KPMG issues European minimum wage survey

KPMG issues European minimum wage survey

KPMG in Romania has issued a report giving detailed information about minimum wage requirements in all EU member states as well as the EEA and Switzerland. The aim is to help employers who deploy staff to other countries gain a better understanding of this area of legislation, which at first glance might appear simple, but which, in practice, can be quite complex.

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As Madalina Racovitan, Partner and Head of People Services at KPMG in Romania, explains: “Free movement of workers is one of the fundamental principles of the European Single Market, bringing benefits both to companies and individuals. The number of those taking advantage of it is growing all the time. But it also brings many complications, and compliance with minimum wage legislation is one of them. Nearly all the countries surveyed have some form of minimum wage, but its details vary widely. In some, like Romania, there is a single national minimum wage for all types of employment. Other countries have different minimum wages based on factors like industry, position, age or other criteria. In these cases, the minimum wages are often established as part of collective bargaining agreements.” 

As Racovitan continues: “Even in the simpler cases, where there is just one legally defined national minimum wage, there are numerous complications, particularly for employers who send their staff on assignments abroad. For example, what is considered income for the purposes of complying with the minimum wage? If the employer pays for the costs of accommodation, can this be taken into account? Often the definition of what is acceptable will vary from one European country to another. Moreover, if an enhancement to the home salary is required, what form should this take? Will a salary increase be the solution, or could this generate problems when the employee returns and a decrease needs to be applied?” 

Compliance with minimum wage requirements as well as other rules imposed under the so-called “Posting Directive” (Directive 96/71/CE) has become increasingly important, since a new Directive 2014/67/EU on the enforcement of the “Posting Directive” is currently in the process of being implemented into the domestic legislation of EU member states. The objective of the “Enforcement Directive” is to establish a common framework comprising a set of appropriate provisions, measures and control mechanisms, which will allow better and more uniform implementation, application and enforcement in practice of the Posting Directive, in order to prevent, avoid and combat abuse of the applicable rules by employers taking improper advantage of the freedom to provide services. We consequently expect the authorities in all member states to exercise more careful scrutiny in the near future over employers posting workers to other member states.

As Racovitan concludes: “The KPMG report provides an overview of some of the key points, and should be a useful starting point for any employer considering sending staff on assignment to another country, or already doing so. Nevertheless, given the complexity of these issues, and the severity of the penalties for non-compliance, it is highly recommended that employers in this position should seek expert guidance on minimum wage legislation, to establish not only the amount which needs to be paid and the forms of income which this can include, but also to clarify the most appropriate legal framework.”

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