Cross-border business trips
By Dr. Michaela Felisiak
Many factors need to be considered for cross-border business trips inside the EU. Among those are labor law, social-security law, tax law and immigration law. There are also many formal matters, such as registration duties, that employers must comply with before they are permitted to post their employees abroad.
The reasons to send employees on cross-border assignments are diverse: Employees can be posted abroad to fulfill orders sent by foreign customers or for company-internal purposes. A few other reasons include visits to trade fairs or to customers abroad. As a result, assignments abroad may consist of short-term visits or take up to several years.
Regardless of their duration, a number of legal areas must be considered.
Labor law factors: employment agreements
Labor law alone involves a number of legal issues that need to be considered when workers are sent on a cross-border post. First, it is imperative to determine whether the current employment agreement even encompasses an international assignment. If not, the employment agreement will need to be amended or supplemented. The question as to which legal provisions apply to the international assignment could also play a role.
In answering these questions, the duration of the cross-border assignment plays a key role. Short international assignments, particularly business trips up to one month in length, do not require the employment agreement to be adjusted.
European directive on the posting of workers
However, short business trips inside the EU also must comply with the working conditions of the respective country of destination. These include, for example, minimum rates of pay (statutory wages and generally binding wages determined by collective agreement, where applicable), minimum paid annual holidays, maximum work periods, minimum rest periods, and any other employment protection regulations applicable in the country of destination.
In practice, employers must inform themselves in advance regarding the minimum conditions governing employment in the respective country of destination.
The duty to comply with minimum working conditions in the respective country of destination is based on the European Directive 96/71/EC concerning the posting of workers, which has been in effect for more than 20 years. The directive on the posting of workers has been implemented into national law by the Member States. In Germany, the respective provisions are laid down in the Posted Workers Act. The most important issue here is compliance with the minimum rates of pay, which is particularly important for postings where the posting country’s minimum wage lies below that of the country of destination.
The directive on the posting of workers is currently being reformed. Following the principle of “equal pay for equal work”, posted employees should, in the future, be subject not only to the applicable minimum working conditions, but also to the same general working conditions as regular employees working at the same site. This means posted workers would also have to be granted any additional components of employee wages–for example, allowances, Christmas bonuses and compensation for overtime work. Only if these components of wage are equal is it possible to maintain a level of remuneration equal to that of local workers. The reformed directive on the posting of workers also covers other aspects of employment. For example, it limits postings to 12 months under labor law regulations.
Currently, the reformed directive on the posting of workers is being implemented in the national laws of the EU Member States. The new regulations will come into effect on July 30, 2020.
Registration requirements for business trips to EU countries
If workers are assigned to work in an EU member state, special registration and reporting requirements apply. According to those requirements, online registration with the respective surveillance authority must be completed prior to the cross-border assignment.
Complying with registration requirements often turns out to be difficult for companies because some countries have registration requirements whereas others do not, and exceptions are treated differently from country to country.
In Germany, the registration requirement only applies within certain industries, such as construction. Before posting workers in Germany, foreign enterprises must therefore verify whether they need to register with the minimum-wage reporting portal, Meldeportal-Mindestlohn (www.meldeportal-mindestlohn.de). In other countries, however, the duty to register applies across a broad range of circumstances.
Sanctions for infringements also vary depending on the country of destination. If the applicable registration requirements are not fulfilled, employers may face high fines — even up to six-figure sums. Repeated infringements may also result in a suspension of activity in the country concerned, or individual workers may even be prohibited access to sites.
Social security factors
With respect to social security, the employer must determine whether an international activity affects mandatory social security contributions.
To avoid the necessity to switch between social security systems, the EU Member States along with Iceland, Liechtenstein, Norway and Switzerland have established a regulation regarding the coordination of social security systems (Regulation [EC] No 883/2004). Within these countries, workers are subject to the social security program of just one Member State — specifically, the one where they regularly pursue their activities. As a result, a short assignment abroad does not change an employee’s social security contributions.
Employers may apply for a social security certificate (A1) to prove they make the necessary social security contributions. Although European provisions do not necessarily lay down a requirement to carry an A1 certificate, there are in fact local provisions that imply such a requirement. For example, A1 certificates must be carried at all times in Austria.
Rights of residence
Another factor that is often underestimated when employees are assigned abroad is the issue of residence rights. If third-country nationals are to be posted to other EU Member States, residence rights must be considered from two angles. First, employers must check whether an assignment is permissible according to the immigration-law regulations of the respective country of destination. Second, employers must consider whether residence in another country will result in the loss of an employee’s residence permit in his or her home country.
It is, therefore, important to know that the right to residence is a local right and must always be considered from a national perspective.
All the cross-border issues mentioned above must also be viewed from a tax perspective. Many entrepreneurs know the 183-day rule. Still, comprehensive consulting on this point is a must if workers are posted abroad.
Each time workers are posted internationally, early and proper preparation is necessary on a number of fronts. To fulfill all requirements, employers must grapple with a patchwork of rules, as each country establishes its own requirements for cross-border business trips and postings.
The risks of noncompliance are often underestimated. Due to increased monitoring within the Member States, the risk of a noncompliant posting being discovered is high, and employers can expect severe penalties. Considering the constant changes in this realm and the imminent implementation of the reformed directive on the posting of workers, it is time for employers to comprehensively review their in-house system for posting workers abroad and ideally develop a relevant compliance system.