Posting allowance or cost allowance: an often subtle difference with important consequences
According to the Posted Workers Directive, an employer must pay a posted worker the correct mandatory remuneration as applies in the host country. Posting allowances are considered as part of a posted worker’s remuneration provided they are not paid as a cost reimbursement. The question whether or not 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 applying in the host country.
After having summarised the legal principles set out by the Posted Workers Directive as well as the Belgian implementing legislation, we shed light on the general practices adopted by the Belgian social inspection services. Finally, we comment on an ECJ ruling dealing with this matter.
1. The posted workers Directive and its Belgian implementation: allowances as part of the remuneration?
The Posted Workers Directive provides that an employer must comply with the mandatory remuneration as applies in the host country to which the posted worker is temporarily assigned. The concept of remuneration covers “all the constituent mandatory elements of remuneration”, such as mandatory premiums, end-of-year-bonuses, etc. Consequently, an employer must not only pay the posted worker a salary that complies with the minimum basic salary as applies in the host country but must offer a remuneration package with a value that is at least equal to the minimum and mandatory remuneration package that a locally hired worker in the host country is legally entitled to. To verify whether or not 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, and the mandatory remuneration requirements vary per industry. An employer will thus 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 first has to determine which Joint Committee applies to the activities he develops on the Belgian territory, which requires a factual assessment.
The Posted Workers Directive also clarifies that allowances specific to the posting (i.e. a “posting allowance”) are considered to be part of the remuneration, unless they are paid in reimbursement of expenditure actually incurred on account of the posting, such as expenditure on travel, board and lodging. If it is not clear from the terms and conditions of employment which elements of a posting allowance are paid in reimbursement of expenditure actually incurred on account of the posting or which are part of remuneration, then the entire posting allowance is considered to be paid in reimbursement of expenditure.
In Belgium, the 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.
2. The Belgian social inspection services guidelines: allowances not part of the remuneration?
Many posted workers receive a per diem allowance during the posting period.
In its published sector guidelines, the social inspection service confirms that it a priori does not consider per diem allowances as remuneration. It is up to the employer to demonstrate (i) that the per diem allowance is not granted to cover travel, board, lodging or other costs (ii) and that the per diem allowance is directly related to the work (i.e. the amount of the per diem allowance must vary by the volume of the work performed) to qualify as remuneration.
As an exception to the above, the social inspection service may accept that a per diem allowance constitutes remuneration if the employer finances the travel, board and lodging costs separately.
3. The ECJ’s ruling
In case C-428/19, the ECJ was asked to rule about the question of whether a daily allowance intended to cover expenditure during a posting period must be taken into account as part of the minimum wage.
- Summary of the relevant facts
In the case at hand, Hungarian employment legislation was at stake. Three Hungarian truck drivers were employed by Rapidsped, a company based in Hungary. From time to time, the truck drivers performed work abroad in France. As per Hungarian employment legislation, the workers were entitled to a per diem allowance for work carried out abroad. In a personnel note issued by Rapisped, it was stated that the per diem allowance was intended to cover the costs incurred abroad by the posted workers. However, the longer the duration of the posting period, the higher the amount of the per diem allowance.
Furthermore, the truck drivers could become entitled to a fuel premium calculated by the fuel consumption: the less fuel the truck drivers consumed, then the higher the premium.
The truck drivers received a gross hourly salary of EUR 3.24, whereas the French gross hourly minimum wage was (significantly) higher. Rapidsped argued that the difference was being compensated by the daily allowance and the fuel premium and thus defended the position that these components were part of the gross minimum wage. The truck drivers challenged this argument.
- The ECJ’s analysis
The ECJ observed, with reference to the personnel note issued by Rapisped, that the daily allowance was intended to cover costs incurred by the posted workers abroad. However, as the amount of the daily allowance increased together with the duration of the posting period, the ECJ considered this as an indication that the daily allowance was provided to compensate for the disadvantages triggered by such a posting and the fact that the posted workers were away from home and their usual life environment, rather than covering expenses. The ECJ also observed that there was not any element available allowing the ECJ to conclude that the daily allowance was paid to reimburse the expenditure actually incurred.
Consequently, the ECJ concluded that a daily allowance of which the amount varies by the duration of the posting period is part of the minimum wage, and hence constitutes remuneration.
In his opinion, the Advocate General had reached a similar conclusion but his reasoning was mainly based on the observation that the daily allowance was paid on a lump-sum basis without the posted workers having to submit evidence of the expenditure actually incurred. There was no evidence whatsoever that the posted workers effectively spent the daily allowance, and if so, that the daily allowance was spent to cover expenditure caused by the posting. The Advocate General strongly emphasized that a daily allowance is part of a posted worker’s (minimum) wage unless it covers actual expenses incurred and that the latter can be demonstrated.
4. Lessons learned: remain vague or be clear?
In the case at hand, the ECJ 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 (e.g. 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 ECJ was asked to interpret the “old” Article 3.7 of the Posted Workers Directive, before it was amended by Directive 2018/957. 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, then the entire posting allowance will not be taken into account to determine whether the mandatory remuneration package as applies in the host country has been complied with.
Therefore, and also given the explicit guidelines of the Belgian social inspection services, it 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.
ALTIUS’ Employment team is available to assist foreign employers considering posting workers to Belgium, including providing practical advice on the applicable working and employment conditions taking into account the Posted Workers Act’s requirements, and providing assistance with the relevant contractual documentation. Furthermore, the Altius’ employment team can provide further guidance regarding any additional employment-related formalities, registrations and obligations triggered by a posting set-up.
 Directive 96/71/EC of 16 December 1996 concerning the posting of workers in the framework of the provision of service, as amended.
 ECJ 8 July 2021, C-428/19.
 Article 3.7 Posted Workers Directive.
 The question related to the interpretation of Article 3, 7° § 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”.
 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).
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