Recruitment HomepageLibraryCompliance and cross border contract staff

There are a number of issues which must be considered when cross border contract staff are engaged in European countries. These issues derive largely from the differences between the prevailing legislation in various continental European countries and those prevailing in the UK and Ireland.

In the UK and Ireland the legislation is based on the concept of common law while on the continent, legislation is based on civil law. Civil law is derived from statutes while common law is based on fairness and reasonableness.

Temporary employment is highly regulated in most European countries. In many cases if an agency wishes to provide temporary contract staff to clients, a licence is required. Countries with such requirements include Germany and Belgium. The regulations often include restrictions on the reasons for taking on temporary staff, the maximum duration of a temporary contract and the maximum number of times that a temporary contract can be renewed.

What are the implications for Parc in placing temporary contract staff with clients in mainland Europe?

As discussed earlier, in many countries Parc is required to have a licence. Parc currently holds licences in Ireland, Germany and Belgium (Flanders region). Licences are not required in the United Kingdom, the Netherlands and France provided the agency has a licence in another EU Member State. As a leading international provider of specialist staffing solutions Parc will always ensure that it complies with the various regulations. To this end Parc has a dedicated tax & compliance department which constantly monitors the ever-changing regulations in the countries in which Parc may be required to supply contract staff. Unfortunately the regulations sometimes mean that Parc is prevented from providing the client with its precise requirements. E.g. a temporary worker for a 16-month contract in Germany (German regulations provide for a maximum of 12 months for a temporary contract). Penalties can be imposed on Parc if the regulations are not complied with.

What are the implications for the Client?

The issues of concern for the Client stem from the same regulations. In general a client can only engage temporary staff for a number of specific reasons including; replacing a permanent staff member who is absent due to such things as sickness or maternity leave or when a company has a temporary need. The duration of the contracts may be regulated and the contract with Parc must contain certain terms and conditions. The detailed rules are different in each country. Each one deserves a web page in its own right. As with agencies, if the regulations are not adhered to, penalties can be imposed directly on the client by the labour authorities. In Belgium for example, if the client obtains temporary staff through an agency that is not licenced in the appropriate region in Belgium, the contract can be deemed null and void. If this happens then the contractor is deemed to be a full time employee of the client and the client and agency become jointly and severally liable for all income taxes and social security payable.

What are the implications for the contractor?

The implications for Contractors vary depending on the country in which they are working. The Rome convention and the recently introduced posting of workers directive covers workers from one member state who work in another member state. These pieces of legislation ensure that the posted worker has the protection of the most favourable state. Temporary workers in many countries have additional protection under domestic legislation; this protection can include for example an entitlement to be paid at least the same as the equivalent permanent employee.

Brief summary of rules as they pertain in various countries

France

If an agency has a licence in another EU country there is no need to obtain a licence in France. However the agency must still abide by the rules in France. Temporary employment is highly regulated but the industry is well developed.

Parc must file a declaration with the local French labour administration each time a contractor is supplied to a French company. The declaration, which must be in French, has to include the following information.

	The name and address of the agency,
	The names and address of the managing directors of the agency
	The entities to which the social security is to be paid
	The employee's name, gender, date of birth, address, nationality, qualification, contract start date and end date.
	The name and address of the customer

Parc must also obtain a financial guarantee from an authorised French financial institution equivalent to 8% of the agency turnover. Failure to duly draft and file these declarations or to have the financial guarantee in place could lead to a fine and or imprisonment. The rules governing French employment law apply regardless of the contract i.e. even if you state that a contract is to be governed by Irish law, French employment rules still apply.

Temporary employment contracts are permitted only in very limited circumstances:

	Rule 14.1 covers employees posted for less than 12 months
	Rule 14.2 covers employees working in two or more member states

Replacement of an absent employee
A temporary increase in business
Seasonal or, by its nature, temporary employment
The employment agreement may not exceed 18 months (or 24 months in certain circumstances) and must be made within two days of the start of the employment.

Belgium

The regional labour authorities regulate the temporary employment industry in Belgium. There are three regional authorities in Belgium, one for the Flanders (Dutch) region, one for the Wallonian (French) region and one for the Brussels region. The industry is highly regulated and an agency must have a licence to operate from the appropriate region.

There are limited and specified reasons for taking on temporary staff with the maximum duration of the contracts determined by the reason for the temporary need. One of the most common reasons for needing temporary staff is a temporary increase in business. The maximum duration of such a contract depends on whether union approval has been obtained for the temporary staff. If approval has been granted by the union then the maximum duration is dependent on the union approval, without union approval the local labour administration must approve the temporary worker and the maximum duration is six months.

All agencies must make a payment equivalent to 8.35% of the temporary workers (interim worker) wages to the social fund for interim worker. This in turn is repaid to the interim worker in December of each year. The amount paid to the interim worker is based on the interim worker's earnings up to the year ended March of the same year.

All interim workers must be on employment style contracts, a copy of which must be filed in Belgium. Social security must be paid to the appropriate authority.

Germany

As with many other continental European countries the temporary employment industry is highly regulated. An agency wishing to provide temporary staff must have a licence. The maximum duration of a temporary contract is 12 months. The industry is still in its early stage of development compared to countries such as the Netherlands and the UK.

There are restrictions on the reasons for taking on the temporary staff.

Social Security

Social security is governed by the EU regulation 1408/71, this regulation covers where cross border workers should pay social security. The over riding principle of the regulations is to ensure that there is some consistency and stability to the payment of social security.

There are two relevant sections concerning contract workers:

	Rule 14.1 covers employees posted for less than 12 months
	Rule 14.2 covers employees working in two or more member states

Rule 14.1 allows for the situation where a company posts one of its employees to another member state for less than 12 months. The social security of the first Member State shall apply. This was extended to cover agency workers provided they are subject to the first Member State's social security prior to recruitment and posting.

	Rule 14.2 covers individuals working in two or more Member States
	Rule 14.2.a cover pilots employed directly by airlines. They pay social security in the country of the airline subject to the following restrictions
	Rule 14.2.a.i if they are employed by a branch or permanent representation in another country then they pay social security in that country.
	Rule 14.2.a.ii if the pilots is employed in a country where they reside, then social security is paid in that country.
	Rule 14.2.b.i covers other workers, they pay social security in the country they are resident in if they carry out their duties partly in that state
	Rule 14.2.b.ii covers workers other where they do not work in their country of residence then they pay social security in the country of their employer.

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