Recent amendments which reinforce employee rights have been made to the Posted Workers Directive. The most important changes include:

1. application of nearly all mandatory host country employment rights after the first 12 (or 18) months of a posting
2. significant extension of the scope of minimum employment rights that apply during the first 12 (or 18) months of a posting

The rules and amendments apply to the EU and postings to an EU-member state.

However, following from the EU-Swiss agreement on the free movement of workers, Switzerland is strongly encouraged to align its rules and principles applicable to posted workers, to the ones laid down in EU-legislation. Still, there is no real obligation for Switzerland to do so. Whether or not measures will be taken on a Swiss domestic level (following which postings to Switzerland would become impacted as well), is uncertain and will depend on further negotiations with the EU.

As a result, postings by Swiss companies to an EU-member state will be affected once the changes will enter into force (i.e. on 30 July 2020). On the contrary, assignments to Switzerland will not (at least not until Switzerland implements necessary measures).

The European Union enacted the Posted Workers Directive in 1996 (96/71/EC)

This Directive treats the cases of posted workers, in other words employees temporarily working in an EU-member state other than their ordinary place of work. It requires employers to ensure that employee rights (including minimum wage requirements) match those in the country of work. By doing so, it discourages unfair competition between companies located in different European countries. Over the last two years, the Directive has been the subject of a heated debate due to increasing wage gaps between European countries as well as the use of loopholes to get around the current rules. Moreover, the number of posted workers has increased significantly since the Directive was enacted. This has led to a number of amendments which have been adopted at the end of June, most notably the following:

1. After 12 (or 18) months, nearly all mandatory host country employment rights will become applicable

The amendments limit the period during which only the minimum employment conditions as laid down in the 96 Directive must be met, to 12 months. A 6-month extension of this period can be applied for with the host country’s competent authority. At the end of the 12 or 18 month-period, the worker will become entitled to nearly all mandatory employment rights applicable to local employees in the host country.

Two exceptions exist whereby there is no obligation to apply mandatory host country employment rights:

• Procedures, formalities and conditions relating to the conclusion and termination of employment contracts, including non-compete clauses
• Providing supplementary occupational pension schemes

It should be noted that the reform does not have any impact on social security legislation. A posted worker will remain subject to home country social security coverage during the full first 24 months of a posting.

2. The scope of minimum employment rights applicable during the first 12 (or 18) months of a posting will be extended significantly 

a. “Remuneration” instead of “minimum rate of pay”

Before the amendments will enter into force, a posted worker is entitled to the host country’s “minimum rate of pay”. As this concept was not defined before the changes, the domestic interpretation applies. In view of the amendments, the concept “minimum rate of pay” has been replaced with the notion of “remuneration”. A posted worker will become entitled to all remuneration as is mandatory following host country rules and practices. Therefore, posted workers will no longer only be entitled to the specific remuneration components falling under the domestic definition of a minimum wage, but to all mandatory elements of remuneration including all bonuses and allowances such as allowances for travel, meal and accommodation expenses (except if it is clear that the expenses are specifically incurred on account of the posting).

b. Scope extended to universally applicable collective agreements

Before the changes will enter into force, companies need to adhere only to the minimum employment rights as embedded in host country legislation, regulation and administrative positions. The construction sector is the only industry for which employment rights agreed to under collective bargaining agreements need to be complied with as well.

Following the changes, this exception will become the rule across all industries. As such, it will become mandatory to also apply the minimum rights that are laid down in universally applicable collective bargaining agreements.

Read more on how to be compliant with the Posted Workers Directive.

Deloitte’s view 

Companies should review their postings to ensure compliance with these new rules as soon as they will enter into force. Companies that have collective bargaining agreements in place should carefully consider what these imply for them and consider changes to their posting policy.

If you are interested in this topic or have questions, please contact us for further information.

Renaat Van den Eeckhaut – Partner, Global Employer Services Leader Switzerland and EMEA

Renaat leads the Global Employer Services (GES) Practice for Deloitte Switzerland and EMEA. He specialises in international assignment and cross-border employment matters and advises on tax, social security and international mobility policies. Renaat has nearly 20 years of experience with Deloitte Belgium and Switzerland and has worked with many companies across a broad range of industries. Renaat holds a Master in Law and Accounting Law and has authored many publications on international taxation.

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David Wigersma - Partner, Global Employer Services

David has 17 years of experience in the area of international corporate and individual taxation planning. He specialises in addressing the complex compliance needs of a cross-border workforce with varied elements of compensation.

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Harry Verougstraete - Senior Manager, Global Employer Services 

Harry is a Senior Manager within the Global Employer Services team of Deloitte in Switzerland. He is leading our Posted Workers Directive (PWD) offering and is co-leading our international social security team in Switzerland. Harry has more than 9 years of experience with Deloitte Belgium and Switzerland. He supports companies on global mobility related matters and is specialised in coordinating global mobility programs. He advices on tax, social security and PWD related matters. 

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