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Europe – Labour ministers reach an accord on sub-contractors

11 December 2013

European Union labour ministers gave tacit approval earlier this week to tougher rules on employing cheap temporary workers from eastern Europe and elsewhere, responding to political unease at a time of record joblessness, reports euractiv.com.

Ministers agreed to curtail abuses of European Union law that enables companies to temporarily move cheaper, foreign workers from one EU country to another, but which France said amounts to social dumping.

The 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.

However, not all EU ministers in Brussels gave their support for tightening the rules.

While France championed the case for stricter enforcement, Eastern European countries; such as Hungary and Slovakia whose workers are the intended beneficiaries, showed reluctance to increase enforcement. They were joined by the United Kingdom, which fears that tougher EU rules could stifle the ability of UK companies to do business abroad.

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.

Michel Sapin, the French employment minister: “It will now be possible to establish a chain of responsibility to fight more effectively against fraud and more widely against fraudulent arrangements.”

According to the agreement: "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."

Sub-contractors will now be liable via the company which employs them. At the request of the United Kingdom, 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, to flesh out the broad deal agreed by labour ministers. It could be several months before a final accord is reached.

Laszlo Andor, EU Employment Commissioner, told reporters: "There is an urgent need to reinforce the safeguards in EU rules.”

The French government says the number of so-called posted workers in France, mainly from Poland, Portugal and Romania, rose by +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.

EU officials, however, say that many foreign sub-contractors do not respect pan-European rules that govern pay and working time for such staff. Under these 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 some of the highest in Europe.

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