Doing business across EU borders should be frictionless. But in reality, European companies still face excessive bureaucracy when posting workers to another EU country, writes Thilo Brodtmann.
Thilo Brodtmann is the executive director of the Mechanical Engineering Association (VDMA), which represents more than 3,200 mainly small- and medium-sized companies.
What does it take to send a worker from Germany to a French client? If you believe in the smooth functioning of the European Single Market, the answer might surprise you: it takes a lot of time and paperwork.
Imagine a German machinery company getting a call from a manufacturer in France. A machine is not working properly, and so the entire production line is at a standstill. The client asks for immediate technical assistance. However, the German supplier of the machine is not allowed to simply send one of its experts across the border to help.
Before every worker posting, the company needs to notify the French authorities. This notification must include personal details of the employee, qualifications and salary. A contact person or agency located in France must be named in case of queries. And when finally going to France, the worker must carry corresponding documents, all of which must be available in French.
France’s bureaucratic hurdles for the posting of workers is a drastic example, but unfortunately not the only one among EU member states. A notification of a posting to Spain requires documentation in Spanish. Sending an employee to an Italian client presupposes a contact in Italy.
In fact, many of the 28 EU countries have special requirements for foreign workers crossing their borders.
As a result, doing business within the European Single Market is frictionless only in theory. In practice, companies face a patchwork of national regulations when posting workers abroad.
One-sided revision of the Posting of Workers Directive
This year, the EU has concluded a revision of the Posting of Workers Directive. The revised directive mainly focuses on the enforcement of equal pay. For example, all wage components which are customary in the host country, including holiday pay, weekend and overtime bonuses, will have to be paid for long-term assignments of more than 18 months.
Unfortunately, the revision did not look into the implementation of the Directive in the member states and left the mess of national notification requirements untouched. In this way, the EU allows member states to further apply excessive notification procedures to wall off their markets. But that contradicts the idea of the Posting of Workers Directive and the Single Market in general.
This also comes at a price for technology-based industries, in which social dumping is hardly an issue. The mechanical engineering sector, which VDMA represents, develops the whole range of production equipment from machine tools or harvesters to components such as drives or pumps. Wages are relatively high, and so are most companies’ export shares – especially within the EU.
Those European industry companies are seriously restrained by hurdles for the posting of workers, because the regulations not only hamper trade in services but also in goods.
The sale of a machine, for instance, usually requires the deployment of an employee for assembly, commissioning or maintenance. German machinery companies alone carry out more than 200,000 postings per year. The annual cost of complying with all the bureaucratic procedures for these assignments amounts to more than 50 million euro.
Pick the low-hanging fruit to facilitate EU labour mobility
The EU Commission is currently drafting a report on how the Posting of Workers Directive is implemented by member states. The EU should take that opportunity to finally abolish the jungle of national notification requirements.
Fortunately, it is possible to remove some of the biggest barriers for companies without limiting workers’ rights or opening the door for social dumping in other sectors.
First, there should be uniform reporting requirements for posted workers in the EU member states. In each country, the same kind of documents should be required. Standardised forms – possibly available on an EU-wide online platform – could remove the language barrier and allow companies to provide the necessary information for a posting in English.
Second, there should be harmonised definitions for postings that need to be reported. With respect to the goal of preventing social dumping, reporting obligations can be limited to assembly and maintenance assignments. Postings for a training course abroad or visiting a trade fair, however, should not require a notification.
Third, the EU must consider abolishing reporting obligations for short postings altogether. Postings of less than ten days, for example, should be done within the EU without the obligation to notify the host country. This would hardly constitute a gateway for social dumping, but it would remove some of the hurdles for the posting of workers in Europe.