Posting of workers: taxation, social and health contributions, labour law and administrative requirements

This article will answer the following questions:

• What employers should consider when posting workers?
• How to settle foreign business trips and what are the tax implications?
• How does posting workers affect the settlement of social insurance?

An employer having a registered office or a permanent place of business in the territory of a country of the European Union, European Economic Area or Switzerland (they will be here collectively referred to as “Member States”, for convenience) may, under the employee posting scheme, assign their employee to temporarily perform work in another Member State, to provide services on behalf of the employer. 

Where global mobility of workers is becoming omnipresent, their posting turns out to be a high-profile topic among employers. In this article, we discuss the steps that should be taken to effectively carry out the process of posting workers to another Member State.

Step 1: determine the posting period. What are the differences between long-term and short-term posting?

There are two standard periods for posting workers:

• not exceeding 12 months – short-term posting;
• exceeding 12 months – long-term posting.

Whether it is a short-term or long-term posting will determine the posted worker’s terms and conditions of employment. 

Where the posting period does not exceed 12 months, the employer is obliged to provide the employee with a certain catalogue of employment conditions that apply in the host Member State. If, however, a worker is posted for a period exceeding 12 months, the employer must guarantee the posted worker not just a portion but virtually all terms and conditions of employment in force in the host Member State. 

Additionally, EU regulations allow for the extension of the short-term posting period up to 18 months while maintaining the employment conditions applicable to short-term posting. 

The extension of the posting period is effected by the so-called motivated notification, submitted to the relevant authority in the employee’s host Member State. 

Step 2: review compliance with employer’s labour law obligations  

An employer posting workers to work in another Member State for a period not exceeding 12 months is obliged to provide them with terms and conditions of employment that are in no way less favourable than those offered in the host Member State. This particularly is a matter of meeting the requirements regarding: 

• work time regulations, 
• periods of daily and weekly rest, 
• annual leave entitlement, 
• remuneration for work, 
• health and safety at work, 
• protection of female employees during pregnancy and maternity leave, 
• rules for equal treatment and the prohibition of discrimination in employment, 
• reimbursement of business trip costs.

In the event of long-term posting, the employer is obliged to provide the posted worker with all terms and conditions of employment that are in no way less favourable than those provided in the host Member State – provided for the terms and conditions of concluding and terminating employment contracts, non-competition clauses and employee capital plans (Polish: PPK).

Step 3: find out your tax obligations when posting workers

Posting workers calls for the analysis of its tax implications.

It will be crucial to consider the change in the taxpayer’s tax residency, the obligation and manner of paying advance income tax on behalf of the employee, the obligation to register the employer as an advance income tax withholding agent, and the risk of creating a permanent establishment (PE) by the employer in the country of posting (and therefore creating an obligation to account for a portion of the employer’s income in that country).

Step 4: apply for the A1 certificate

If you would like to post a worker, you should know in which Member State you would have to pay the employee’s social and health insurance contributions. 

As a rule, employees are subject to social insurance in the country where they perform work. Posted workers may however still be subject to the legislation of their home Member State if the projected duration of their posting fails to exceed 24 months and the employee is not posted to replace another posted person. 

If the employer would like to claim this employee social insurance incentive, they should, before the posting is effected, apply to a relevant authority in the home Member State and obtain the A1 certificate.

Step 5: check out your administrative duties

The employer should also find out the administrative duties that posting workers actually entails. The employee may be obliged to register their stay in the host Member State. Where the posted worker is not a citizen of a Member State, they may be required to undergo additional procedures aimed at validating their stay and employment. 

Posting workers calls for a broader perspective, in order to be able to ensure that the obligations of both the employer and the employee are met. Should you be interested in comprehensive advisory on posting workers or any related matters that might raise doubts, we strongly encourage you to contact us.