Update on local legislation implementing the Directive on the Posting of Workers

On 12 February 2020 the German Federal Cabinet adopted a draft law to implement the revised European Directive on the Posting of Workers in the framework of the provision of services.

The revision of the Directive entered into force on 29 July 2018 after lengthy negotiations in Brussels (Directive 2018/957/EU amending Directive 96/71/EC). The revision of the Directive aims to improve the working conditions of posted workers while protecting the economy from wage dumping and unfair competition.

The draft law implements the revised Directive. In the future, posted workers will benefit to a greater extent from working conditions that are regulated by German laws, regulations and administrative provisions as well as by generally binding collective agreements. Changes will in particular be implemented with regard to the posted workers’ remuneration. While local law currently limits the mandated application of binding rules to minimum wage rates (Mindestentgeltsätze), the new law expressly extends this obligation to all elements of remuneration. This means that entire salary schemes, overtime charges or even allowances (e.g. dirt and hazard allowances) and payments in kind by the employer must in future be paid for all employees working in Germany. At the same time, however, the remuneration schemes can distinguish between groups of employees according to activity, qualification and professional experience. The draft bill also includes a prohibition to offset expense reimbursements received by the employees for their work abroad against their remuneration.

If the working conditions are regulated in generally binding collective bargaining agreements on a federal level (allgemeinverbindliche Tarifverträge), they will in the future also apply to posted employees in all sectors. Previously, this only applied to the construction industry.

In addition, employees on long-term assignments of more than 12 months – with a possibility to extend this exception to 18 months – will in the future benefit in principle from all working conditions mandated in Germany. This applies both to working conditions regulated by law and to conditions laid down in generally binding collective agreements. Employers based abroad must then – like employers in Germany – comply with all generally binding collective agreements.

The law can now be submitted to the Bundesrat (Federal Council) and parliamentary proceedings can be initiated. The locally implementing law is to enter into force on 30 July 2020, as provided for by the revised Posting of Workers Directive.