The European Commission proposed on Tuesday that workers from one European Union country posted to work in another must be legally entitled the same pay as local host country workers, rather than only to the host country’s minimum wage.
The Commission proposal is a revision of the 1996 EU law on posted workers that has sparked controversy in the past as the diverse 28-nation EU struggles to reconcile the freedom to offer services across the whole bloc with stark differences in wealth and levels of social protection among its members.
An average hour of work costs an employer 40.30 euros in Denmark and 39.10 euros in Belgium, but only 3.80 euros in Bulgaria, 4.60 euros in Romania or 8.40 euros in Poland, according to Eurostat data for 2014.
A construction firm from Latvia, where the average hourly labor cost is 6.60 euros, can therefore offer much higher than that to its own Latvian workers to carry out a contract in Sweden, where the hourly cost is 37.40 euros, and still remain competitive compared to local Swedish firms.
“From now on, all the rules on remuneration that are applied generally to local workers will also have to be granted to posted workers,” the Commission said.
“Remuneration will not only include the minimum rates of pay, but also other elements such as bonuses or allowances where applicable,” it said in a statement.
The Commission believes raising the wages of all posted workers to host country levels will remove what it calls “social dumping”, or unfair competition.
Critics say this will protect labor markets in rich countries and certain sectors from any outside competition, because a price of a service is a key factor in a contract.
Under current legislation, a company is not obliged to pay a posted worker more than the minimum rate of pay set by the host country. The Commission wants to change that.
“This can create wage differences between posted and local workers and potentially lead to unfair competition between companies. This means that posted workers are often remunerated less than other workers for the same job,” the Commission said.
Under the proposal posted workers should be covered with the host country’s universally applicable collective agreements.
Countries should also have the option to impose local collective pay deals on subcontractors from other EU countries hired by the main contractor from the host country.
Unlike now, also workers posted to another EU country for less than two years, called temporary workers, would be covered by the universally applicable collective pay agreements.
Those working abroad for more than two years would have all the same rights as local workers, including protection against unfair dismissal.
To become law, the proposal will have to be supported by EU governments and the European Parliament.