On July 30, 2020, the reformed Employee Posting Act (“AEntG”) came into force. The amended AEntG implements the reformed Posted Workers Directive (EU) 2018/957, which responds to wage differentials in the European labor market and ensures that posted workers will be subject to the same working conditions as local workers in the future. The Bundestag approved the bill on June 18, 2020.

Key aspects of the amended AEntG

• The AEntG expands the catalog of working conditions to be observed in Germany for posted employees. Particular importance is attached to the new regulation concerning the remuneration to be granted. By replacing the term “minimum wage rates” with “remuneration”, the AEntG now ensures that posted employees will in future receive the comparable remuneration of domestic employees, which has become established among companies and the public as the Equal Pay principle of the reformed Posting of Workers Directive. The total remuneration, which is calculated, among other things, in accordance with the German Commercial Code (HGB), must therefore be taken into account. §2a AEntG is composed of the following components:
  • Base Compensation,
  • Compensation components linked to the type of work, qualifications and professional experience of the employees and to the region,
  • Allowances, bonuses and gratuities, including overtime rates.

The AEntG provides in § 2b para. 1 AEntG makes it clear that allowances which are not paid in return for the work performed but to reimburse costs actually incurred as a result of the posting, such as allowances to compensate for travel, accommodation and subsistence costs, may not be offset against the remuneration of the posted employee.

• However, the additional working conditions to be observed must be laid down in a collective agreement that has been declared generally binding. Only if the employment relationship of the posted employee is covered by the scope of a generally binding collective agreement do the compliance requirements of the equal pay principle apply.

• The amended AEntG has extended the scope of generally binding collective agreements pursuant to Section 5 TVG. In the future, generally binding collective agreements will apply not only to foreign companies that post employees in the construction industry, but to all companies that provide services in all industries listed in the AEntG. These include the following industries:

• Construction
• Building cleaning
• Security services
• Special mining operations in hard coal mines
• Laundry services in the contract business
• Waste Management
• Education and training services according to SGB II and III
• Meat processing
• Nursing Industry

In addition, collective bargaining agreements are also relevant for all industries other than those mentioned above, if the extension of the legal provisions of the collective bargaining agreement appears necessary in the public interest. However, there is currently no extension for other industries.

In addition, different collective agreements are relevant depending on the duration of the postings, i.e. short-term and long-term postings. In the case of short-term postings (up to 12 months with a one-time extension option of six months), only nationwide generally binding collective agreements must be observed, while long-term postings (of more than 12 months plus six months) are subject to regional generally binding collective agreements.

Even if posted employees do not fall within the scope of a generally binding collective agreement, posting companies must still comply with mandatory working conditions such as minimum wage rates, working time regulations, minimum annual leave as well as other mandatory working conditions for long-term postings during assignments in Germany.

• Under certain conditions, posted employees are entitled to reimbursement of travel, accommodation and subsistence expenses due to work-related away-from-home activities under German law, provided that the regulations of the country of origin are less favorable.

• In the case of postings lasting longer than 12 months (with a one-time extension option of six months), in addition to remuneration and the listed minimum working conditions in §2 Para.1 AEntG, all other terms and conditions of employment are granted that are laid down in Germany in legal or administrative regulations as well as generally binding collective agreements. However, this does not apply to procedural and formal requirements and conditions for the conclusion or termination of the employment relationship, including post-contractual non-competition clauses, or to the company pension scheme (Section 13b (1) of the German Corporate Governance Code). AEntG). The additional working conditions for long-term assignments must be observed from July 30, 2020. If the posting started before July 30, 2020, the additional working conditions must be complied with as soon as the posting exceeds 18 months.

• Certain activities, such as initial installation work, contract negotiations, participation in trade fairs or establishment of a branch office, training, are exempt from the new rules if they are performed on a small scale. The rules do not apply to the road transport sector.

• When using temporary workers, the amended AEntG now obliges the user employer in Germany and abroad to inform the hirer of the applicable working conditions for comparable employees in Germany (cf. Section 15a AEntG).

• The competent control authority remains German Customs.

Recommendations for action for companies

To implement the Equal Pay Compliance requirement, companies should take the following steps:

• Check whether their employees fall within the scope of the equal pay principle,
• If the equal pay principle is to be observed, review and, if necessary, adjust the remuneration structure (e.g. by introducing an equal pay supplement),
• Ensure that posting-related documents comply with legal requirements (e.g., posting contract, posting policies, timesheets, etc.),
• Making registrations with labor authorities only after meeting Equal Pay requirements,
• Integrate Equal Pay requirements into the overall travel process,
• Reconcile Equal Pay requirements with processing of A1 applications.

KPMG Law Consulting Services

We provide comprehensive advice on the implementation of the reformed Posting of Workers Directive in Germany and throughout Europe. Our consulting services include in particular:

• Implementation of Equal Pay risk analyses
• Development of a company-specific Equal Pay concept for the implementation of Equal Pay requirements
• Review and adjustment of the compensation structure
• Integration of Equal Pay requirements into the overall travel process
• Provision of an IT-based Equal Pay Assessment Tool for assignments to Germany
• Advice on any documentation requirements for companies (e.g. timesheets etc.)
• Training your HR/employees in:
  • General Equal Pay Requirements
  • Development of an Equal Pay concept for the in-house implementation of Equal Pay requirements
• Review and adjustment of personnel deployment concepts
• Review and amendment of secondment contracts and policies
• Provision of a PWD/Equal Pay Update Service

For more information, visit our Equal Pay Hub at the following link: https://kpmg-law.de/rechtsgebiete/eu-entsenderichtlinie/

Contact us:

For further information and assistance, please contact one of the following subject matter experts from our KPMG Law Germany team: