‘Habitual residence’ rules deprive EU workers from social benefits

Press conference by László Andor, Member of the EC, Member of the EC, on the guide on application of ‘Habitual Residence Test’ for social security. (EC Audio-visual Services, 13/1/2014).

With a timely move the European Commission published yesterday a guide on the application of the ‘Habitual Residence Test’, in this way permanently blocking what has been termed as social ‘benefit tourism’. By the same token, the Commission also erased the rightful expectation of people who are employed as ‘posted workers’ in another EU member state, to claim the social benefits of the host country. In most cases they have already been deprived of the right to claim equal wages as their colleagues of the host member state.

This ‘habitual residence’ guide came only a few weeks after the Commission facilitated the ‘posting of workers’ last December, by securing that this arrangement can be used even by a temporary employment firm or a placement agency. Those labour ‘merchants’ can now hire workers in one member state to be employed by one or more “user” businesses established in another Member State. Of course the remuneration will be of the low labour cost country.

In principle, the above arrangements are not new. Even since 1996 the Directive 96/71/EC provided that in the case of ‘posted workers’ “The obligation to respect the minimum rates of pay does not oblige Member States to set or introduce minimum wages, if they do not exist in the Member State in question”. In Britain and Germany there is no legally binding minimum wage. As a result, the remuneration of posted workers from Poland or Bulgaria working for two years in Germany or Britain tend to be nearer to the levels of his or hers country of origin rather than the much higher levels of the host country.

Balkan wages in north Europe

But it’s not only the level of remuneration for Bulgarian workers posted say to Germany that resembles Balkan standards. Also the social security conditions applying in their case are the ones provided by the regime of their country of origin rather than the host member state. Regulation No 883/2004 of 29 April 2004 ruling on the coordination of social security systems, foresees the following in the Article 12, “A person who pursues an activity as an employed person in a Member State on behalf of an employer which normally carries out its activities there and who is posted by that employer to another Member State to perform work on that employer’s behalf shall continue to be subject to the legislation of the first Member State, provided that the anticipated duration of such work does not exceed twenty-four months and that he is not sent to replace another person”. Last December the EU extended this arrangement to posted workers who ‘belong’ to an agency of their home country and work on behalf of more than one employer in the host country, under Balkan conditions for at least two years.

In short, ‘posted workers’ get Balkan wages and social protection, while working for up to two years in another member state. Now the Commission wants to make sure that even ‘posted workers’ who live and work for up to two years in another member state cannot claim social benefits in this host country. And this despite the fact that their residence is there for at least two years. Yesterday László Andor, Commissioner for Employment, Social Affairs and Inclusion, said: “There are clear safeguards in EU law to prevent people from abusing social welfare systems of other EU countries. This guide will make it easier for Member States authorities to apply the ‘Habitual Residence’ safeguards in practice. The handbook is part of the Commission’s ongoing actions to facilitate the free movement of people throughout the EU.”

Habitually lost

A few lines below this statement the Press release issued by the Commission makes sure that ‘posted workers’ cannot be considered as ‘habitual residents’ in the country in which they work for two years. For example a Bulgarian working legally in Germany or a Polish working in Britain for two years is not entitled to German or British social security benefits. The Commission stresses that the “The guide, drafted in cooperation with Member States, clarifies the separate concepts of ‘habitual residence’ and ‘temporary residence’ or ‘stay’”. These definitions are laid down in EU law (Regulation EC/883/2004). Even a British citizen who has settled in Portugal and still owns a home in Britain is not any more a ‘habitual resident’ of Britain and is not entitled of the social benefits of his country of origin.

This new Commission guide on application of ‘Habitual Residence Test’ for social security gives a lot of complicated examples in order to help the national authorities answer questionable claims of benefits. The common denominator in all those cases is that the foreign citizen or the national who lives abroad is not entitled of social benefits. Even students in another country who return to their parents’ home only during holidays are not considered as ‘habitual residents’ of the country where they study and spend 90% of their days for say five years.

Who sets the rules

It’s more than evident that the Commission has succumbed to the demands of the big core member states like Germany, France and Britain. Obviously, the central and wealthy EU member states are trying to curtail the demands for social benefits and restrict the right to such claims to the absolute minimum of people. The exoneration from the right to claim social benefits in their own country of nationals who live most of the year in another member state must be a total novelty.

In any case, this new guide of ‘Habitual Residence Test’ is a clear indication that the internal dualism of the EU between high and low labour cost countries is to be safeguarded rather than to be erased. Presumably, the high labour cost member states want to have access to low cost labour but they do not facilitate the permanent emigration. The foreign national may be living and working for years in another EU member state but he is always considered as ‘habitual resident’ of his country of origin and has no rights on the social benefits and the level of labour remuneration of the host country.