The Lithuanian Free Market Institute has analysed the Proposal COM(2016) 128 for a Directive of the European Parliament and of the Council amending Directive 96/71/EC of The European Parliament and of the Council of December 16, 1996, concerning the posting of workers in the framework of the provision of services. The proposal is aimed at introducing the principle that the same work at the same place should be remunerated in the same manner, implying tighter regulation of posted workers from new Member States.

Posting of workers plays an essential role in the Internal Market, particularly in the cross-border provision of services. It consists of the case in which undertakings post an employee to another Member State to provide services. Directive 96/71/EC provides three options of posting: a direct provision of services between two companies under a service contract, posting in the context of an establishment or a company belonging to the same group (intra-group posting), and posting by hiring out a worker to a temporary work agency established in another Member State. Simply put, posting of workers allows a worker from a sending country to work in a recipient country while observing regulations of the former.

Some old Member States request the principle of “equal pay for equal work in the same place”, meaning that posted workers would not receive lower pay than the minimum wage of the recipient country. During the discussion accusations of social dumping by new Member States with regard to old Member States surfaced. The impact assessment equated lower minimum wages in new Member States to social dumping and presented differences in labour market regulation as unfair competition.

However, new Member States argue that the principle of “equal pay for equal work in the same place“ may be incompatible with the Single Market, as pay rate differences constitute a legitimate element of competitive advantage for service providers.

The present policy brief looks into the accusations by certain old Member States that new Member States are guilty of social dumping and addresses the following issues:

– Is labour regulation less restrictive in new Member States?
– Are lower minimum wages in new Member States a deliberate policy choice?
– Does the principle of “equal pay for equal work in the same place” exist in the European Union?

The full policy brief Posting of Workers in the European Union is available here.