Revised posted workers directive: throwing out the baby with the bathwater?

The EU needs to acknowledge the vital economic role of posting and differentiate the rules according to its different types.

Posting has a shady reputation, in part deserved. This booming practice, whereby workers are sent (‘posted’) for limited periods across borders to provide services within the European Union, is one of the most contentious issues in Europe today. Stories abound about how posting undercuts wages, work standards and organised labour.

The French president, Emmanuel Macron, made the issue a showcase for EU reform, propelling it to the centre-stage of European politics. The debate pitted Europe’s west and east against each other, indelibly linking terms such as ‘unfair competition’ and ‘social dumping’ to posting. Europe would have to get serious about its social dimension.

The controversy resulted in a revision in 2018, amid much pomp and circumstance, of the Posting of Workers Directive. The revision imposed inter alia time limits and the principle of ‘the same pay for the same work at the same place’. 

Even though this revision was needed to give some credibility back to ‘social Europe’, it risks throwing out the baby with the bathwater. Europe is already hampered by slow economic growth, weakening global competitiveness and severe manpower and skill shortages. The blunt restrictions imposed on posting only risk making things worse.

Major misconceptions

There are two major misconceptions about posting.

The first is that it mainly happens from the poorer EU countries to the richer ones. That is not true. The majority of posted workers in richer countries, such as Germany or France, come from the neighbouring countries.

The second and perhaps biggest problem is that the revised directive makes no distinction between different types of posting. Politicians and commentators do not seem to realise that posting serves many different needs, including functions of vital economic importance.

We conducted research into employers’ motives for using posting. Our investigations (forthcoming in the European Journal of Industrial Relations) brought to light that posting is about far more than deploying cheap, flexible labour—although this is a real and, in some respects, worrisome driver in some sectors.

Crucial motive

Cost minimisation is indeed a crucial motive in sectors such as construction, transport, meat, food and cleaning. Labour cost matters hugely in such business environments. As social-security contributions are due in the sending country, posted workers tend to be significantly cheaper than local workers. Also, the tentacles of labour inspectorates in the receiving countries do not reach into the sending countries, making it much harder to monitor compliance.

This ‘competition posting’ is however concentrated in such particular risk sectors, where employers like it for its reported flexibility in terms of take-up and shedding of manpower. On top of that they perceive posted workers as hard-working—travelling for work, often alone, seen as prepared to work hard and long hours, including during evenings and weekends.

But in the advanced, interconnected economies of Europe other motives matter. In high-value-added sectors such as finance, chemistry or technology, posted workers deliver niche expertise. Such ‘specialisation posting’ of highly skilled workers is used by multinationals to groom individuals with potential for international careers and to deploy researchers across their facilities.

This form of posting has nothing to do with cost. Indeed, it is much more expensive than hiring local workers. Nor should it be neglected in an ever-more-integrated EU single market.

In terms of numbers, posting of experts is not as significant as posting for cost reasons but these posted workers often fulfil crucial roles in complex, transnational supply-chains, vulnerable to even the smallest of technical interruptions. Think of vaccine development and production in the context of Covid-19—it would not have happened without posted workers.

Insider-outsider divisions

There are real problems with posting. First, many European labour markets are already marked by strong insider-outsider divisions. Posted workers are part of the flexible shell that helps the insiders keep their well-protected, high-quality jobs and social benefits while the outsiders remain in the cold.

Secondly, it makes certain sectors dependent on a continuous supply of posted labour. Many businesses could not function any more without large numbers of posted workers. Their availability disincentivises those sectors to address real shortages in the labour supply of some professions. Welders, meat processors and truck drivers have become hard to find in local labour markets.

Such shortages were already structural and remain neglected by employers and politicians, deepening the dependence on posted workers and perpetuating employers’ preference to work with flexible, cheap, posted labour. And the availability of posted workers has far from reached its limit: the fastest growing category are third-country-national labour migrants being posted across the EU.

Hard to replace

These are valid concerns. But the answer does not lie in bluntly restricting posting, as does the revised directive, which limits posting to 12 months. Expert postings are however usually longer, typically three years. These people often provide vital, hard-to-replace services which Europe cannot afford to forgo.

The social corrections introduced to counterbalance the negative consequences of competition posting were driven by legitimate concerns. But it would be useful to distinguish between sectors where abuse is a real risk (and by many accounts a reality) and those much less prone. Regulations should accordingly be differentiated—by reserving limitations on posting to the risk sectors, for example.

At the very least we need to start thinking about posting in a more varied and nuanced way. Its reality is far removed from the reductive stereotypes—and we cannot afford to run Europe on stereotypes.