Impact of market integration on employment conditions in road haulage
23 Nov 2015
Andrea Broughton, IES Principal Research Fellow
The road haulage sector is an important transnational sector in the European Union. The industry has undergone significant structural change over the past decade, due to liberalisation of the market and the increased competition that this has caused. IES recently undertook research for the European Parliament that assessed the impact of market integration on employment conditions in the sector. A complicated picture emerged of a sector characterised by long and complex subcontracting chains and instances of long driving times, inadequate rest, and some employer practices aimed at circumventing EU and national employment regulation.
Composition of the sector
The road haulage sector is very male dominated, with open-ended and full-time employment the most common form of contracting. However, subcontracting is becoming a prominent feature of the sector, often involving complex subcontracting chains across borders, which enable employers to benefit from hiring workers on the basis of lower wage levels. This practice of subcontracting has been linked to a proliferation of employment practices that have the capacity to undermine the working conditions of drivers. These include false or bogus self-employment and the employment of non-resident drivers via so-called letter-box companies, which are companies registered in a particular Member State, but which in actual fact have no activity in that country.
The sector has undergone significant structural change over the past 10 years, due to market integration and liberalisation, resulting in increased competition following the opening of market access for drivers from the newer EU Member States in central and eastern Europe (the so-called EU12). Operations based in these countries now have a much greater share of the market than 10 years previously, and the number of those employed in the sector overall has grown significantly in most EU-13 countries (EU-12 plus Croatia) in the past 10 years, whereas it decreased in most of the other EU Member States.
The practice of cabotage, which is the national carriage of goods for hire or reward carried out by non-resident hauliers in a host Member State, has grown over the past decade. Typically, a driver might carry a load from one country to another and then while in the destination country will carry out some delivery work within that country or in neighbouring countries. The practice of cabotage grew by 50 per cent between 2004 and 2012, and by a further 20 per cent in 2013 alone. According to the European Commission, this rise is largely due to the lifting of restrictions on the market access of EU-12 drivers. Despite this growth, however, cabotage still only accounts for a mere 1 per cent of total freight activities in the EU-28. EU regulation allows hauliers to perform up to three cabotage operations within a seven-day period beginning the day after the unloading of the international transport cargo. There are concerns about the extent of cabotage as it could potentially undercut road haulage operators that are based in the destination Member State.
Pay and employment conditions
Labour costs in the sector vary considerably between Member States and although there are indications of labour cost convergence, considerable divergences remain. Labour costs have fallen to the greatest extent in Greece, Portugal and Cyprus since 2008, and have risen most strongly in Bulgaria and Romania (albeit from a very low base). The divergence in reported wages in part reflects different methods of remuneration: variable elements are a key component of total remuneration in particular in the case of EU-12 nationals.
Drivers in the international road haulage sector face a number of challenges in relation to working conditions and general employment conditions. These include long driving times and insufficient rest, time spent away from appropriate rest and washing facilities, and high strain coupled with low autonomy. These issues are all exacerbated by the increasing internationalisation of the sector, which results in longer missions and longer periods away from home. There is also evidence that the employment conditions of EU-12 drivers are worse than those of EU-15 (the western European Member States, prior to EU enlargement in 2004) drivers in terms of pay, social protection, working time and rest breaks.
There are also occupational hazards related to the type of material transported (which can result in exposure to specific chemical or biological hazards) as well as to prolonged exposure to diesel, which can increase the risk of respiratory diseases. There are also physical risks related to prolonged sitting in a static posture, combined with whole-body vibration, while loading and unloading activities are associated with specific ergonomic risks (such as musculo-skeletal symptoms associated with performing physically demanding loading and unloading tasks).
However, the sector, both nationally and internationally, also struggles with the popular perception that it is more dangerous than it actually is:
“In terms of health and safety, the perception is that it’s a dangerous profession, but the statistics don’t bear this out. In terms of the number of deaths, the figures for this sector are lower than the average of other sectors.”
Brian Bayliss, chair of the European Commission’s
High-level Group on Road Haulage
The future of the sector
There is a comprehensive body of European legislation governing the sector, which aims to balance market integration (access for operators and free movement) and protection of employees, for example, regulation of working time and rest periods. This is principally the Posting of Workers Directive; Regulations on access to the profession of road haulage operator and access to the international road haulage market; the Directive limiting working time in road transport; the Directive on social legislation relating to road transport activities; and the Regulation on harmonisation of certain social legislation relating to road transport.
However, there are doubts as to whether this legislation is adequately protecting the employment conditions of drivers who are working in an increasingly integrated, internationalised and competitive sector. Although current legislation is deemed to be adequate in general, there are issues around weak application and enforcement in Member States, which may be partly due to a lack of clarity or loopholes in existing legislation. Specifically, there are differences in interpretation of EU legislation, definitions and categorisation of infringements and the levels of fines and sanctions. There are also discrepancies in control mechanisms and enforcement practices.
We found that in order to close any loopholes and clarify issues and concepts defined in European legislation, a review of existing legislation may be of use. In addition, intensified coordination could help to improve the situation, including more guidance from the EU in the form of explanatory information, tools, financial help and exchange of good practice.
Social partner views
There is a high degree of consensus among the social partners – employer and worker representatives – about how to improve the situation. They agree that there should be clarification on the application of the Posting of Workers Directive to international drivers and that other loopholes should be closed, such as regulation of the use of the tachograph, in order to ensure that drivers have adequate rest. The social partners also agree on the need for legislative action to enhance enforcement of EU legislation, for better sharing of information and data, and an enhanced social dialogue. Combating social dumping (whereby foreign service providers undercut local service providers using cheaper labour, often with lower labour standards) through joint liability in sub-contracting chains and further action against letterbox companies is another key area of consensus.
The main areas of divergence between the social partners include how to sanction companies in breach of social legislation, the creation of an EUwide corps of inspectors for roadside checks, and how to limit the length of subcontracting chains.
Our main areas for policy revision were to develop a common classification of infringements in order to standardise practice in all Member States, and to examine whether indicative values can be assigned to sanctions in relation to minor, serious and very serious infringements in all areas of employment conditions.
We also recommended that enforcement could be strengthened by encouraging Member States to staff labour inspection bodies adequately and to fund the training of enforcement officers, and by promoting cooperation between different national authorities.
Finally, in order to limit subcontracting and the proliferation of letter-box companies, we recommended that formal, written contracts should form the core of employment relationships in the sector, thus formalising supply chains. Further, conditions for access to the road haulage market could be tightened.
Broughton A, Curtarelli M, Bertram C, Fohrbeck A, Hinks, R and Tassinari A: Employment Conditions in the International Road Haulage Sector. European Parliament 2015. http:// www.europarl.europa.eu/RegData/ etudes/STUD/2015/542205/IPOL_ STU%282015%29542205_EN.pdf