In an increasingly integrated European labor market, posting workers to another EU Member State has become a vital tool for companies seeking to provide services across borders. The rules that govern these postings are complex, reflecting the need to safeguard both fair competition between service providers and the rights of employees who are sent abroad.
When determining compensation for posted workers, the focus should not be narrowly placed on mere payroll exercises. Instead, compensation must align with a broader context—one that considers the legal, collective bargaining, and operational frameworks of both the sending Member State and the host Member State. This article delves into the four main pillars that underpin transnational remuneration for posted workers and offers insight into the critical factors that organizations must address to ensure compliance and fairness.
Before analyzing how posted workers’ wages should be computed, it is essential to establish the context in which remuneration is being determined. Typically, companies find themselves in one of two situations:
🔸 Bidding Procedure: When a company bids for a contract in another EU Member State, it must estimate the labor costs of posted workers. Ensuring the correct application of the posted workers’ remuneration rules at the bidding stage can affect the competitiveness and legality of the bid.
🔸Payroll Calculation: Once the contract is awarded and the posting commences, employers must ensure that the wages they pay each posted worker comply with the applicable laws and collective agreements in the host Member State.
Successfully bridging these two scenarios requires an accurate understanding of the transnational measure (as per Article 1.3 of Directive 96/71/EC, as amended) that governs posting. The directive clarifies which rules apply to posted workers, taking into account both sending and host countries’ legal frameworks. Failing to comply at the bidding stage can lead to cost miscalculations and potential legal disputes once the posting is underway.
The cornerstone of posted workers’ rights in the EU is Directive 96/71/EC, subsequently amended by Directive (EU) 2018/957. Under this legislation:
🔸Minimum rates of pay in the host Member State must be extended to posted workers for assignments of a certain duration.
🔸Working time, rest periods, and other mandatory employment conditions of the host Member State must be observed.
🔸Extended conditions apply for postings that last longer than 12 (or in some cases 18) months, meaning posted workers must be granted nearly all the terms and conditions of employment applicable to local workers in the host state, barring provisions relating to the conclusion or termination of employment contracts and supplementary occupational pension schemes.
Thus, determining how these rules interact with the laws of the sending Member State is fundamental to establishing the correct transnational remuneration.
When employees are posted abroad, they remain employed by their original employer in the sending Member State. This arrangement means that certain statutory rights from their home country still apply, even though they are physically working in another state. Examples include:
🔸Minimum wage or standard pay scales (if higher than those in the host Member State, the principle of favorability could apply).
🔸Social security contributions (depending on applicable bilateral or EU social security regulations).
🔸Mandatory employment protections, such as anti-discrimination laws or parental leave entitlements.
If a binding collective agreement applies to the posted worker in the sending Member State, the employer must analyze how its clauses intersect with the host Member State’s legal framework. In some instances, the sending country’s collective agreement stipulates more favorable terms (e.g., higher pay rates or more generous leave) than the legal minimum in the host state. Conversely, if the host state’s rules offer more advantageous provisions, those must be applied to ensure compliance with the principle of favorability.
The way Directive 96/71/EC (as amended) has been transposed into national legislation can differ from one Member State to another. Consequently, determining the applicable wage and working conditions for posted workers in each country requires:
🔸Review of national implementing laws: Identifying which aspects of the host nation’s employment law serve as mandatory minimum standards for posted workers.
🔸Sector-specific regulations: Certain industries, such as construction or transport, may have distinct rules or extended collective agreements.
A pivotal step is identifying the correct collective agreement applicable in the host Member State, which often depends on:
🔸Industry classification: Many host countries have sector-specific collective agreements that stipulate wage scales, working time, allowances, and bonuses.
🔸Geographical coverage: Some agreements apply only in particular regions or localities.
🔸Extended collective agreements: In some Member States, certain collective agreements are declared universally applicable and must be observed by all employers within the sector, including foreign service providers posting workers.
Beyond collective agreements, posted workers may also benefit from mandatory statutory provisions in the host Member State. These can include regulations for:
Employers must conduct a holistic analysis that covers all relevant laws and agreements—only then can they determine the “transnational remuneration package” that meets or exceeds the legal and contractual minimums.
The duration of the posting is crucial because the directive’s amended provisions impose stricter rules for long-term postings. After 12 months (or sometimes extended to 18 months by formal notification), posted workers are entitled to nearly the full range of the host Member State’s employment conditions.
The replacement condition stipulates that if a posted worker performing the same task is “replaced” by another worker for that same service, the overall duration is cumulative. This prevents employers from rotating staff to circumvent long-term posting rules.
A key factor in determining compensation for posted workers is the principle of favorability. This principle ensures that the worker always receives the best possible conditions when comparing the sending country’s laws and agreements with those of the host country. For instance:
Employers must compare specific entitlements—like minimum wage rates, overtime pay, and paid leave—rather than merely comparing the overall pay package. In practice, each element of remuneration is analyzed individually, granting the posted worker whichever is more favorable.
Putting these considerations together, we can distill four main pillars that shape transnational remuneration for posted workers:
Contextual Determination
Sending Member State Framework
Host Member State Transposition & Collective Agreements
Duration, Replacement & Favorability
Compensation for posted workers lies at the intersection of home and host Member State regulations, EU directives, collective bargaining agreements, and the specifics of the individual posting. It is significantly more than a spreadsheet exercise: it is a legal and strategic challenge requiring careful interpretation and alignment of multiple factors.
By focusing on these four pillars of transnational remuneration, employers can ensure they meet both minimum compliance obligations and promote fair treatment of their posted workforce. The outcome is not only legal certainty but also enhanced trust and productivity among employees operating abroad, ultimately strengthening the success of cross-border projects in the European Union.
