EU labour ministers gave initial approval on Monday (9 December) to tougher rules on employing cheap temporary workers from eastern Europe and elsewhere, responding to political unease at a time of record joblessness.
Ministers agreed to curtail abuses of European Union law that enable companies to temporarily move cheaper, foreign workers from one EU country to another, but which France said amounts to social dumping.
Yesterday’s agreement will force companies to provide more documentation, proving that the contracts for workers are bona fide. This will be an “open list” of documents that each country will be able to determine according to their national law.
But not all EU ministers in Brussels gave their whole-hearted support for tightening the rules.
While France championed the case for stricter enforcement, eastern European countries such as Hungary and Slovakia whose workers benefit, showed reluctance to toughen them up. They were joined by Britain which feared that tougher EU rules could stifle the ability for UK companies to do business abroad.
Greater liability in the construction sector
An area of particular worry was the massive use of sub-contractors in the construction business which opened the way to abuses of social law.
“It will now be possible to establish a chain of responsibility to fight more effectively against fraud and more widely against fraudulent arrangements,” explained Michel Sapin, the French employment minister.
Sub-contractors will now be liable via the company which employs them. "Member states shall provide for measures ensuring that in subcontracting chains, posted workers can hold the contractor, of which the employer is a direct subcontractor, liable, in addition to or in place of the employer," reads the text of the agreement
At the request of Britain, these provisions will apply only to the construction sector.
The agreement was helped by the shifting position of Poland, which ended up backing France in supporting a deal.
Only the United Kingdom, Hungary, the Czech Republic, Latvia, Estonia, Slovakia and Malta voted against.
The revised directive will now fall to negotiations between EU countries and the European Parliament, which also has a say in lawmaking, to flesh out the broad deal agreed by labour ministers. It could be several months before a final accord is reached.
"There is an urgent need to reinforce the safeguards in EU rules," EU Employment Commissioner Laszlo Andor told reporters.
Each year, more than a million workers are moved by employers across EU borders to work chiefly in construction, farming, hospitality and road haulage.
The French government says the number of so-called posted workers in France – mainly from Poland, Portugal and Romania – rose 23% this year to more than 200,000. Officials estimate that many more go unregistered.
Companies shift workers across Europe to high-wage centres to take advantage of cheap employment taxes in their home countries.
Social security charges in France can be two, three or four times higher than those in Britain, Poland or Slovakia, meaning companies can cut their labour costs significantly by moving staff there from countries with lower charges.
But EU officials say many foreign sub-contractors do not respect pan-European rules that govern pay and working time for such staff.
Under EU rules, workers may be posted abroad for up to two years for a specific purpose. Their contracts must respect the labour law of the host country, but social security charges remain those of the home state.
In France, that means they must be paid the gross minimum wage of about €1,400 a month for a 35-hour week, with five weeks annual holidays. But they are not liable to French payroll levies, which are the highest in Europe.