By Holger Kunze
It is a situation that can occur at any time in the mechanical engineering industry: A customer has a problem with a machine and asks for immediate technical assistance. Time is pressing, since the client is losing money every hour production is interrupted. In most cases, the machinery company can simply send a technician to solve the issue - at least if the machine is installed in the same country. If the client is based abroad, however, matters are more complicated.
In theory, doing business across borders should be frictionless within the EU. Free movement of services and persons (i.e. workers) is among the four freedoms guaranteed by the European Single Market, and allows the posting of workers within the European Union. In practice, however, a company is required to notify the respective national authorities before sending an employee abroad. This is where the bureaucratic process begins.
If the machine is located in France, for example, the machinery company must first notify the French authorities before sending an employee across the border. This notification includes personal details, qualifications and the salary of the worker. A contact person or organization in France needs to be named in case of queries. And when going to France, the worker must carry the corresponding documentation, all of which must be available in French.
Patchwork of national requirements
Although the requirements for posted workers are particularly complicated in France, the problems are not limited to this country, with similar problems occurring in a number of member states. While the free flow of goods and services is a guaranteed European freedom, each member state is responsible for the labor market policy in the country. This ruling allows member states to impose reporting regulations for foreign workers, which can result in excessive requirements. Like France, Spain also requires documentation in Spanish, while in order to post a worker to Italy, companies are required to name a contact person located in Italy, a regulation which often poses issues, particularly for SMEs without an office in the country.
The damage for the European economy is significant, since barriers for posted workers not only hamper the trade of services, but also of goods. "The sale of a machine often also requires the deployment of employees for assembly, commissioning or maintenance," says VDMA Chief Executive, Thilo Brodtmann. VDMA estimates the additional bureaucratic costs for the posting of workers to total at least 51 million euros per year for the German mechanical engineering industry alone.
However, not only the reporting requirements themselves can pose problems, but also the maze of differing national regimes. Particularly companies with limited human resources often struggle to navigate the web of systems imposed by each member state. "The current situation regarding deployment is in complete contrast to the idea of the single market," says Brodtmann. "The EU must finally put an end to the jumble of specific national requirements and create uniform rules for the assignment of employees to other EU countries."
The wrong reform
Indeed, the European Union recently completed a revision of the Posting of Workers Directive in spring 2018. Unfortunately, the member states, Parliament and Commission turned a blind eye to the complaints made by the industry, with the reform focusing more on equal pay for employees, an issue which is rarely problematic in the high-paying mechanical engineering industry.
Even worse, the revision makes the posting of workers more complicated. In future, all wage components which are customary in the host country, including holiday pay, weekend and overtime bonuses, will have to be paid when employees are posted for assignments with a duration of over 18 months. "This is good news for Social Europe today," said EU Commissioner for Employment, Marianne Thyssen, on the day the revision was adopted.
For industrial companies operating in the Single Market, it was anything but good news.
Low hanging fruit
Despite this, VDMA has proposed realistic reform steps that would already help companies which conduct business across borders. One step might be to exempt some types of postings from the national reporting requirements. Short postings of 10 days or less should be possible without reporting for the sake of practicality. Furthermore, reporting obligations should be limited to postings for assembly and maintenance assignments, which would exempt sales staff, for example, as they work in a sector where social dumping is hardly an issue.
A second idea is to harmonize the reporting requirements, which would save time and provide legal clarity for companies. Uniform procedures for the posting of workers to the respective EU states should be mandated, for example by introducing identical documents. The best-case scenario is one where a common online platform for notifications is available and is used by all member states. This would abolish the language barrier between companies and national authorities, at least for written correspondence.
Over the past few months, VDMA has actively campaigned for corresponding simplifications in this regard. One example for this is the establishment of a dialog between Members of the European Parliament and mechanical engineering companies to raise awareness for the issue. On October 10, VDMA and the media outlet Euractiv will hold a work shop in Brussels titled: "Barriers to high skilled labour mobility - a challenge for European SMEs and the Single Market".
Politicians in Brussels often refer to the Single Market as the major achievement of European integration. They may be right, and industrial companies in particular do benefit from the freedom of being able to conduct business across Europe. However, this does not absolve lawmakers from continuing to work on improving the Single Market wherever possible. With regard to the posting of workers, the level of dysfunction is evident and it is time for the EU to come up with a European solution.