Compliance with the EU Posted Workers Directive: What Employers Need to Know

Grace Shie: Welcome to The Inside Track, my name is Grace Shie, and today I am joined by my colleague, Paul Sarauskas. Today, Paul and I will do a deep dive into one of the most important and often misunderstood areas of European mobility compliance. And that's the EU Posted Workers Directive and the filing of posted worker notifications. So today we're going to talk about what is a posted worker. What does this directive require of employers who have a posted worker? And what are some of the common pitfalls to watch for? So let's go ahead and get started. Paul, thank you for joining me today.

Paul Sarauskas: Thank you for having me, Grace.

Grace Shie: My opening question is, let's talk about what is the EU Posted Workers Directive?

Paul Sarauskas: Sure, the EU Posted Workers Directive is an EU law that was created to sort of handle cross-border travel. So when an employee is in one EU country and they're going to another EU country to perform work, they wanted to make sure they kept an eye on what was happening between the cross-border transfers of employees. The European Union, as we know, has free movement. So if you're in one European Union country, you can easily travel to another without any immigration concerns, you just cross the border, you're in. So what the directive did, it wanted to sort of keep an eye on the free movement and make sure it continues to happen, but at the same time, protect workers. And by protect the workers, what I mean by that is there was an issue of social dumping in the European Union. And by that, I mean, if one country, for example, has employees that have a very low salary, they would send those employees to another country where perhaps salaries are much higher. And so that other country would be dumped by all these employees that are earning a lot less than local employees. So the directive came into place to make sure that as we have free movement throughout the European Union, we're also protecting these employees to make sure they're having all their rights protected. And by their rights, mean things such as minimum wage, minimum breaks or maximum breaks for rest periods, time off, annual leave, and then health and safety at a workplace. So these were all concerns that were basically behind the reason for this direct.

Grace Shie: So Paul, when do we know when an employee is considered a posted worker under this directive?

Paul Sarauskas: That's a very good question, Grace, and one of the toughest ones to answer. Essentially, when we're sending an employee temporarily from one EU country to another to carry out services, that's a posting. The services can be sent to either a local entity, for example, an affiliate or a branch of another company, to a private individual, to a public organization, even to a government institution. So essentially, anywhere you're sending someone to another EU country, we need to keep that into mind. And the posting can occur with contract of services. So if there's a contract in place between one EU country and another, if an employee is going from one branch office to another within Europe, that could also be a posting. And even if you're working through a temporary working agency. So basically, any place you go into another EU country to work for any other client or site or individual could be considered a posting.

Grace Shie: So when an employer has what is identified as a post-it worker, then as I understand from what you described, the directive instructs that employer to provide notification, to engage in some type of filing that this post-it worker is going to that destination, to that host country. What information is that employer required to provide?

Paul Sarauskas: It's pretty much the same across all countries. Very basically, the information should include the name of the employer that's sending the employee, the name of the posted worker or names of the posted workers, because some countries you can add more than one name on a posting. You should also have the address of the posting where this work will actually take place, expected duration, starting date and end date of the posting, the type of service being provided. That's also very important and then also a contact person in the country that's hosting. So wherever this employee is going to be sent, we have to have a name of a person at that company site as a contact to liaison with any authorities in case there's any issues with the posting.

Grace Shie: I take it though, because there are so many EU member states and they each do their own implementation that there are likely some differences across the countries. Can you an example of some of the more meaningful ones that our clients are interested in?

Paul Sarauskas: Yes. Absolutely, and that's one of the biggest compliance issues for employers, is that even though it's one directive covering all the EU countries, each country handles it a little bit differently. I can just give you some examples. For example, in France, you have to register on this website called SIPSI. It's all in French, so it has to be a French-speaking person that can get on the site and register these post-it work notifications. The documents should also be submitted in the French language, which could be burdensome for some employers if you're sending them from a non-French speaking country. Having everything translated into French can be cumbersome. Germany, for example, there's a requirement to be in touch with the customs authorities as part of the whole process. As I mentioned earlier, some countries already had a similar rule in place. Belgium is a perfect example. When the post-it work directive came into place, Belgium had what's called a LIMOSA declaration, L-I-M-O-S-A. And their LIMOSA declaration was pretty much what the Posted Work Directive was set up to establish. And so they just continued on with their own LIMOSA declaration. So we call it a Posted Work Notification in all countries, but in Belgium, for example, we call it a LIMOSA declaration. The thing that's most complicated in all these countries is that what providing a service means in one country to trigger the Posted Work Notification may not trigger it in another. And that's really the biggest difficulty and the most meaningful difference is that. What an employee does in that country, what activity will that trigger the post-work notification?

Grace Shie: Great, so let's tease that out a bit. Oftentimes our clients are trying to discern what activities would constitute services under the directive. And in our world, classic business travel doesn't necessarily constitute services if you're looking at it strictly from an immigration perspective. But we know in our experience that under the directive, the way it's implemented in certain countries, sometimes business travel or business travel activities can be caught up under the directive. So why don't you talk a little bit about that.

Paul Sarauskas: Sure, that's a great question because as we know, there's a lot of business travel throughout the European Union. The critical analysis is again, whether they're providing a service. If someone's going on business travel, we consider business travel very casual meetings, attending a conference or a fair. Those are considered just traditional business travel and in most cases, that's not going to trigger a post-work notification. It gets a little bit more complicated when we again talk about providing a service. And for that, we get more into the depth of doing hands-on work or not just attending a meeting. And if I can share a couple examples, I think that might help clarify it. An example of a posting that would require the filing is, for example, installing equipment. If you're being sent from one country to another to install equipment that was sold from the sending company to the host, that would trigger a posting. Performing an audit, an audit of services, is requiring a posting. IT consulting also would require it in most cases. And hands-on training, if you're going to deliver some hands-on training, that's definitely something that would trigger a post-it work notification. Classic examples of business travel, which do not require that, would be, again, as I mentioned before, attending a conference, attending a meeting with a potential client. If you're having a potential client meeting, there's no service because there's no relationship yet established. So you're just there to meet a new client, talk to them, possibly working together, but that's not considered a service because that relationship has not been established. Another one that comes to mind, which happens a lot, especially since the pandemic, is remote work. If someone's going to go sit in their hotel room in a European Union country and just handle, some emails from their hotel room, that of course is not considered to be a posting, it's just not providing a service. You're there just temporarily in a hotel checking your emails and so that remote work would not be considered a posting.

Grac Shie: Now, one of the common questions we get from our clients, Paul, is whether this EU directive applies to them if they are outside the United States or more importantly, really for their employees. For example, a U.S. citizen who's working and employed in the United States and sent into the EU, does the directive apply to those U.S. citizens?

Paul Sarauskas: Yes, it does. In fact, that's surprising to lot of our clients. But half of the EU countries do have the supply also to US nationals coming in from the US to EU to visit. So it is something that needs to be considered when you talk about international business travel.

Grace Shie: So while from an immigration perspective, the visa waiver program, if you will, allows US citizens to enter the EU countries without a visa, what I understand you saying is that the employer is not exempt from post-it worker obligations. Is that right?

Paul Sarauskas: That's correct. US nationals also need to be considered when we're talking about post-report notifications. It's not just EU nationals. So anyone coming from the US to a European Union country needs to look into this before they travel because they might have to do a post-report worker notification. They can enter without a visa on their US passport, but if they're going to be providing a service, a PWN or post-report notification would be required in about half of the countries.

Grace Shie: So that's very broad and possibly a surprise for some of those who are listening. And I can hear employers asking next, but what if the trip is really brief, Paul? What if you're just going into the EU for just a few days? So in other words, does the length of stay in the EU country matter?

Paul Sarauskas: No, it doesn't matter. And again, here too, each country is a little bit different. There are some countries that have an exemption for maybe a 30-day trip. Belgium has an exemption for eight days of installation. But no, even for a short-term stay in Poland, for example, Poland has a requirement that even if you're there for a two-hour meeting, you have to do a postal notification. So it's shocking to a lot of our clients that they're sending people all over Europe on business trips. And even for a two hour visit at a local branch office, a post at work or notification could be required. yeah, duration has no impact. You have to really look at each case on a case by case basis to decide whether or not a PWN is required.

Grace Shie: Got it. So once an employer determines that the notification is required, then when is the filing obligation, when does that take place? When is the PWN to be filed?

Paul Sarauskas: Well, it should be filed before the trip, so we always encourage our clients to at least have it filed the day before the employee travels to Europe. It has happened on occasion where they file the same day, but as a general rule, it should be filed before travel.

Grace Shie: Okay. And then once an employer meets its obligations to file the worker or posted worker notification, are there any post filing obligations or are they done?

Paul Sarauskas: No, there's a lot more. We're not done yet. So just the filing of the PWN isn't enough. You would think so. You provide all this information. You follow the rules. You follow the PWN. That's important. It's great that it's done. But then after that, there's a compliance aspect. And then this, again, goes to protecting the rights of the employees. So in addition to the filing of the PWN, there now is an employer compliance obligation to maintain copies of relevant compliance documents and those documents are pretty much standard across all EU countries. And that would be obviously a copy of the PWN, the posted work notification, a copy of the employee's passport or identification document. They're pay slips. You have to show pay slips for the entire posting. So if it's a one day posting, that's your pay slip for that day. If it's a 30 day posting, 30 days of pay slips. Time sheets. And this is one that drives everyone crazy. Time sheets are required. And the time sheets you have to show the hours you started, any breaks you took, and the end of the day how many hours you worked. And that's for every day of your posting. Luckily, some countries are limiting that requirement. France, for example, took that out. It's no longer required. But generally speaking, that's required as well. And another very important aspect of this is social security coverage. One thing that the European Union wants to make sure is that when the employees come in, again, protecting their rights, that these employees are covered by social security. So if you're coming from a US country, you can show a copy of your U.S. Social Security Certificate of Coverage to show proof of Social Security. If you're coming within Europe, there's the A1 certificate, which is proof that you're covered by Social Security in your country. yeah, the filing is done, but all these other documents need to be maintained and not just during the posting, also for up to two years and maybe longer after the posting is completed. Well, you can see it's a huge obligation, not just for the filing, but ongoing obligation because in case of any audit, and that's what we want to make sure we're you know, helping out our clients. You don't want to be audited. No one wants to be audited. We hate that word. But we work with our clients to make sure that they have all the information collected in case of an audit. It includes all these documents. And one of the other important things to maintain is a local contact in that country. So each post-to-work notification has to list a local person in that country as a representative in case of any requirements from the labor authorities for an audit. So that's also a very important part of this process is to list a local contact that can also speak that local language in case of any request from the label authority. So again, filing is done, that's great, but all these other obligations will then fall into place for the employer, which is quite burdensome, but very important because you don't want to get caught not complying with this directive.

Grace Shie: Well, that segues to the next question as well. What is the penalty framework then?

Paul Sarauskas: That's all over the board too, even though it's one directive, each country is so, so different. I'll give you some examples. Lithuania, for example, a 300 euro fee for a non-compliance issue. Germany, you can get up to 500,000 euros. You can see a huge difference in penalties based on which country. Belgium, for example, can impose fines up to 56,000 euro per infringement and that'll be multiplied by the number of employees. So these numbers can be astronomical. Knocking on wood, we haven't seen a lot of these happen. What will usually happen in my experience is that if an employer is seen to have not complied and it's their first one, usually it's just a warning to make sure that they don't do it again. But obviously the government, if they see companies continually non-compliant with this directive the fines will increase and not only the fines, the other possibility is that you can suspend an employer's ability to post workers, order work stoppages and even exclude companies from public procurement. the penalty should scare employers enough to realize that they need to really get a process in place so that their employees are complying with these rules.

Grace Shie: Well, with that, then let's close out and talk about your top suggestions for how employers who are addressing compliance, how do they tighten up what they're already doing to be in compliance with the EU Posted Workers Directive? What are your top suggestions?

Paul Sarauskas: Yeah, for an employer, it's a most importantly, stay informed. Stay informed, consult a professional, whether it's a law firm or an accounting firm. Get in touch with professionals that do this every day. They know what they're doing. They will help direct you and teach you how to take care of these. And again, as part of that, have someone in-house dedicated to doing this, someone in your HR department that can start to learn about the process and also just get a handle of it, manage it. Create a whole process flow in place and one of the things that's most important from my perspective is a pre-assessment tool. Anytime you're going to send someone out into the European Union, you to test yourself to go two questions. One is, is the employee providing a service? We've talked about that a lot today. And then is that service being provided to an identifiable recipient in that host country? If the answer is yes to those two questions, it's pretty much a PWN is required. So I would encourage companies in their global mobility programs to make sure they set something up. So that there's this pre-assessment tool anytime they send someone into the European Union to make sure that this PWN requirement is met if needed. And once they start getting the process in place, they'll see it's a pretty standard procedure across countries.

Grace Shie: Thank you, Paul. This has been an important overview. We're starting with an overview first of the EU Posted Workers Directive and the practical challenges of preparing and filing posted worker notifications and maintaining ongoing compliance. I think hearing what you shared with us, if there's one thing to take away from today, it's that this area of compliance is complex because we have many different countries in the EU, each with its own set of rules for implementation. Those rules vary and can vary significantly country to country, and getting it wrong can result in serious consequences. Thanks for joining me today, Paul. And that wraps up this episode of The Inside Track. Thank you for joining us.