Introduction
Are allowances part of remuneration?
Social inspection services guidelines on allowances
Comment
According to the EU Posted Workers Directive,(1) an employer must pay a posted worker the correct mandatory remuneration as applicable in the host country. Posting allowances are considered as part of a posted worker's remuneration if they are not paid as a cost reimbursement. The question whether the qualification as a posting allowance is justifiable is not always easy to answer. A recharacterisation into a cost allowance may have important consequences, as this may result in a situation where a posted worker's remuneration package no longer meets the mandatory minimum requirements that are applicable in the host country.
This article provides an overview of the legal principles that are set out by the EU Posted Workers Directive, the Belgian implementing legislation and the general practices that have been adopted by the Belgian social inspection services.
Are allowances part of remuneration?
The EU Posted Workers Directive provides that an employer must comply with the mandatory remuneration that applies in the host country where the posted worker has been temporarily assigned. The concept of remuneration covers "all the constituent mandatory elements of remuneration", such as mandatory premiums and end-of-year-bonuses. Consequently, an employer must not only pay the posted worker a salary that complies with the minimum basic salary that applies in the host country, but they must also offer a remuneration package with a value that is at least equal to the minimum and a mandatory remuneration package to which a locally hired worker in the host country would be legally entitled. In order to verify whether the amount paid to the posted worker is at least equal to the gross mandatory remuneration package under the laws of the host country, the total gross amount of remuneration should be compared, rather than any individual constituent parts of remuneration.
This will often result in technical comparison exercises, especially if a complex mandatory remuneration scheme applies in the host country, such as in Belgium. The mandatory remuneration requirements vary per industry.
An employer will, therefore, have to verify the mandatory remuneration requirements as set out in the applicable sector level collective bargaining agreements concluded at joint-committee level. This implies that a posting employer must first determine which joint committee applies to the activities that they develop on the Belgian territory, which requires a factual assessment.
The EU Posted Workers Directive also clarifies that allowances specific to the posting (ie, a posting allowance) are considered to be part of the remuneration, unless they are paid as reimbursement of the expenditure that was actually incurred on account of the posting, such as on travel, board and lodging.(2) If it is not clear from the terms and conditions of employment which elements of a posting allowance are paid in reimbursement of such expenditure, the entire posting allowance is considered to be paid in reimbursement of expenditure.
In Belgium, the EU Posted Workers Directive is implemented by the Belgian Posted Workers Act of 5 March 2002 and provides for similar wording regarding the possible requalification of a posting allowance into a cost allowance.
Social inspection services guidelines on allowances
Many posted workers receive a daily allowance during the posting period.
In its sector guidelines, the Belgian social inspection service confirms that it a priori does not consider daily allowances as remuneration. Therefore, it is up to the employer to demonstrate that the daily allowance is:
- not granted to cover travel, board, lodging or other costs; and
- directly related to the work (ie, the amount of the daily allowance must vary by the volume of the work performed).
As an exception to the above, the social inspection service may accept that a daily allowance constitutes remuneration if the employer finances the travel, board and lodging costs separately.
In case C-428/19, the Court of Justice of the European Union (CJEU) had to decide whether a daily allowance intended to cover expenditure during a posting period must be taken into account as part of the minimum wage. The Court concluded that a daily allowance is part of an employee's (minimum) wage if there are no elements available indicating that the allowance is deemed to reimburse (actual) expenses incurred and if the amount of the allowance varies in function of the duration of the posting. This could give posting employers the idea of remaining vague about why a daily allowance has been granted (eg, by not specifying the costs that such a daily allowance seems to cover) in order to increase the chance that such a daily allowance is considered as part of the remuneration. However, it is important to stress that the Court was asked to interpret the "old" article 3.7(3) of the Posted Workers Directive, before it was amended by Directive 2018/957.(4)
Under the amended wording of the Posted Workers Directive and its Belgian implementing legislation, the approach is just the other way around: if it is not clear from the terms and conditions of employment which elements of a posting allowance are paid to cover expenses or which are part of remuneration, the entire posting allowance will not be taken into account to determine whether there has been compliance of the mandatory remuneration package that applies in the host country.
Given the explicit guidelines of the Belgian social inspection services, it also remains of the utmost importance to duly clarify in an assignment or posting letter whether a daily allowance, if granted, is part of remuneration and, if not, which expenses it intends to cover to avoid requalification issues afterwards.
For further information on this topic please contact Emma Van Caenegem at ALTIUS by telephone (+32 2 426 1414) or email ([email protected]). The ALTIUS website can be accessed at www.altius.com.
Endnotes
(1) Directive 96/71/EC of 16 December 1996 concerning the posting of workers in the framework of the provision of service, as amended.
(2) Article 3.7 Posted Workers Directive.
(3) The question related to the interpretation of article 3.7, section 2 of Directive 96/71/EC of 16 December 1996 concerning the posting of workers in the framework of the provision of service:
allowances specific to the posting shall be considered to be part of the minimum wage, unless they are paid in reimbursement of expenditure actually incurred on account of the posting, such as expenditure on travel, board and lodging.
(4) Article 3.7 of the Posted Workers Directive now provides as follows:
Allowances specific to the posting shall be considered to be part of remuneration, unless they are paid in reimbursement of expenditure actually incurred on account of the posting, such as expenditure on travel, board and lodging. The employer shall, without prejudice to point (i) of the first subparagraph of paragraph 1, reimburse the posted worker for such expenditure in accordance with the national law and/or practice applicable to the employment relationship. Where the terms and conditions of employment applicable to the employment relationship do not determine whether and, if so, which elements of the allowance specific to the posting are paid in reimbursement of expenditure actually incurred on account of the posting or which are part of remuneration, then the entire allowance shall be considered to be paid in reimbursement of expenditure. (Emphasis added.)