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Has the Mobility Package ended social dumping in the transport industry?

The Mobility Package was primarily designed to enhance the working conditions and occupational safety of truck drivers. Have the regulations been effective, or have they proven inefficient?

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Fair Mobility, a trade union-related project, was initiated in 2011 to implement fair wages and working conditions for employees from Central and Eastern European EU countries in the German labour market, including in freight transport. Despite numerous legal measures, the situation for many professional drivers remains precarious, according to the organisation.

A dossier published in July 2022 highlights long working hours, inadequate pay, and a lack of social security. Drivers from Eastern Europe and Asia, particularly India and the Philippines, are most affected.

“In principle, it is positive that the Mobility Package aims to create greater transparency in remuneration in international road transport and improve social conditions,” states Anna Weirich, who coordinates the advisory network’s activities in international road transport.

Expenses Model and Letterbox Companies

A major critique is the complexity of the posting rules—for both drivers and legal enforcement—which means many industry grievances continue.

“In practice, we see that freight forwarders still verbally agree on daily rates, which are often predominantly expenses. Wage composition might have changed in individual cases, but not significantly across the industry,” notes Weirich.

With the so-called expenses model, logistics companies exploit the wage disparity within the EU, paying truck drivers from Eastern European countries based on their home country’s lower wages, rather than the operating country’s minimum wage as mandated by minimum wage laws and the posting directive.

The higher minimum wages are circumvented by including expenses, which should be earmarked and not offset against the gross minimum wage, allowing companies to save on taxes and pay lower social security contributions.

Fair Mobility estimates that companies save an average of about 5,000 euros per driver annually. Letterbox companies also remain a problem. Since orders in international road transport often go to subcontractors, entire chains of companies form, consisting of senders, forwarding companies, and freight carriers, with the latter typically employing the drivers.

It’s common for Western European companies to favor freight carriers with branches in Eastern European countries or to establish such branches themselves to manage international transport. These are often merely letterbox companies. What needs improvement in Germany is for major customers, who commission the trips, to take responsibility for the living and working conditions of the drivers, as required under the LKSG, emphasises Weirich.

Price war or social dumping?

Accusations of social dumping, whether justified or not, are primarily directed at Eastern European countries like Poland and Lithuania. Poland is reportedly becoming a significant hub for foreign logistics firms, attracted by liberal labour laws and fast visa processing, as noted in a Deutschlandfunk report on the Polish transport industry.

Following the introduction of a third-country worker quota in 2021, many Lithuanian companies have reportedly relocated their headquarters to Poland. But is this really social dumping, or merely a price war between transport companies?

“Competition over lower freight rates due to lower labour costs has always been emotionally charged for entrepreneurs. The labour costs of Polish transport companies stem from a remuneration model in our country that involved non-taxed, social security-exempt components. However, this discrepancy between non-taxable salary components and taxable elements has been a point of contention between drivers’ unions in Poland and employers, even challenged by the Constitutional Court and questioned previously by a decision of the Supreme Court,” explains the industry organisation ZMPD.

The remuneration model for truck drivers should also change as a result of Directive 2018/957 of the European Parliament and of the Council (EU), amending Directive 96/71/EC concerning the posting of workers in the provision of services in Poland, which has already been amended.

“Certainly, the directive does not prohibit national systems from continuing to pay tax-exempt salary components to posted workers, it merely indicates that these cannot be considered part of the foreign salary. For example, if the Romanian model allows for the payment of daily allowances to Romanian drivers, this need not change. To put it simply, Romanian transport companies can pay their drivers working in Germany the applicable salary there, but they are not allowed to include the difference as part of the salary and may have to compensate for it,” the organisation clarifies.

Zenonas Buivydas, Secretary General of the Lithuanian industry association Linava, also views the allegations as exaggerated. He accuses the EU of harming the competitiveness of Lithuanian transport companies with the introduction of the Mobility Package.

“When it comes to allegations of social dumping by Western European companies, these are clearly inflated claims—the allegations are completely unfounded. This is a political issue, with Western European companies lobbying for the Mobility Package. The Mobility Package has not improved conditions for our national hauliers, but has only created additional financial and administrative burdens for companies. Ultimately, restrictions and new obligations were introduced without considering the rights of countries on the EU’s periphery, including Lithuania, to equal opportunities in European road freight transport,” he asserts.

Criticism of the Mobility Package also comes from Povilas Drižas, Secretary General of the International Transport and Logistics Alliance (TTLA).

“More than three years after the adoption of the Mobility Package, the provisions of these regulations are still interpreted and applied differently by transport inspectors in different EU Member States. Drivers are asked to provide different types of documents, and those stipulated by law as acceptable alternatives are often not accepted. The varied implementation of the legislation exposes companies and drivers to unequal treatment during roadside checks. Vehicles and drivers are stopped for checks that can last ten hours or more, and drivers are frequently pressured by inspectors, increasing their stress levels,” says Drižas.

Drižas also highlights that Western European companies are complicit in the system of social dumping:

“If a company provides transport services in accordance with the regulations of the country in which it is registered, as well as the country in which it provides the service, and in line with EU regulations, there is no basis for such allegations. However, the issue of bogus companies operating in Western Europe that do not meet the establishment criteria of EU law while using cheaper labour from other countries should be more thoroughly addressed. There are many examples of social dumping by companies from Western European countries,” Drižas concludes.