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.
Top stories in this issue:
Canada: PRPP bill heralded
China: Shaky start for expat social security coverage
EU: Pension reform updates
India: National Labour Code mooted
UK: Pensions Bill clears House of Commons
US: Class Act shelved
Proposed NHIF contribution formula
Business Daily, Daily Nation
The National Health Insurance Fund (NHIF) has released details of the private sector premium increases that would help finance a prospective universal health system. The monthly member contribution – Sh320 (US$3.19) since 1990 – would not rise dramatically but would be pegged to medical inflation. The rate would actually be reduced for some low-income workers. The new employer contributions would be linked to worker salaries, ranging up to Sh2,000 per month for employees earning over Sh100,000 gross salary.
Draft code of practice on workplace bullying; OHS harmonisation stragglers
Safe Work Australia opened consultations on numerous draft codes of practice at the end of last month. Most addressed specific sectors, but Preventing and Responding to Workplace Bullying – arriving in the context of a high-profile lawsuit – has drawn some stakeholder attention. One awkward stretch addresses "unintentional bullying," behavior that distresses co-workers without intent to harm. Comments are welcome through 16 Dec 2011.
Also, two states have served notice that they will not meet the 1 Jan 2012 deadline for adopting legislation based on the Model Work Health and Safety Act (IH 07/20/11). Victoria and Western Australia have both objected that the time frame is too tight and that they need to explore the ramifications of implementing these changes. Both have penciled in a 1 Jan 2013 start date.
Shaky start for expat social security coverage
China Daily JSM, The Telegraph
The law on foreign worker participation in Chinese social insurance programs (IH 10/12/11) went into effect with much still unresolved. Crucial national and local implementation measures have yet to surface and it appears that local authorities are often giving contradictory guidance to stakeholders. Affected employers are nonetheless being advised to submit queries to local authorities if only to have a paper trail. Reportedly, Beijing has the implementing regulations fundamentally in place while Shanghai and Guangdong are about a month away and longer lags are expected for several other cities and provinces.
Pension withdrawal options
Fiji Village, Fiji Times, Radio Fiji
The Fiji National Provident Fund (FNPF) will soon revise the FNPF Act to include the sharp reduction in the portion of a member’s account that will comprise the annual benefit upon retirement (IH 08/03/11). The drop from 15% to approximately 8.7% is more sustainable for a lifetime pension but very unpopular. To put it in perspective, the FNPF will offer two new options: a monthly pension for a fixed period like 10 or 15 years and a set monthly pension until one’s account runs out.
National Labour Code mooted; Various
Business Line, Business Standard, Zeenews
The Labour Minister’s address to a session of the Standing Labour Committee emphasized the theme that it would be easier to protect worker rights if there were a single National Labour Code covering basic employment rights. He envisions the common standards including:
- minimum wage provisions;
- maximum working hours;
- occupational safety standards; and
- union rights and responsibilities.
He also stressed the importance of equal rights for contract workers, who have been a growing segment of the workforce.
In other news:
- The Insurance Regulatory and Development Authority’s (IRDA) overdue guidelines on pension products (IH 08/10/11), featuring expanded access to annuities, (IH 09/28/11) are now characterized as making annuities mandatory for a broad range of pension products. The IRDA chairman will also press life insurers to provide annuities.
- The head of the IRDA has urged the private health insurance sector to expand its coverage. He said that the market for private health insurance will remain small until policies fill in some glaring gaps such as outpatient procedures and preventive care.
- The Employees Provident Fund Organisation (EPFO) will soon announce high returns (9-9.5% range) again for 2011-12. A surplus allowing another year of high returns was credited to tapping idle accounts. EPFO critics charge that the organization does too little to contact participants who have funds in dormant accounts.
Foreign worker service website
Korea Times, Himalayan Times
The Ministry of Employment and Labor has launched Hi Korea, a website that will greatly simplify several aspects of foreign workforce administration. Employment status changes such as new contracts, dismissals and abscondments may be registered online rather than in person at the appropriate government office. Other highlights include a foreign recruitment management system and a clearinghouse of guidance for foreign workers and their employers.
There have been some high-profile campaign promises leading in to the 26 November election. The Finance Minister announced that, provided projections for returning to surplus are accurate, a governing National Party would finance the transition to KiwiSaver auto-enrolment (IH 10/05/11) in 2014-15. If National prevails next month, there will be a public consultation early next year on the details of the enrolment mechanism. Incidentally, the administration has been alerted to both price gouging in the default KiwiSaver schemes and instances of inadequate member education on the risks associated with fund selection.
The Labour Party has posted Work and Wages Policy, a position paper that pledges to:
- raise the $13 per hour minimum wage to $15;
- introduce a sector-based minimum wage;
- rescind the 90-day probation law introduced by the current administration;
- observe holidays that occur on weekends on a neighboring Monday; and
- promote flexible work schedules.
Health, occupational health initiatives
Gulf New, Peninsula, Arabian Business
The Supreme Council of Health (SCH) decided to block one drug wholesaler’s exorbitant price hikes with a 20% cap on drug price increases and a requirement that they print the price on the packaging so that retailers cannot mark-up the products. These policies will soon extend to the whole sector. Another SCH project is an occupational health registry to gather information on workplace injuries and diseases in order to help craft occupational health regulations. SCH has also asked companies in the private sector to install workplace gyms to help fight the nation’s obesity epidemic. Those unable to accommodate this in the workplace are requested to make arrangements with offsite facilities. This is not obligatory, but as part of the SCH’s five-year agenda, it is presented as something that could prove mandatory if it doesn’t quickly become customary.
Arab news, MENA.FN
As the Nitaqat program (IH 07/27/11) is being rolled out, the Labor Ministry has delivered a few clarifications and warnings:
- Hiring Saudi workers through a temporary agency to briefly beef up one’s Saudi workforce is not compliant with Nitaqat.
- Companies with fewer than 10 workers are still expected to employ at least one Saudi.
- Dismissals of Saudi workers will be investigated and when done without adequate cause (IH 10/19/11), the employer’s penalties will include paying damages to the worker.
Foreign worker policies questioned
Business Times, Straits Times, CNA
The Singapore International Chamber of Commerce (SICC) has been urging the government to relax its new restrictions for skilled foreign workers (IH 08/31/11) because employers have insufficient access to the talent they need. Meanwhile, the Ministry of Trade and Industry (MTI) is exhorting the private sector to tap the resources of vulnerable populations for its "inclusive growth" campaign. One legislator has offered a Solomonic solution. Foreign worker quotas could be determined by the number of re-employed older workers and mothers of young children on a company’s staff.
Foreign worker initiatives; Vote against health insurance contribution breaks
Taipei Times, Asia Pulse, Asia in Focus
The Council of Labor Affairs is preparing a website that would allow employers to hire foreign workers directly online. Set to debut on 1 Jan 2012, the site would spare both employers and workers hefty fees averaging several hundred US dollars each. Also, the Ministry of Economics Affairs is due to post a set of measures for attracting more skilled foreign workers by the end of this month. A product of interministerial consultations, the draft legislation will reportedly include tax incentives.
In addition, a Department of Health (DOH) panel overseeing the National Health Insurance (NHI) Act has determined that a health insurance contribution waiver for people who stay overseas at least six months (IH 10/12/11) is a loophole subject to widespread abuse. The members voted unanimously to rescind it. This is part of a set of 2G health reform (IH 01/06/11) that is set to take effect in July 2012. It will affect over a half million nationals residing abroad.
Compromise on minimum wage hike
Bangkok Post, Thai News, Reuters
The Ministry of Labour announced (Thai only) that the new administration can now check off one item on its ambitious agenda (IH 10/12/11). The Central Wage Committee was able to agree on a 300 baht (US$9.90) daily minimum wage once it gained the support of employer representatives by agreeing to defer its introduction from 1 Jan 2012 to 1 Apr 2012. The new floor – increased by an average of 40% – will debut in the most populous provinces on that date and will be phased in for the rest of the nation by the end of 2012.
Retirement deferral incentives
BelaPAN, BELTA, Interfax
The Deputy Prime Minister came out with his own spin on the Labor Minister’s adamant denial that a retirement age hike is imminent (IH 09/28/11). Noting that the ratio of people of retirement age to workers is 5:8 and rising, he said that the administration is studying foreign best practices for at the very least offering strong incentives to postpone retirement. He promised that he would do nothing "drastic." He also mentioned that general revenues are robust enough to allow a pension benefit increase of at least 20% from 1 Nov, 2011.
Retirement deferral bonus
BTA, Balkan Insight, Sofia News
Last February, the Minister of Labour and Social Policy shelved the retirement age reform measures that had recently cleared Parliament (IH 01/06/11), citing the harsh economy and job market. He has now introduced proposals to at least encourage later retirement. The 3% benefit increase per year of retirement deferral would rise to 4%. (Last month, Parliament rejected a measure that would have raised it to 5%.) He also plans to amend the Labour Code to ban compulsory retirement for workers who have reached retirement age.
Unemployment Insurance Fund proposes lowering premiums
The Unemployment Insurance Fund’s supervisory board has formally proposed cutting the 4.2% premium to 3% (1% employees/2% employers) at the start of next year. The administration had already penciled in a charge reduction for early 2013, but the board said that a surplus arose sooner than expected. It will also have enough funds to introduce a new return-to-work scheme that will train a disabled worker for a new position with the same employer when a disability interferes with current duties but the person is still able to work.
Pension reform updates; ESG promotion; Banker pay disclosure
IPE, IPE, IPE
A pair of speakers at the National Association of Pension Funds (NAPF) annual conference previewed next month’s White Paper on Pensions and next year’s (tentatively third-quarter) revision of the IORP (Institutions for Occupational Retirement Provision) Directive (IH 08/31/11). EU Commissioner for Employment, Social Affairs and Inclusion Làszló Andor noted that the commission is sensitized to the sharp differences between the pensions and insurance sectors, suggesting that the Solvency II Directive (IH 05/18/11) will reflect this sensitivity. He noted further that the White Paper on Pensions was receptive to the proposals in the green paper responses (IH 03/16/11). Ruth Goldman of EIOPA (European Insurance and Occupational Pensions Authority) "predicted" that the IORP revision will very firmly exclude the mandatory second-pillar pension schemes of some Central European member states from the definition of IORP. Nine nations had warned the commission that these schemes would be difficult to maintain if subject to IORP rules. Incidentally, there is news at press time that a second "massive" consultation on the IORP Directive revision is now underway. There will be full coverage in next week’s issue.
Meanwhile, the European Commission has tasked the International Corporate Governance Network (ICGN), Principles for Responsible Investment (PRI) and the European Federation of Financial Analyst Societies (EFFAS) with drawing up guidance and a professional development program for institutional investors on weighing environmental, social and governance factors in their investments. The project should finish in April 2013. Also, the European Banking Authority (EBA) delivered a review of the required "Pillar 3" disclosure submitted by the banking sector. It found fault with the majority of remuneration statements, citing both inadequate detail and too little discussion of the relation between pay policy and risk.
Incomes framework agreement detailed
YLE, Helsingin Sanomat
The 25-month framework national income agreement (IH 10/19/11) will now be the basis for collective bargaining at the sectoral level and it will only take effect if adequately reflected in the sectoral agreements. An assessment is scheduled for 25 November. Along with a pair of wage hikes totaling 4.3%, the negotiators agreed that:
- The job alternation leave formula (IH 10/05/11) would not be modified.
- A study on agency work and temporary employment would result in draft legislation on when they are an appropriate alternative to full employment.
- From 1 Jan 2012, the threshold for entitlement to adjusted unemployment benefit when hours are reduced would rise from 75% to 80%.
- From 1 Jan 2013, all workers would be entitled to three days of paid training leave per year.
- Draft legislation on flexible working hours and working time banks would be issued by the end of November 2012.
- By the end of 2012, the 40-day paternity leave right would extend to 54 days. The days would have to be taken within a child’s first two years.
- The periodisation of compensation for untaken leave days will cease on 1 Jan 2013.
EWC Directive transposed
Europolitics, Planet Labor
Having missed the 6 Jun 2011 deadline for transposition of the "recast" European Works Council Directive, the government produced Ordinance n. 2011-1328 (French only), which was adopted by the Council of Ministers and posted by the Labor Ministry last week. There has been no mention of the ordinance straying significantly from the directive’s intent.
Voluntary board quotas, Kurzarbeit expiration
Der Spiegel, HDB, SIA
The top 30 companies of the DAX stock exchange, seeking to avoid the boardroom quota legislation that is already circulating in the relevant ministries, has agreed to set a voluntary target for female composition of corporate boards and upper management (IH 04/06/11). They now aim for 35% female boards by 2020. The Labor Minister still prefers a statutory minimum of 30% by 2018. Also, the popular Kurzarbeit short-time working program is set to expire on 31 Dec 2011. Social partners agree that it is an important alternative to lay-offs and are lobbying for another extension.
Austerity package approved
NYT, Dow Jones, Kathimerini
Parliament has narrowly passed a key austerity package (IH 09/28/11) featuring temporary pension reduction for people with income above a certain level and a temporary relaxation of collective bargaining rights (IH 10/19/11). The EU is now ready to release the vital next tranche of the bailout loan, but the IMF is reportedly wavering.
Cabinet approves draft labour code
A draft labour code (IH 08/31/11) with over 300 provisions has won the Cabinet’s endorsement. Among the measures now sharing the spotlight:
- With few exceptions, employers would be barred from dismissing workers within five years of retirement age.
- The annual cap on overtime would rise from 200 hours to 250, 300 if a collective contract allows for it.
- New rules on protecting worker privacy would include a ban on employer-mandated pregnancy tests.
The unions are demanding tripartite consultations on the bill before it reaches Parliament.
Agency worker derogation urged; Pension fees investigation; Guidance on workplace drug testing
Irish Times, SIA, Business and Finance
The administration faces a 5 Dec 2011 deadline for transposition of the Agency Workers Directive, which would give temps the same pay and working conditions as permanent workers. Employers are eager to obtain a derogation similar to the 12-week probation period that the UK included, but that would entail social partner approval and unions oppose it.
Meanwhile, the Department of Social Protection, the Pensions Board and the Central Bank will collaborate on a study of administrative fees for a wide range of pension arrangements. Main concerns include their transparency and their cumulative impact on retirement income. An initial report is due in December. The Irish Association of Pension Funds (IAPF) is now among those stakeholders broaching the possibility of fee caps.
Also, the Health and Safety Authority (HSA) has issued Intoxicants at Work Information Sheet, guidance on employer and employee rights and duties in this area. It advises employers on the standards for contract language on those elements of drug testing policy that are not addressed in existing laws, but its status as an information sheet (stakeholders had been led to expect regulations or a code of practice) gives it no legal standing.
Reprieve on mandatory premium hikes; 30% rule changes reconsidered
DutchNews.nl, Bloomberg, NIS
The Dutch Central Bank (DNB) has reported that defined benefit plan funding ratios have sharply dropped in the past quarter, leaving about a third of them with a choice of raising premiums or cutting benefits by the end of this year. The DNB has since decided that this required adjustment would be too precipitous a response and that it will grant at least some of the affected plans an extra year to get back to a 105% funding ratio.
Also, the Finance Ministry has been receptive to stakeholder concerns over planned changes to the 30% expatriate tax regime (IH 10/19/11) and will reconsider the proposals. The changes are included in a package of budget measures that is expected to pass in the Lower House soon.
Gender equality bonus sweetened
The Guardian, The Local, Today
The gender equality bonus was introduced in 2008 as a SEK3,000 (US$458 ) per month tax break when fathers share equally in the take-up of paid parental leave. Parliament has now made it a bit more tangible – still SEK3,000, but split into monthly SEK1,500 direct deposits to each parent’s bank account.
Pensions Bill clears House of Commons; NAPF conference highlights; Employment law modifications debated
Professional Pensions, The Independent, IPE
The House of Commons narrowly approved Pensions Bill 2011 after the addition of some late amendments, including the administration’s partial retreat on the pace of the retirement age hike for women (IH 10/19/11). The House of Lords is expected to approve the amendments this week. The auto-enrolment plan at the heart of the reforms introduced in this law may still face some obstacles. The former Chancellor of the Exchequer disclosed at a pension industry conference that the current administration is "of course … thinking about" delaying next year’s launch of auto-enrolment. He cautioned that if an ambivalent administration placed it on hold for a significant period waiting for the economy to improve, it would be tantamount to abandonment.
Meanwhile, the National Association of Pension Funds (NAPF) annual conference occasioned some newsworthy announcements:
- Lord Hutton asserted that the UK is ripe for "managed" defined contribution schemes with a guaranteed minimum return. Pensions Minister Steve Webb said that a similar proposal is due from his office early next year.
- The Pensions Minister and the NAPF sparred over whether defined benefit plan exit incentives are inherently wrong or just hard to get right. The minister is planning a crackdown.
- The new head of the NAPF introduced the concept of "super trusts," essentially more highly evolved defined contribution plans with economy of scale. He also announced that there will be an industry summit to develop a code of conduct on pension fund fee transparency.
In addition, the still-unreleased Beecroft report (IH 10/19/11) and recent comments from one of the Prime Minister’s top advisors have the ruling coalition bitterly divided over recommendations that the flexible parental leave proposal (IH 01/06/11) and a flexible hours proposal for young parents be scrapped. By one account, the Beecroft report will be released by the end of this month.
PRPP bill heralded
Financial Post, National Post, WSJ
Last week, the Minister of State (Finance) delivered a speech and posted background documents on the defined contribution Pooled Registered Pension Plan (PRPP) model that he and provincial counterparts agreed would be a key vehicle for pension reform (IH 07/20/11). Designed to complement the Canadian Pension Plan (CPP) and targeting people who are not already in occupational pensions, PRPPs would have economy of scale to keep the administrative costs of individual members down. Stakeholder consultations have been underway since this summer and the draft legislation should reach Parliament by the end of this year.
Cayman Island News, Mondaq, Cay Compass
There has been a flurry of legislative action in recent weeks:
- The recently passed Immigration (Amendment) (No.3) Bill 2011 would create two exemptions to the seven-year cap on work permits. Term Limit Exemption Permit (TLEP) would allow extensions under certain conditions for key employees and the Ten Year Work Permit would be limited to qualifying occupations. The Governor has been asked to refrain from signing the bill until a constitutional challenge to a procedural shortcut in its passage is resolved.
- National Pensions (Amendment) Bill, 2001 would allow pre-retirement pension scheme withdrawals for first home purchase. Its legality is also being disputed.
- The Governor has recently signed Gender Equality Bill, which bans sexual harassment in the workplace while requiring equal pay for equal work and equal employment opportunities. It will take effect on 31 Jan 2012.
- Special Economic Zones Bill, 2011 would waive work permit requirements for qualifying establishments that are set up in a designated special economic zone (SEZ).
CLASS Act shelved; Core OSHA guidance revised
AHL, Washington Post, Newsday
The Secretary of Health and Human Services has notified Congress that the CLASS (Community Living Assistance Services and Supports) voluntary long-term care insurance program introduced in the Affordable Care Act as a stand-alone project is "not … viable." A new study confirmed what the HHS had been suspecting for some time, that since a voluntary LTC plan would attract few of the young, an affordable and sustainable scheme would be impossible. HHS will try to come up with an alternative solution to the long-tem care needs of an aging population.
Also, the Occupational Safety and Health Administration (OSHA) has produced a bundle of new guidance on compliance with occupational safety rules. Many of the publications are sector-specific, but there are significant modernizations of Workers’ Rights and Employer Rights and Responsibilities Following a federal OSHA Inspection.
"Project Agree" targets AFP system
BNamericas, El Ciudadano, Diario Electronico
The five AFP pension funds have experienced poor returns lately, with losses between April and September equivalent to half the national budget. The Labor Minister is both counseling (Spanish only) patience and exploring non-disruptive reform options (IH 10/19/11). Analysts have suggested a thorough review of investment policy, but legislators, unions and citizens’ groups are uniting behind a more radical option. The premise of Project Agree is that the social security system replaced by AFP in 1980 should be reinstated. Those willing to keep AFPs in a mixed retirement system recommend mandatory employer contributions.
OECD occupational annuity model
A forthcoming report from the Organisation for Economic Co-operation and Development will make the case for occupational pension funds offering their own annuities. This would shield workers from both excess fees and insurer bankruptcies. Initial industry responses point out that employers would be wary of taking on mortality risk.
Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.