The enlarged EU and the free movement of East European sevice providers

Research paper by Klaus Pedersen & Søren Kaj Andersen

It is likely that only between 5 and 15 percent of the Eastern European businesses, operating in Denmark, are covered by a collective agreement, compared to an average coverage around 80 pct. for Danish employees. This is one of the key findings in FAOS report prepared for Employment Ministry, entitled The enlarged EU and the free movement of East European service providers - extent and effects on the Danish labour market. Further, the report shows that Eastern European firms and their employees only to a limited extent at today have become part of the organized Danish labour market. Statements from Danish Tax Authorities VAT-registration show that, in March 2008, a good 1150 Eastern European companies delivered services in Denmark, bringing along their own staff from their home country. However, this number is associated with considerable uncertainty, as both public authorities and social partners find that there to some degree is embedded a registration deficiency.

In a previous analysis, FAOS' research has estimated that East European service providers on average have brought along 15 employees. This would mean that around 17,000 East European workers were posted to Denmark in March 2008, mainly from Poland. Tax registration shows that 3 out of 4 East European companies operate in the construction industry. The Danish Construction Employers' Confederation has about 30 service providing East European member companies, entailing these firms also to be obliged by a collective agreement. The 30 companies are representing approximately 3 percent of VAT-registered construction firms for East Europe. Pension-Denmark, which administers the occupational pensions for most skilled Danish workers, indicates registration of approximately 100 pension remitting East European companies, including the 30 members from Eastern Europe.

It is difficult to equate the pension remitting companies with the actual coverage of the collective agreements. But as the right for the individual employee to receive pension under collective construction agreement applies from the first day at work, the figures ought to show a realistic picture, at least of how many East European companies, which comply with collective agreements they have signed. Nevertheless, speaking to core personal in relevant Unions, they estimate to have obtained around 2-300 accession agreements with East European companies since May 2004. Accession-collective-agreements are differing from industry agreements by way of being settled directly in between a union and the company. Construction also accounted for the vast majority of accession agreements, though this practise is also found in the agriculture and nursery sector, and to a less extend, in the manufacturing sector. Further, our study has shown that unions, despite an apparent interest, are rather poor in providing documentation on the outcome of collective coverage and recruitment of East European labour migrants. Thus, e.g. as mentioned, it is not to say whether 5, 10 or 15 percent of East European posted workers are covered by Danish collective agreements.

We know from a previous FAOS research study that only few East Europeans workers are organized in a Danish trade union, probably between 2 and 4 percent. It is a similar low proportion of East European companies, which join the Danish employers' organizations, while the collective agreement coverage is somewhat higher. Nevertheless, it seems generally fair to conclude at this point that labour migrant from East Europe only has become part of the organized Danish labour market to a very limited extend.

Research paper, FAOS, Department of Sociology, University of Copenhagen, July 2008.