A2 were adopted by the Administrative Commission for the Coordination of Social Security Systems. Decision A1 should not be confused with the portable document A1, which is commonly referred to as decision A1 or more commonly: the A-decision.
Tax liability in Poland arises both when the employee has a centre of personal and economic interest in Poland and when he stays in Poland for at least 183 days in a given tax year. At the same time, the fulfilment of only one of these criteria is sufficient. Other Member States may have similar or different criteria for recognition as a tax resident.
Tax liability means that tax must also be paid in Poland on income earned abroad, and not only on income earned in Poland. In the case of posted employees, it is very often the case that the criteria of residence in one country and temporary residence and earning income in another coincide. Then such a person will be considered a resident within the meaning of the legislation of both countries. In order to avoid double taxation, Member States have concluded bilateral double taxation conventions that allow income tax to be paid to only one country.
List of double taxation treaties LINK
Posting of workers is not social dumping. Social dumping does not have a legal definition, although the European Parliament in 2016 in the Guillaume Balas Report explained that it is “broadly defined, deliberate practices and circumvention of applicable European and national law that contribute to the development of unfair competition, leading to the unlawful minimisation of labour costs and the violation of workers’ rights and the exploitation of workers”.
National prejudices and protectionist-soaked allegations of social dumping came to life during the work on the implementation and review directives. In the EMPL Committee, the S&D side and the trade unions (ETUC) explicitly formulated the allegation of social dumping by the countries – especially from Central and Eastern Europe – from which workers are posted, working in wretched conditions for wretchedly low wages, without the right to leave, with violations of working time regulations and without any social protection cover. Such phenomena do, of course, occur in Europe and are a manifestation of unfair competition by breaking the law. However, they must not be equated with the posting of workers, which is the safest form of going abroad to work.
In the case of proper posting, there can be no social dumping, if only because of the principle of favourability adopted in labour law. Indeed, the posting employers are bound by more favourable labour law provisions for the employee in terms of pay, holidays, working time and other terms and conditions of employment. According to the rules introduced by the 1996 Directive on the posting of workers in the framework of the provision of services, a posted worker is entitled to the remuneration in force in the country to which he or she is posted, provided that this remuneration is higher than the remuneration in force in the country of origin. For example, if an employee from Poland goes to France, he or she receives the French salary because it is higher. However, the situation would be the opposite if it was a French employee who was seconded to Poland – he would then remain on the French salary. On the other hand, we would have to deal with social dumping if the posted employee did not receive the remuneration to which he or she was entitled, or was underpaid.
Social dumping, on the other hand, can be the transfer of production from a country with high labour costs to a country with lower labour costs while maintaining sales in the country with high labour costs.
One of ELMI’s goals is to counter human trafficking and labour exploitation by educating and promoting the idea of safe and legal work abroad. Seeking work abroad – separated from family, in a foreign culture, in an unfamiliar working environment – can involve new risks: unequal treatment of workers on the basis of nationality or citizenship, insufficient protection of workers’ rights, illegal employment and, in extreme cases, exploitation, modern slavery and human trafficking. In its activities, the association emphasises that the posting of workers is the safest form of going to work abroad – it consists of performing work temporarily in another country, but on the basis of a contract signed with an employer in Poland, before departure. An employee delegated to work abroad still remains under the protection of Polish law, which increases the comfort of their work and their sense of security. This happens regardless of which country’s laws are more favourable to the employee. The choice of the law of the sending country is dictated by a better knowledge of it.
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