The challenges and complexities of the European Union's Posted Workers Directive (PWD) can be overwhelming. But for companies to operate effectively and legally in Europe, it must be managed correctly. In this piece, I will outline the risks associated with the PWD and provide proven strategies to avoid costly legal issues and damage to a company's reputation.
What is the Posted Workers Directive?
The Posted Workers Directive (PWD) sets rules and conditions for companies temporarily sending their employees to work in another European Union country.
It was established by the European Commission to ensure everyone gets treated fairly and equally and to stop companies from taking advantage of lower wages and worse working conditions in some countries. Companies need to keep up with the latest PWD criteria since the criteria are updated regularly.
The Risks Posted Workers Present to a Business
In the fast-paced world of global business, it can be easy for an organization to forget or simply ignore the PWD. But what some management teams may see as a short business trip or project can become an expensive nightmare with long-lasting effects.
Here are the top risks the PWD poses for companies.
Non-compliance with Local Labor Laws
There are significant differences in labor laws within the European Union (EU.) HR teams need to ensure that the employment contracts of the posted workers are adjusted to meet the local requirements. To ensure that posted workers' contracts are compliant, companies must understand minimum wage, annual leave, benefits, and other employee rights.
An important part of the PWD is ensuring that posted workers are insured and continue to pay social security. A posted worker continues to be covered by social security in their home country, but the employer must request a PD A1 form and alert the host’s country officials.
If a posted worker’s duration in the country is less than six months, they shouldn’t be liable for income tax there. However, it's important to point out that there are no universal tax rules across the EU. To avoid surprises, companies should review the tax laws in the countries where they are sending workers.
Non-compliance with the PWD can result in significant fines and reputational damage to global organizations. For example, a violation of employment standards is a €50,000 fine per employee, and repeated offenses can mean a fine of €500,000 per employee.
How to Manage Liabilities for Posted Workers
Posting workers within the EU can be a valuable asset for expanding organizations. But it carries the potential to disrupt business operations. Companies can lower the risks for posted workers by taking the following steps.
Collaborate with Tax, Employment, and Immigration Experts
Work with experienced EU tax experts to manage accurate repórting and reduce the risks of hefty legal penalties. European immigration professionals can advise and help build a compliant strategy for posted workers. EU employment specialists provide guidance on payroll, benefits, and local labor regulations to ensure an ongoing, productive working operation.
Partner with Employer of Record (EOR)
As the CEO of a company that provides Employer of Record (EOR) services, I must recommend this option. An EOR can help companies comply with the PWD while boosting efficiency and productivity. Compliant contracts, work visas, and managing employee benefits are some services an EOR can deliver.
Create a Comprehensive Posted Worker Database
By creating a pre-deployment database, you can avoid compliance issues and risks. It helps remind companies to address visa needs, provide proof of insurance, evaluate tax risks, and confirm local labor laws. Using a database can help companies reduce issues and ensure smooth postings.
Post Workers with Confidence
The EU's Posted Workers Directive demands careful attention from businesses with cross-border operations. As I’ve explained, the risks are challenging, but they can be effectively managed with the proper knowledge and strategies.
Working with an Employer of Record, collaborating with tax, employment, and immigration experts, and maintaining a comprehensive Posted Worker Database are steps in the right direction. By following these plans and staying up to date with the evolving regulations, businesses can thrive across Europe.