This weekly compilation of stories from wire services, newspapers and other sources is intended to keep Mercer employees and registered visitors to mercer.com informed of benefits, compensation and HR developments around the world. Facts have not been independently verified, and opinions expressed are those of the editor. Readers are invited to clarify, correct or expand on these items.

Australia

AASB exposure draft on super reporting; Various
The Age, AAP, The Australian
The Australian Accounting Standards Board has issued Exposure Draft 179 Superannuation Plans and Approved Deposit Funds, which would refine the reporting requirements for superannuation schemes. Cash flow statements would be mandatory for defined benefit plans, changes to member benefits would have to be reported and approved deposit funds would have to adopt fair value reporting. A consultation will run through September 30, 2009.

In other news:

• The Workplace Relations Ministers’ Council (WRMC) reported a framework agreement on uniform occupational health and safety (OHS) laws (IH 11/12/08).  It will be the basis for a model OHS Act to be adopted by both federal and state governments.
  
  
• The Prime Minister has denied charges that the preservation age – 55 now, due to reach 60 by 2024 – is set to rise until it matches the retirement age, which would rise from 65 to 67 under one of the proposals in last month’s budget (IH 05/13/09). The issue could, however, be revisited in the final draft of the Henry tax review at the end of this year.
  
  
• There was considerable pushback on proposed changes to the share scheme tax regime in the new budget (IH 05/13/09). Treasury officials have now conceded that the $60,000 annual income threshold for paying tax on shares or options when they are granted will need to rise. The Treasury will consult with stakeholders on how to modify the proposal.
  
  
• The Australian Prudential Regulatory Authority (APRA) has opened a consultation on draft remuneration guidelines for the large segment of the financial sector that it regulates. It aims to break the link between incentive compensation and excessive risk-taking. The consultation closes on July 24, 2009.
  
  
• The Superannuation Minister has fleshed out the mission of the coming super review (IH 05/06/09) with a terms of reference release. The review will conclude by June 30, 2010.
  
  
• The budget measure on means testing the private health insurance rebate (IH 05/13/09) was incorporated in Fairer Private Health Insurance Incentives Bill 2009, which has already cleared the House, but faces a tougher fight in the Senate.

China

Stock option tax relief
Xinhua
The Finance Ministry has issued new guidance on the taxation of stock options at exercise. Noting that restrictions on the sale of company shares prevent executives from cashing in immediately on the stocks, the new policy allows gradual payment of this tax within the six months after the stock options are exercised.

GCC

See also; Saudi Arabia, UAE

Rift over monetary union
Zawya, RGE, Gulf News

Plans for a Gulf Cooperative Council (GCC) monetary union (IH 01/08/09) are in limbo now that the UAE, one of the two dominant GCC partners, has withdrawn from the plan. The UAE balked when the GCC abandoned its commitment to base the Gulf Monetary Council in Abu Dhabi. Oman is also out. Saudi Arabia still plans to push for introduction of a four-state monetary union as early as 2010.

Hong Kong

Expanded role possible for insolvency fund
SCMP

Social partners agreed last week that the Protection of Wages on Insolvency Fund can and should also cover a worker’s paid leave entitlements in an insolvency. The proposal would entitle affected workers to up to 14 days leave pay. The Labour Advisory Board will meet this week to discuss the proposal.

India

Pension regulation; NPS market restrictions; Various
Economic Times, Financial Express, Business Standard
Legislation now before Parliament would extend the role of the Pension Fund Regulatory and Development Authority (PFRDA) to private pensions. Consolidating pension schemes under one regulator is expected to promote greater harmony between private pensions and the freshly launched New Pension System (NPS, IH 05/13/09). The PFRDA has noted that the NPS rollout is hampered by the limited number of points of presence (PoP) established so far. The regulator plans to draw new players into the market and to flesh out the regulatory framework for PoPs. One drawback is the Insurance Regulatory and Development Authority (IRDA) circular on insurance companies branching out as pension fund managers (PFMs). Insurers would have to set up discrete subsidiaries to act as PFMs.

In other news:

• Pre-budget consultations will get under way this week, and revenue officials are already suggesting that the controversial fringe benefits tax (IH 11/09/05) will be fully withdrawn. The budget will arrive in the first week of July.
  
  
• The Prime Minister has warmly received a working paper on an approach to consolidating and modernizing the labour laws. This revision would resolve many inconsistencies, replace barriers to employee termination with a more generous severance pay formula and attempt to create a more streamlined dispute resolution process.
  
  
• The IRDA has issued instructions to insurers on health insurance products for senior citizens. Protections for seniors include greater transparency on any age-related differences in the products and the entitlement to purchase any health insurance product before age 65. Any insurer denying health coverage to a senior citizen would have to supply a written explanation.

Japan

Corporate governance campaign
Financial Times

The Ministry of Economy, Trade and Industry (Meti) will release a report on corporate governance later this month, and has set out to smooth its path by discussing Japan’s failings in corporate governance, particularly the resistance to independent directors. Meti officials suggest that compulsory appointment of independent directors would help to attract foreign investors.

New Zealand

2009 Budget; Various
NZPA, Scoop, NZ Herald
Budget 2009 is most notable for proposing an 11-year contribution holiday to the Super Fund (IH 05/06/09). Critics charge that the superannuation fund will be left unable to fulfill its mission of absorbing the extra expenses when the baby boomer generation retires. There is also a review of ongoing efforts to support the job market and boost productivity.

In other news:

• The administration’s “reprioritizing” of expenses entailed shutting down the Department of Labour’s Pay and Employment Equity Unit at a time when the unit’s mission is far from complete.
  
  
• The Minimum Wage and Remuneration Bill was defeated in Parliament last week. It would have extended minimum wage protection to contract workers while raising the $12 per hour floor to $15 in three increments over the next three years.
  
  
• The Employment Relations (Statutory Minimum Redundancy Entitlements) Amendment Bill incorporates key recommendations of last fall’s report on redundancy rights (IH 10/16/08). As a member’s bill submitted by the opposition Labour Party, its progression to the debate stage is far from certain. The Labour Party is also planning to model a proposal after Australia’s General Employee Entitlements and Redundancy Scheme (GEERS), which protects acquired rights in an insolvency.

Saudi Arabia

Partial relaxation of sponsorship system
EIU

The Ministry of Labour has indirectly affirmed Bahrain’s assertion that all of the GCC member states share its antipathy toward the sponsorship system (IH 05/13/09, GCC).  A recently released ministry study initiated five years ago proposes having immigrant workers in several key occupations sponsored by their recruitment firms rather than their employers, so as not to tether them to the initial employer.

Singapore

Revised guidelines on excess manpower; CPF Life bill
Straits Times
The Ministry of Manpower has updated its Guidelines on Managing Excess Manpower in light of the continuing economic downturn. New strategies to avoid layoffs include universal adoption of the monthly variable salary component, encouragement of unpaid leaves and refinements of the flexible work and shorter workweek models.

Also, the CPF (Amendment) Bill has been introduced in Parliament. It offers a legislative framework for the CPF Life annuity scheme (IH 01/14/09). An addendum to the President’s Address indicates that the law is expected to take effect this year, but the scheme isn’t expected to be operational until 2013.

UAE

Immigrant worker rights package
Khaleej Times, Arabian Business
New employment regulations will modestly improve the lot of immigrant workers:

• Establishing a new court system to field workplace disputes
  
  
• Setting standards for foreign worker accommodations and transportation.
  
  
• Allowing a worker to switch employers after two months without pay
  

The Labour Ministry has advised the International Labour Organisation (ILO) that a review of the sponsorship system (IH 05/13/09, GCC) is in preparation, but observers have noted that there would be stiff private sector resistance to removal of this system.

Croatia

Update on transposition of EU labour laws
HINA
Social partners Federation of Independent Trade Unions of Croatia (SSSH) and Croatian Employers Association (HUP) have reached common ground on many provisions of a legislative package that would bring Croatia into harmony with EU labour laws (IH 09/10/08). Croatia would maintain a 40-hour workweek, with allowances for raising it as high as 48 hours in collective bargaining. They still differ over fixed-term contracts, which SSSH would limit to two one-year terms with a three-month break in between.

EU

See also: Poland, UK, first paragraph

New pension supervisor proposed; Various
DRE, WSJ, IPE
A new European Commission model for financial supervision would create several new regulators, some replacing existing bodies. Removal of the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS) and installation of the European Insurance and Occupational Pensions Authority (EIOPA) is intended to boost harmonization and dispute resolution for national rules on cross-border pensions. EIOPA’s board would consist of the heads of each nation’s pension authority. The European Council of Ministers is expected to vote on this financial supervision blueprint later this month.

In other news:

• The UK’s Financial Reporting Council (FRC) is among those warning of a potential rift between the International Accounting Standards Board (IASB) and the European Union. Some member states would prefer that the EU have its own set of accounting standards. Member state finance ministers are expected to air their concerns about IASB in their June 9 meeting.
  
  
• Five states will be dealt reasoned opinions over inadequate transposition of EU rules on corporate governance issues in a company merger.
  
  
• The European Court of Justice ruled in a trio of cases that member state laws restricting ownership and operation of pharmacies to pharmacists do not violate EU rules on freedom of establishment.

Finland

Minimum wage proposal
Helsingin Sanomat, YLE

The main union federation, Central Organisation of Finnish Trade Unions (SAK), has proposed a statutory minimum wage of €1,500 per month. Sectoral minimum wages would continue to be a part of collective bargaining, but SAK wants to have this floor in place.

Germany

Cabinet backs Kurzarbeit expansion; Corporate governance bill
BBM, Die Welt, Reuters
The Cabinet has approved an enhanced version of the short workweek expansion negotiated by the Labor Ministry and social partners last month (IH 05/06/09). Employers would now be fully relieved from social security contributions from months 7-24 and they would be entitled to return to a full-time schedule for a number of months, then claim the balance of the short workweek entitlement without having to notify the Federal Labour Agency.

Also, there was debate in Parliament last week over a bill that would give shareholders a nonbinding vote on top executive compensation. There would be limits on salary packages with variable pay components to prevent "windfall" bonuses and shareholders would have the option of suing for damages when a board awards an exorbitant salary. It may be merged with an existing package of executive compensation reform measures (IH 04/29/09). The dominant party in the grand coalition and its junior partner have quickly resolved earlier differences over this bill to ensure swift passage so it won’t be deferred until after the September 27 election.

Ireland

Social Welfare and Pensions Act 2009 [F]; Section 50/50A guidelines
Global Pensions, IPE
The Social Welfare and Pensions Bill 2009 (IH 05/06/09) has passed in Parliament, and the Finance Ministry is hard at work on the implementing regulations in order to launch the Pension Insolvency Payment Scheme (PIPS) “as soon as possible.”  In an adjustment to PIPS and other relevant provisions of the new law, the Pensions Board has pushed the June 2009 deadline for filing funding proposals back to December 2009.

In addition, the Pensions Board has issued Section 50/50A guidelines advising defined benefit plan trustees on how to apply to the board for a reduction of benefits. It outlines the mandatory audit of the scheme including sustainability, investment strategy and risk management. The guidance also previews the board’s forthcoming application form for reduction of benefits.

Latvia

Unemployment benefit extension
BNS
The Prime Minister announced that a complex unemployment benefit scheme with income replacement levels varying over the course of a four- to six-month  term will be replaced by a nine-month benefit period at a flat 45 lats (€64) per month.

Netherlands

Pension system review; Short-selling disclosure
Global Pensions, IPE, IPE 
The Social Affairs Minister has identified some of the standout issues of a wide ranging pension system study:

• Trimming excess fund governance structure
  
  
• Reviewing the structure of the financial assessment framework in light of the economy’s impact on second-pillar pensions
  
  
• Re-assessing the method for valuation of liabilities
  
  
• Considering the legal ramifications of contracting out key functions such as asset management
  

Also, Authority Financial Markets (AFM) has gleaned from a stakeholder consultation that short selling is too valuable to ban, but that it needs to come under greater scrutiny. For now, there will be mandatory reporting of short positions from June 1, 2009, to January 1, 2010. AFM’s long-term approach to the short-selling quandary will pursue international convergence and transparency without excess administrative burden.

Poland

EC reasoned opinions over pension taxation, investments
IPE
The European Commission has entered stage two of the infringement procedure against Poland over a discriminatory tax regime for foreign pension funds (IH 07/03/08) and over the 5% cap on foreign investment for open pension funds (IH 10/16/08). Poland maintains that the EC does not have jurisdiction over the latter because the pension funds are public entities. The reasoned opinions give the government two months to come up with a satisfactory response.

Portugal

Golden parachute tax, double taxation relief
DRE
The Council of Ministers has introduced a legislative package featuring a 35% corporate tax rate on executive severance pay that is deemed excessive. The bill defines “excessive” as “not related to the productivity objectives.”  Another provision ensures that employees of Portuguese companies who are posted overseas will not be subject to double taxation on their earnings. The ruling party holds a decisive majority in the National Assembly, so the bill has strong prospects for passage.

Slovenia

Paid leave bill; Sick leave cuts proposed
STA
The Cabinet has approved and set on Parliament’s fast track a bill that would offer forced leave at partial pay as an alternative to layoffs (IH 04/22/09). Workers would be paid 85% of normal salary, with the employer supplying 35% and the state paying the balance. The subsidized leaves will be offered for up to half of a company’s staff for up to one year starting as early as this week and ending in March 2011. Bonus pay, overtime pay and layoffs would be banned at enterprises participating in this program and the workers who benefit would have to spend at least 20% of their leave time in training.

Also, union confederation ZSSS is contesting a proposal championed by employer groups and the Health Insurance Institute (ZZZS) that would reduce the sick leave benefit. The annual paid sick leave entitlement would be cut from 30 to 20 days, income replacement would drop from 80% to 70% and there would be a waiting period before workers are compensated.

Spain

Job support measures
El Pais, GIDA, Reuters
The Prime Minister has unveiled a new set of proposed measures to help stabilize the job market:

• People who have never worked and those whose unemployment benefits had lapsed would become eligible for benefits.
  
  
• The government will negotiate productivity goals with social partners.
  
  
• Small and medium businesses that resist the temptation to cut staff would pay 5% lower corporate tax for up to three years.
  

The Labor Ministry is looking into a plan to subsidize the voluntary return home for Romanian workers who have given up on the Spanish job market. Also, the administration has been resisting calls for a more employer-friendly labor reform, but some officials are now suggesting that tripartite negotiations on more flexible workplace rules may be in order.

Switzerland

Six-week holiday referendum
Swisster, AP, Swiss Info

The worker organization Travail Suisse has collected enough signatures (French only) to force a referendum on stretching the annual paid holiday entitlement from four weeks to six. The signatures have not been formally presented to the government, so the referendum may be several months away. A similar referendum was defeated in 1985.

UK

Auto-enrolment under the consumer rights directive; “Fit note” consultation; Clarification on trivial commutation
Professional Pensions, Global Pensions, Tamebay
The Association of British Insurers (ABI) has flagged concerns about the European Commission’s Proposal for a Directive on Consumer Rights. In its present form, the draft directive barely touches on financial services, but there has been some worry about the concept of "inertia selling" being extended to automatic enrolment in occupational pensions, and the ABI expects the issue to come up at the amendment stage. Automatic renewal of insurance policies is another potential stealth addition to the directive.

Meanwhile, the Department for Work and Pensions (DWP) has opened a consultation on imposing a “return to work” trajectory on disability leave. Rather than issuing a “sick note” to qualify a worker for disability leave, a doctor would compose a “fit note” describing the range of tasks that one would be able to perform before fully recuperated.  The consultation runs through August 19, 2009, and the DWP is aiming for a spring 2010 launch. Also, Teresa Preece sent in a clarification on the trivial commutation regulations linked in IH 05/13/09. The June 1, 2009 effective date for trivial commutation applies for a minority of cases. The main start date for the trivial commutation changes remains December 1, 2009.

Canada

Consultation on CPP flexible retirement; Quebec Pay Equity Act revised [F]; Pension relief draft regulations; EI debate
Globe and Mail, Benefits Canada, Montreal Gazette

The triennial review of the Canadian Pension Plan (CPP) has yielded a consultation paper on a set of changes in support of a more flexible approach to retirement. It would end the Work Cessation Test, refine both the early pension reduction and the late pension augmentation formulas, make continued contributions mandatory for those who join CPP early while staying in the workforce and gradually raise the general low earnings drop-out.  Comments are welcome through July 31, 2009.

The Quebec National Assembly gave unanimous approval to Bill 25 (IH 03/25/09), a set of measures to strengthen the Pay Equity Act.  It will require greater transparency and set stiffer penalties. There is now a December 31, 2010 deadline for enterprises to conclude their first pay equity procedure.

In addition, Mercer has issued a Communiqué summarizing draft regulations in support of Quebec’s recently passed pension relief measures (IH 01/22/09). Also, the Prime Minister has indicated that his party intends to block proposals that would relax and standardize the eligibility rules for employment insurance (EI). Backers of an opposition bill that would end the EI waiting period (IH 05/06/09) have suggested that this intransigence may warrant a special election.

US

Proposed regulations on suspension of certain employer 401(k) contributions; Various
AP, Legal Times, NYT
The Internal Revenue Service’s proposed regulations Suspension or Reduction of Safe Harbor Nonelective Contributions sets out the terms under which financially strapped employers may suspend their qualified non-elective contributions (QNECs) to 401(k) schemes during the plan year. The employer must give affected employees advance notice of the change and the modified plan must still pass the nondiscrimination tests. Comments are welcome through August 19, 2009. While these are proposed regulations, plan sponsors may rely on them now. Any changes in the final regulations would be applied prospectively.

In other news:

• The President has issued a memorandum to the heads of executive departments and agencies on reviewing excessive preemption of state laws. This comes in response to widespread preemption in regulations under the previous administration. The preemption in occupational health and safety laws was cited as an example. While there has been no specific mention of ERISA (Employee Retirement Income Security Act) preemption at this point, it has had a major role in the health reform debate.
  
  
• The final regulations on 401(k) investment advice have been deferred again (IH 03/25/09), this time until November 18, 2009. The Labor Department’s final rule explained that the delay will give it time to “evaluate questions of law and policy concerning the rules.”
  
  
• While there are health reform activities under way on several fronts, the Senate Finance Committee has again dominated the press coverage with Financing Comprehensive Health Care Reform: Proposed Health System Savings and Revenue Options, which features a trial balloon for taxing employer-provided health benefits.
  
  
• The Securities and Exchange Commission (SEC) announced that it will propose rules to strengthen the right of shareholders to nominate board members.
  
  
• Healthy Families Act HR 2460/S1152 offers a formula for workers in enterprises with at least 15 employees accruing entitlement to up to seven days of paid sick leave per year. This legislation has surfaced before, but prominent backers and a hospitable environment have improved its prospects.
  

Chile

President signs employment support measures [F]; Pay equity bill passed [F]
Global Post, Xinhua, Santiago Times

The job support package negotiated with social partners in April (IH 05/13/09) sped through Congress (Spanish only) and was quickly signed by the President. The measures will be in effect for one year, starting on July 1, 2009. The 350% employer tax deduction for training expenses is reported as 250% in the government’s press release. The five-month worker training leave will be at 50% of pay subsidized by equal contributions from the employer and unemployment insurance. There was also mention that equal pay legislation championed by the President (IH 09/04/08) cleared both houses of Congress and awaits her signature. It aims to eliminate all forms of unequal remuneration and its protection will extend to temporary workers.

IASB

Exposure draft on IFRIC 14
AE, DRE
The International Accounting Standards Board has issued the Exposure Draft Prepayments of a Minimum Funding Requirement: proposed amendments to IFRIC 14. The amendments would remedy an unintended consequence that would sometimes prohibit recognizing some prepayments for minimum funding contributions as assets. Comments are welcome through July 27, 

Symbols key:

[F] = a proposal has, for all intents and purposes, become law

[-F] = a new law has been rescinded

Mercer International Headlines is published by the US international consulting practice library of Mercer. Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.