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.

Egypt

Minimum, maximum wage
MENA FN, Bikyamar, Ahram Online

The Finance Minister recently decided to raise the monthly minimum wage to EGP700 (US$117) but the increase has yet to be implemented. The government is now reportedly aiming for EGP800. It is preparing a study of wage policy that is meant to address inequalities in the system and confer more robust powers on the Supreme Council of Wages. Another likely outcome is setting a wage ceiling at 36 times the minimum wage.

South Africa

Immigration Amendment Act of 2011; Strike violence liability ruling
HR Future, IOL, Business Day

Immigration Amendment Act of 2011 was gazetted in late August and the President should soon announce the date of entry into force. Some provisions have stirred debate among stakeholders:

• The Exceptional Skills Work Permit will be replaced by a Critical Skills Work Permit. People with outstanding talents or skills will no longer qualify for this special designation unless their exceptional skill is one that the Ministry of Home Affairs has formally flagged as in short supply.
• Corporate Work Permits will become invalid for foreign workers who lose their jobs or change employers.
• New conditions are set for Intracompany Transfer Work Permits, including a two-year cap.
• Applicants for work permits may no longer take along a lawyer or Immigration Practitioner for making representations to the Department for Home Affairs. There is concern that otherwise desirable workers unfamiliar with the culture and/or language would fare badly under these circumstances.

Also, the Supreme Court of Appeal (SCA) ruled last week that the union that organizes a strike assumes responsibility for any subsequent violence or property damage. The court affirmed the validity of industrial action but determined that because strikes often turn violent, unions should have some stake in self-policing. The Congress of South African Trade Unions (Cosatu) – while confirming its commitment to peaceful strikes – countered that holding one party accountable for whatever mayhem occurs in the charged atmosphere of a strike is unreasonable. It will appeal the case in Constitutional Court.

Australia

Consultation on superannuation prudential regulation; Super guarantee charge survives legal challenge; MySuper draft legislation
SMH, Global Pensions, Tax Analysts

APRA (the Australian Prudential Regulatory Authority) has posted the Discussion Paper: Prudential Standards for Superannuation as a prominent sidebar to the administration’s "Stronger Super" initiative (IH 09/28/11). Issues addressed include scheme governance, risk management, investment standards, management remuneration and APRA’s new oversight powers. Comments are welcome through 23 Dec 2011.

Also, the High Court of Australia has dismissed a high-profile constitutional challenge to the penalty regime for companies that fail to contribute the full amount under the superannuation guarantee system. A successful challenge could have mortally wounded the superannuation guarantee, but this reprieve did give stakeholders occasion to note that the regime’s inflexibility has had unintended consequences and that a revision of the rules is desirable. Incidentally, a measure soon to appear before Parliament would make company directors personally liable for missed super contributions in order to curb the practice of abandoning a debt-ridden corporate entity and starting up a new company.

In addition, the Treasury has issued Exposure Draft – Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 along with explanatory notes. The draft bill offers a core set of measures on the definition, administration, fee structure and governance of MySuper products under the government’s "Stronger Super" reform program (IH 09/28/11). Comments are welcome through 13 October.

French Polynesia

CPS fights involuntary government loan
RNZ

With its usual loan sources tapped out, the government has approached the Social Security Fund, CPS, for a US$55 million loan, allegedly just to cover basic operating expenses. The head of CPS does not consider this a sound investment and pensioners have petitioned him to stand his ground. He would like the request subjected to a public referendum.

India

SEBI consultation on financial advisors; Compulsory D&O insurance
Hindustan Times, Business Standard, Deccan Herald

The Securities and Exchange Board of India (SEBI) is holding a consultation on a concept paper on regulating investment advisors. The entities that market financial advice or financial products to pension schemes would be among those regulated by a Self Regulatory Organisation (SRO). The SRO would not supersede the roles of the bodies that currently regulate various financial products. It would register investment advisors and oversee financial advice. The consultation will run through 31 October.

Also, SEBI has teamed up with the Ministry of Corporate Affairs and Company Law Board to investigate options for requiring that all public companies take out directors & officers liability insurance. A new generation of D&O policies will cover a director’s whole family to shield them from liability should (s)he die or go into hiding.

Israel

Trachtenberg Committee report
Ha'aretz, Tax Analysts, JTA

The Prime Minister charged the Trachtenberg Committee with drawing up recommendations for giving the citizenry some economic relief during harsh economic times. Some highlights from a massive list of proposals:

• The National Insurance fees, currently employer 5.9% and employee 12%, would shift in the employer’s direction – 7.5% and 10.4%, respectively.
• The regime taxing many qualified stock options at just 25% would come under review.
• Work/life balance would get an assist from both the enforcement of an existing law on compulsory education from age 3 and the gradual extension of the school day to 4 pm.

The report will be forwarded to the Cabinet.

Japan

Funding shift for homemaker pension
Daily Yomiuri

Homemakers married to private-sector workers make no contributions to the state pension but receive a basic pension at retirement age. The Health, Labor and Welfare Ministry is now considering a proposal to credit half of a worker’s pension contributions to his/her homemaker spouse. If the proposal stands up to scrutiny, legislation will be submitted to the Diet next year.

Malaysia

Retirement age hike proposal
OANA, Today, Bernama

The Chief Executive of the Employees Provident Fund (EPF) divulged at a recent conference that a technical committee is drafting the Private Sector Retirement Act, which would raise the normal retirement age from 55 to 60. There would be provisions for staying in the workforce until age 64. The ages appear to be somewhat fluid at this point. The EPF chief has conceded that 58, the current retirement age for civil servants, would be an acceptable fall-back and the head of the Malaysian Employers Federation (MEF) has told reporters of a draft that would allow for those who choose to continue working until age 70 to stay on. The legislation should be ready for the next session of Parliament and a concrete proposal is expected to appear in the 2012 Budget, which is due this Friday, 7 October.

New Zealand

Ruling impacts D&O coverage; Various
RNZ, Newstalk, Scoop

The New Zealand High Court delivered a puzzling decision on the coverage afforded by directors’ and officers’ liability insurance. The court found that although the former company directors facing criminal charges from the Financial Markets Authority had valid insurance contracts covering the cost of their defense in a work-related criminal case, they could not file a claim with the insurer for reimbursement. The court cited a 1936 law that was designed to close a loophole in personal injury cases and the ruling is likely to be appealed, but it still leaves D&O insurers and customers in an awkward limbo for the time being.

In other news:

• Taxation (Annual Rates, Returns Filing and Remedial Matters) Bill (IH 09/22/11) had its low-hurdle first reading last week. More significant is that the vote was nearly unanimous. The Finance and Expenditure Committee is due to report on it on 20 October.
• Sleepover Wages (Settlement) Bill has also cleared its first reading and the Health Committee delivered a favorable report on it earlier this week.
• KiwiSaver auto-enrolment appears to be on the verge of becoming a campaign issue in next month’s national elections. Opposition Labour Party leaders have been talking up a "universal savings programme" while the Prime Minister views soft compulsion as a "nice idea" that "doesn’t suit everyone." Reports on models for bolstering the KiwiSaver scheme have already been submitted to him, but have not been made public.

Pakistan

Industrial Relations Ordinance, 2011 in effect, for now
Business Recorder, The Dawn

Last July, the administration noted that the President quietly promulgated Industrial Relations Act, 2011 (IH 06/02/11) as an ordinance while Parliament was in recess. The ordinance confirms the devolution of industrial relations law to the states and provides the federal legislation covering the Capital Territory. There is still-baffling and allegedly unconstitutional language on federal domain over national level and "trans provincial" industrial relations. Much is ambiguous, alarming to workers, inconsistent or left unaddressed in this text but Parliament is under pressure for swift passage (within "a few months" of its 16 July start) to keep the ordinance from expiring. Stakeholders are now saying that a tripartite committee will need to draw up a comprehensive revision.

UAE

Expat unemployment insurance
GIDA, Emirates 24/7, Arabian Business

The Labour Ministry is considering options for replacing or complementing a difficult to enforce end-of-service benefit with an unemployment insurance scheme. One frequently cited but little-explained option is a Migrant Savings Account with incentives and/or obligations to put cash aside to cover periods between jobs. The ministry stressed that it meanwhile plans to step up enforcement of the end-of-service benefit obligation.

Uzbekistan

Pension confirmation cycle
TCA

There has apparently been enough fraud in claims for the state pension that the Department of the Pension Fund has taken the extraordinary measure of requiring application renewals every six months. Within 10 days of a pension lapsing through non-renewal, the Pension Fund is obliged to send someone to the pensioner’s last known address to find out why.

Channel Islands

Jersey Draft 2012 Budget
IBFD, Tax Analysts, BBC

The Treasury Minister has delivered the Draft 2012 Budget, which features a few interesting measures:

• Tax relief on pension contributions would be limited for those earning over £150,000 per year.
• There would be a £50,000 ceiling for tax-free severance pay, except in cases of death, injury or disability, which would maintain full exemption.
• The tax break for child care would nearly double to £12,000 for pre-school children. Both state-run nurseries and private nurseries would qualify.
• An attractive tax regime for high net worth foreign persons would encourage local investment.

Cyprus

Incentive for new residents
Tax Analysts

A new package of austerity measures that just cleared Parliament features a strong incentive for highly skilled expats to take up residence in Cyprus. Foreign persons with annual income above €100,000 will receive a 50% tax deduction for each of their first five years of employment in Cyprus, effective fiscal 2012.

Czech Republic

President signs health reform bill
CIA, Ceske Noviny, PDM

The President has signed a set of health reform measures (IH 09/22/11) into law. Among the key provisions:

• The daily co-payment for hospitalization will rise from CZK 60 to CZK100 (US$5.43).
• Drug charges under CZK50 will not be reimbursed.
• A ban on payments for higher quality care will be lifted. A panel of experts will determine which treatments will have premium options. The examples provided included soft contact lenses and multiple options for the materials used in artificial joints. Health insurers are planning to offer products filling these coverage gaps.

The constitutional challenge has not yet been settled, but the administration maintains that it is groundless. Also unresolved is the start date, still officially 1 Jan 2012 but the experts will reportedly need another three months to prepare a draft of their "extra services" package, possibly deferring the launch to January 2013.

EU

Financial transaction tax; Various
Global Pensions, DRE, IPE

Pension funds and insurance companies are among the entities that are expressly not exempt under the EU’s draft proposal for a financial transactions levy. The rate would be 0.1% on all share and bond trading, 0.01% on derivatives. The EU Council of Ministers will review the draft and it will then be delivered to the G20 Summit in November. If approved, the measure would become law on 1 Jan 2014. The financial sector has given the proposal a hostile reception and the UK Treasurer said that he would "absolutely resist" this tax unless it is implemented globally. An FAQ accompanies the release.

In other news:

• Parliament has approved the "six-pack" economic governance reform (IH 09/22/11) legislation. The European Council is scheduled to approve it this week, possibly bringing it into effect as early as December.
• An officer with the Directorate-General for the Internal Markets and Services recently delivered a speech previewing the "IORP II" draft revision of the Institutions for Occupational Retirement Provision directive (IH 09/01/11), which is now expected to surface in the third quarter of 2012. A "more comprehensive and wider-ranging" directive would aim for some degree of harmonization of state pension systems. He noted that a study of pension fund solvency rules drew the conclusion that Solvency II rules (IH 08/10/11) would not be appropriate "copied directly" into the new IORP directive.
• One topic brought into the spotlight by the corporate governance green paper (IH 04/21/11) is retirement savings schemes that rely too heavily on employer stock. The European Economic and Social Committee is hosting a conference on the issue later this month.

Finland

Cutbacks for sabbatical scheme; 2012 Budget
YLE, Helsingin Sanomat

The popular job alternation leave scheme pays 70-80% of the unemployment benefit to workers taking a sabbatical of 90-359 days while an unemployed person covers the position. The center-right ruling coalition is preparing legislation for release this month that would cut the leave allowance down to 60% of the unemployment benefit. The trade union confederations are already challenging the measure.

Also, a few provisions in the 2012 Budget rate a mention:

• An interministerial action plan will take on the shadow economy, including abuses of independent contractor arrangements.
• People under age 25 and recent graduates under age 30 will be offered jobs, apprenticeships or training programs within three months of registering for unemployment.
• A pilot project would see local government assuming responsibility for job placement (with some funds for salary subsidies) and training programs for workers who have been unemployed for over 12 months.

France

Social security finance bill
LTN

PLFSS, the 2012 social security finance bill (French only), features some measures from the Prime Minister’s recent austerity plan (IH 09/01/11):

• The 6% "forfait social" levy on income that is otherwise exempt from social security contributions would rise to 8%.
• In a departure from the earlier announcement, a worker’s overtime pay would be subject to income tax and social security charges.
• There would be a greener tax regime for company vehicles.
• There would be a higher sin tax on alcoholic drinks. A tax on sugary soft drinks appears in the 2012 draft budget law (French only).

Germany

New threshold for business expense reporting
LTN

Both houses of Parliament have now passed the tax simplification bill featuring a small but decisive rise in the amount of tax deductible business expense that need not be itemized (IH 02/16/11). The increase from €920 to €1,000 matches the waiver more closely with typical practice. There is also a measure providing some relief on documentation requirements for deductible child care costs.

Ireland

ECJ ruling on VHI; National Pensions Framework update
Irish Examiner, Irish Times, IPE

The European Court of Justice has concluded that state-owned health insurer, VHI, is not entitled to exemptions from EU insurance sector rules, most notably those on funding and on oversight by the central bank (IH 09/28/11). The short-term fallout will include finding €300million to plug a funding gap. This is expected to complicate the transition to a universal health insurance scheme (IH 03/30/11).

Also, the Minister for Social Protection reiterated that the administration remains committed to the National Pensions Framework (NPF) proposals (IH 03/10/10) that were sidelined by Ireland’s economic crisis. She confirmed that an auto-enrolment model is now incubating and said that the Pensions Board will soon consult on a revised minimum funding standard.

Netherlands

Proposal for standard pension disclosure format
IPE

The head of Financial Markets Authority, AFM, has proposed some level of uniformity for disclosure of third-pillar pensions. An interactive "dashboard" model would allow workers to calculate their retirement income streams under different scenarios. Members would be alerted if their projected benefit fell below a certain threshold. He is also planning to give pension providers guidance on the scope of advice they may legally provide.

Romania

Private pension plan legislation; Immigration reform
Mediafax, RRI, PPR

Parliament passed major private pension reform legislation (IH 05/04/11) last week and the Labour Ministry closed a brief consultation (Romanian only) on a private pension reform package covering second and third pillar schemes this past Monday, 3 October. Meanwhile, pension regulator CSSPP is consulting on measures that would expand investment options for private pensions.

The Chamber of Deputies has finally passed the Guarantee Fund Act that was adopted in the Senate last February. Set to become operational in the first half of next year, the guarantee fund will protect the benefits of private pension fund members and their beneficiaries. Contributions from pension fund administrators and providers will finance the program.

The Labour Ministry’s new legislation, a revision of a draft released last February (IH 02/16/11), provides that:

• The minimum capital requirement for a pension provider would be €5 million, half the amount initially proposed.
• A private pension fund would not be able to operate without authorization from CSSPP.
• There is an array of investment caps including 70% on local securities and 15% on foreign securities.
• A pension fund would have to maintain a 105% funding level to avoid coming under supervision and it would forfeit authorization if funding fell below 100%.
• The second pillar retirement age would start at 57 and two months for women and 62 plus two months for men, climbing to 63 and 65 respectively by 2030.
• Withdrawal options include lifetime annuity and fixed-term annuities.

In addition, the CSSPP has posted a consultation (Romanian only) on draft legislation that would allow private pension fund investment in infrastructure, private equity funds and commodity funds. Feedback is welcome through 14 October.

Also, the Immigration Office recently gazetted Law No. 157 (Romanian only) introducing an array of immigration law reforms:

• The work permit requirement will be waived for foreign workers on business visits for up to 90 days in a 180-day period, provided they stick to a limited range of work activities.
• The application process and the documentation requirement for intracompany transfers will be more daunting for employers.
• The EU Blue Card rules are transposed.
• Record-keeping rules are more stringent and penalties for hiring unauthorized foreign workers will now include revoking the right to obtain work permits, even shutting down a worksite.

Russia

Regional holidays bill; Residency threshold for tax relief
Itar-Tass, DRE, Moscow Times

Last month, the Supreme Court voided a local law establishing statutory religious holidays on the grounds that the Labor Code doesn’t empower local authorities to declare public holidays. There is, however, federal law allowing regional holidays that just hasn’t been incorporated in the Labor Code. A bill now before the Lower House of the State Duma would amend the Labor Code to firmly establish the right of regions to set their own public holidays in addition to those designated by the federal government.

Also, the Finance Ministry has published guidance clarifying a favorable tax regime for skilled foreign workers. Nonresident persons posted in Russia for fewer than 183 days in a given year are taxed at 30% while those who reach the half-year mark pay just 13%. Skilled foreign worker status is determined by income level, with 2 million rubles (US $62,111) the defining figure.

Slovakia

Auto-enrolment passage confirmed; State pension discrimination charge; Blue card measure approved
Slovak Spectator, Expatica, IPE

Press sources have now confirmed that the new law on second pillar pension investment funds (IH 09/22/11) has kept intact the auto-enrolment provisions that were in it at the Cabinet stage (IH 06/15/11). While membership is mandatory, one may opt out within the first two years. New entrants that do not contract with a pension fund manager within six months will have their contributions placed in a mixed fund.

Also, the European Commission has sent Slovakia a reasoned opinion over the formula it used for determining state pension rights of an Austrian worker with long contribution periods in both the Slovakian and Austrian systems. There is a two-month window for advising the committee on how this infringement will be remedied. Meanwhile, Slovakia has adopted legislation transposing the EU blue-card directive on mobility for highly qualified third-country nationals. The labour office has not yet drawn up a formal list of qualifying occupations.

Sweden

2012 Budget
DRE, IBFD, Tax Analysts

The Finance Ministry has unveiled the 2012 Budget:

• The sickness insurance reform would be "fine-tuned" to ensure that mechanisms for steering people back into the workforce are both fair and effective.
• Labour market reforms would concentrate on training and job placement for the long-term unemployed.
• The tax incentive for highly skilled foreign workers would now recognize a default minimum monthly salary level of SEK80,000 (US$11,900) as proof of adequate skills.
• The annual tax deduction for commuting would rise from SEK9,000 to SEK10,000 (US$1,470).
• The tax break for environmentally friendly cars would be refined to reward greater efficiency (IH 09/22/11).

UK

EU challenges residency test; Proposed revision to shortage occupation list; Annuities to benefit from ABI code of practice; Debt regulations postponed
Totally Expat, Expat Forum, The Telegraph

The European Commission has ordered the UK to eliminate a residency test that it has found to be in violation of EU social security coordination rules. The UK claims that the right-to-reside test that the commission pronounced discriminatory toward other EU nationals is essential to prevent them from taking advantage of access to its more generous benefits. The residency test was challenged by an Italian woman who worked in the UK and paid social security contributions for two years then lost her job and was denied unemployment benefits. The Work and Pensions Secretary described the commission’s action as "a land grab [with] the potential to cause mayhem." The UK has two months to give the commission a satisfactory response.

The Migration Advisory Committee (MAC), an independent advisory body, has issued Skilled Shortage Sensible, a proposed refinement of the shortage occupation list for Tier 2 of the Points Based System. There is a net increase in occupations but a sharp cutback in openings for non-EEA (European Economic Area) workers. The Home Office – generally amenable to all MAC recommendations – will respond to this proposal by the end of the year.

Meanwhile, the Association of British Insurers has previewed a compulsory code of practice for insurers marketing annuities. It will ensure that customers are not steered into their pension provider’s annuity product and that they receive sufficient information on the annuities market to do some comparison shopping. The code is expected in the first quarter of next year. The ABI has also revised its Principles of Executive Remuneration to allow clawback of unreasonable pay packages.

Incidentally, the Section 75 multiemployer scheme debt regulations (IH 07/14/11) were to have taken effect on 1 October, but a new one-in, one-out policy to curb the proliferation of regulations will delay their introduction until December.

Dominican Republic

Campaign for survivor AFP entitlements
BNamericas

The Superintendent of Pensions, Sipen, has determined (Spanish only) that AFP private pension funds have not actively pursued the beneficiaries of the survivor insurance that AFP affiliates often select. Sipen has ordered the AFPs to pay what is due to the families of deceased affiliates and it is campaigning to raise awareness among survivors. It plans to make disability and survivor coverage mandatory for affiliates over age 60 and to extend the disability and survivor insurance claim period from two years to five.

El Salvador

Investment menu expansion
BNamericas

By the end of this year, financial regulator SSF will deliver a bill to Parliament on a more liberal investment menu for AFPs. They are already allowed to invest in shares, but the stock exchange is not sufficiently developed to make that a robust option, so the new measures would add mutual funds and equity instruments to their options as well as rated bonds and equities issued in Costa Rica and Panama.

US

Health reform endgame expedited; E-Verify bill advances
LA Times, Washington Post, Lawton Constitution

The Justice Department has decided against filing an appeal with the full 11th US Circuit Court of Appeals over the ruling by a three-member panel of the court that a key feature of the administration’s health reform law, the Affordable Care Act, is unconstitutional (IH 08/17/11). This cleared the way for the administration to appeal directly to the Supreme Court for a ruling in the next term, which starts next week and concludes in June 2012.

Incidentally, the House Judiciary Committee has approved Legal Workforce Act (IH 09/22/11), a bill that would require all employers to screen new hires with the E-Verify system. It has fair prospects for passage in a House plenary vote but would have trouble getting through the Senate.

Peru

Pension reform proposal
BNamericas, El Comercio, Andina

The ruling parliamentary coalition (Spanish only) has divulged a few measures in the administration’s AFP private pension fund reform agenda. People above age 40 who have been unemployed over 12 months would be entitled to withdraw up to 80% of their holdings. Also, AFPs would have to suspend affiliate fees after three consecutive months of negative returns on investments. A joint commission appointed by the Ministry of Economy and Finance is developing a broader set of reform proposals that would make the sector more competitive and expand coverage.

Venezuela

Premium caps for seniors and the poor
BNamericas

Insurance regulator Sudesag has released Solidarity Insurance Standards (Spanish only), a range of maximum health, accident and funeral insurance premiums for the underprivileged. Qualifying populations include senior citizens, other retirees and all those below a set income level.

Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.