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:
Belgium: New government’s agenda
Ireland: 2012 Budget
Italy: 'Save Italy' austerity package
Philippines: Philhealth to evolve into UHC; New rules on contract workers
Taiwan: Labor reform package
UK: More on Autumn Statement 2011
Mid-year Mini-Budget; Ruling on leave trade-off
AAP, Smart Company, The Australian
The Treasurer has unveiled the Mid-year Economic and Fiscal Outlook 2011-12. It is most notable for sharply curbing tax breaks on living-away-from-home allowances and benefits (LAFHA) for foreign workers and top management. The aim is to end widespread abuses of the LAFHA scheme, but there are already warnings about unintended consequences. From July 2012, permanent residents would no longer qualify for this exemption and a foreign worker in a fly-in, fly-out arrangement would only qualify if his/her usual place of residence is in Australia. Expenses beyond a statutory amount would have to be itemized. Another provision would defer the standard deduction for work-related expenses to 1 Jul 2013. In addition, the employer-paid foreign worker visa fees would cost 5 to15% more.
Also, Fair Work Australia Decision FWAFB 6709 approved an appeal for a single enterprise agreement that pushed the envelope on compliance with statutory rights under national employment standards. It endorsed the employer’s practice of paying staff a higher hourly rate in lieu of overtime premiums and the payments during annual leave, carer’s leave and public holidays. The dissenter on a three-judge panel warned that workers would not be inclined to take their annual leave and there could be occupational safety implications. Experts are divided on the precedential significance of the decision.
Health reform five-year plan; Exception to new expat social insurance rules
AXinhua, Mail Today, Asia Pulse
The State Council’s 12th five-year plan for health reform aims to deliver on health reform guidelines introduced in 2009 (IH 04/15/09). It will fill coverage gaps, establish a primary role in non-emergency care for community health centers and limit prescriptions to the drugs in the essential medicine system, which would be sold at wholesale prices. Also, Chengdu, the capital of Sichuan province, has issued guidelines for an unusual implementation of the rules on participation of foreign workers in social insurance (IH 10/26/11). In a departure from federal guidelines, Chengdu workers from Hong Kong, Macau and Taiwan will not be exempt from the system.
2012 Budget; FNPF reform
Fiji Village, IBFD, PACNews
Among the highlights of the 2012 Budget, the employer tax deduction for contributions to the Fiji National Provident Fund would drop to 50% and a 20% fringe benefits tax is set to be introduced in 2012. In a sidebar to the budget, the FNPF has outlined a reform program (IH 10/26/11) designed to restore solvency to the fund and better match one’s account with one’s life expectancy. While this will generally reduce benefits, there would be some subsidy for lower-income members, including a pensions floor of $100 (US$55.32) per month. People who had already taken out a pension under the more favorable formula would be refunded their principal amount. This is set to take effect on 1 Mar 2012.
Temporary worker, senior employment proposals
Daily Yomiuri, Nikkei Report
The Labor Policy Council, a body that advises the Ministry of Health, Labor and Welfare, will publish a report this month proposing reforms to the rules on temporary staffing. It is expected to set a time limit for fixed-term contracts. Also, the ruling party’s social security reform plan (IH 12/01/11) is now said to include a measure giving workers the right to retain their jobs if they reach age 60 and choose not to retire. The employer would be obliged to let them keep their jobs until age 65.
The International Labour Organization announced that it will assist the island nation with consolidation and revision of its labour laws. Among its goals:
- Compliance with fundamental ILO conventions
- Tripartite consultation arrangements
- Funding for paid maternity leave
- A streamlined dispute resolution process
Guidance on tax treatment of foreign nationals; Employment bill status
The Inland Revenue Board of Malaysia has issued Public Ruling PR No.8/2011. It explains when foreign nationals are subject to income tax in Malaysia and shows how the foreign tax credit is applied when a seconded worker is subject to double taxation. A foreign worker is not taxed on employment income unless a posting crosses the 60-day threshold.
Also, it turns out that Employment (Amendment) Act 2011 (IH 11/09/11) will need the Senate’s approval and a plenary vote is scheduled for 12 December. While the Malaysian Trades Union Congress (MTUC ) has been a harsh critic of the bill since its publication last year (IH 04/21/10), it has formally retracted the vow of a top officer that it would “declare war” if the bill is passed.
Universal health insurance
The Finance Ministry is reviewing three responses to its invitation to play the private sector role in a private/public partnership for universal health insurance that is set to launch at the start of next year. The 2012 Budget (Dhivehi only) provides for full funding of the program, which will cover all Maldivians with a full range of services, including overseas treatment when needed services are not available locally.
Philhealth to evolve into UHC; New rules on contract workers
Manila Standard, Manila Bulletin, Philippine Star
Since mid-October, the state health insurance body, Philhealth, has issued a series of circulars on expansions of coverage for additional populations and medical procedures. This has been consistent with the administration’s goal of Universal Health Care (UHC). Officials initially gave assurances that premiums would not increase. A more recent press release on going “full-speed towards UHC” describes a timetable for introducing a universal healthcare system that will entail significantly higher premiums. In the informal sector, premiums would be doubled to P2,400 (US$55.47) with the government subsidizing up to half. The formal sector rate, now 2.5% of basic monthly salary with the cost split between employee and employer, would rise to 3% in January 2013. The regulatory framework will include details of the basic health package covered under UHC and the role of supplemental health insurance products.
Also, the Department of Labor and Employment (DOLE) is extolling the advantages to workers and employers of Department Order No. 18-A, which provides a regulatory framework for contract workers. Under the new rules:
- Contract workers are entitled to social security and Philhealth coverage, participation in the contractor’s retirement plan, 13th month pay (pro-rated for those working less than a year) and overtime pay.
- Separation pay and other benefit obligations incurred upon premature termination of a fixed-term contract are spelled out.
- There is a limit on serial renewals of fixed-term contracts.
- Strict parameters are set for what constitutes legitimate contract work.
- Contractors must register and there are a number of violations that would be grounds for loss of license.
Some of the unions want the order scrapped because it stops short of the outright ban on contracting that they and many legislators have pursued (IH 08/17/11).
Final recommendations on corporate governance
WSJ, Asia Pulse
The Corporate Governance Council has submitted its final recommendations on revisions to the Code of Corporate Governance to the Monetary Authority of Singapore. Proposals include:
- More detailed disclosure of management remuneration, including the link between pay and performance
- Clawback provision for executive pay when it is found to be based on misconduct or misstatement of financial performance
- 50% independent directors on every corporate board, accompanied by a stricter definition of independent director
The MAS will issue its response “in due course.”
Labor reform package; Occupational health package
Taiwan News, China Post, Business Week
With polling tight in advance of the 14 January general election, the President has announced a labor reform package featuring a response to the fundamentally unchecked practice of putting workers on unpaid leave (IH 12/01/11). Among the highlights:
- The normal “workweek” (actually 84 hours per fortnight) would be cut to 40 hours.
- There would be higher subsidies for training older workers and for teaching new skills to workers under age 45.
- Unspecified restrictions would ensure that employers are placing workers on unpaid leave only as a “last resort.” There is mention of a disclosure requirement when the unpaid leave figures reach a certain threshold.
- There would be greater employer accountability for workplace safety as well as new resources for worker rehabilitation and return to work programs.
Also, legislation that has cleared its first reading in the Legislative Yuan would make some major amendments to the Occupational Safety and Health Act:
- It would protect all workers, extending coverage to contract workers, apprentices, volunteers, free-lancers and others who have so far fallen through the cracks (IH 05/04/11).
- The existing requirement that any enterprise with at least 300 workers be contracted with an occupational physician or clinic would now extend to any company with 50 or more workers.
- Workers at greatest risk of death from overwork would have their health monitored and their working conditions modified. Target populations would include night-shift workers and those with other unusual schedules.
Health insurance TPA rules
A federal regulatory framework for the third party administrators (TPAs) that process health insurance claims will come into effect on 31 January. Medical claims management may only be performed by licensed TPAs, who will have to renew their licenses annually. They will not be allowed to outsource. TPAs are being given a year to come into full compliance.
Consultation on Pensionskassen Law revision
Der Standard, VersicherungsJournal, IPE
The Finance Ministry has opened a consultation (German only) on a draft revision of the Pensionskassen Law. Among the measures earning heavy coverage:
- A lifecycle model would steer participants into safer investments as they near retirement age.
- Scheme members would also be able to transfer to a low-risk BKV defined contribution scheme (IH 05/06/09) at any stage.
- New transparency and disclosure requirements are meant to make the market more competitive.
- The limit for pension risk pools would rise from 1,000 to 10,000 members.
- In the wake of the European Court of Justice (ECJ) ruling in Case C-236/09, there would be no sex-based actuarial factors.
The consultation will close on 10 Jan 2012.
World Bank proposed pension reforms
Telegraf, BELTA, Belapan
A big chunk of the World Bank’s Belarus Public Expenditure Review: Fiscal Reforms for a Sustainable Economic Recovery is devoted to pension reform. Making the state pension sustainable would entail:
- Raising the retirement age from 55 for women and 60 for men to 65 for all
- Switching pension indexation from wage inflation to CPI
- Complementing it with a notional defined contribution scheme
New government’s agenda
Deredactie, Tax Analysts, NYT
Press coverage of an accord (French only) on the formation of a new government and more thorough accounts of the 2012 Budget (IH 12/01/11) have yielded some interesting details:
- The formula for taxing stock options would not change, but the standard rate used for their lump-sum valuation would rise from 15% to 18%.
- The determination of taxable income in the private use of a company car will factor in both carbon emissions and the price of the car. This is expected to result in a higher levy in most cases.
- A more refined valuation of employer-provided housing and utilities is also likely to raise the tax for most affected workers.
- Top management bonuses are to be banned at those banks benefitting from government bailout.
- A company’s internal assumption of risk in funding a defined benefit scheme is better off shifted to an external pension provider. This measure is evidently still in flux and accounts vary on whether there would be a mandate with a deadline or just tax incentives for externalizing.
Retirement age hike proposal vacillates
Sofia Echo, Business Week, BTA
The administration pushed forward its recent proposal for a pension age increase (IH 12/01/11) calling for the male retirement age to rise from 63 to 65 and the female age from 60 to 63 between 2012 and 2014. Public outrage forced a retreat, but still a faster rise than initially planned. The increase would now start in January 2012 and would be phased-in in four-month increments rather than a year at a time.
Pension and labour reform measures clear President's desk
CTK, CIA, Prague Post
The President declined to sign the new pension reform legislation (IH 11/16/11) but allowed the deadline for a veto to pass. He did sign the latest package of Labour Code amendments (IH 11/16/11). There are a number of prominent provisions, all set to take effect on 1 Jan 2012. Among them:
- The severance formula will start at one month’s pay for those employed less than a year and peak at two months’ salary for those employed over two years.
- The maximum duration for a fixed-term contract will be three years.
- Personnel agencies will no longer be able to employ non-EU workers for contract work for other companies. There are some exceptions and affected sectors will campaign for further modifications.
UIF contribution cut cancelled
The Cabinet has rejected the Unemployment Insurance Fund supervisory board’s draft rules that would have reduced the unemployment insurance premium from 4.2% to 3% (IH 12/01/11). There is some legal uncertainty over whether the government can block the board’s decision. The Social Affairs Minister will nonetheless submit a measure to the Cabinet on maintaining the contribution rate at 4.2%.
Reform of data protection rules; ECJ leave accrual ruling; Globalisation fund eligibility tightened
Europolitics, EU Observer, Euractiv
The Vice President of the European Commission announced that the review of the Data Protection Directive due next month will propose relieving multinational companies of significant administrative burden. Businesses operating in more than one member state are currently required to comply with all local data protection rules. The commission will propose simply complying with the data protection authorities of their countries of establishment. Those authorities would be empowered to punish these companies for infractions committed in other member states.
Also, the European Court of Justice (ECJ) ruled in case C-214/10 that a member state may have rules limiting the carryover period for annual leave a worker has accumulated while on sick leave. A 15-month carryover period was deemed not in violation of the Working Time Directive and not an unfair limit.
Meanwhile, an eight-member minority sufficed to block an extension of the 2009 special rules for the European Globalisation Adjustment Fund (EGF). Measures in this “derogation” halving the eligibility threshold to 500 redundancies, doubling the funding period to 24 months and raising the training subsidy for laid off workers from 50% to 65% will be allowed to lapse at the end of this month.
Sick leave oversight; Gay marriage bill stalled
Esmerk, Helsingin Sanomat
Starting next summer, two new safeguards against abuse of sick leave rules will come into force. Employers will have to notify occupational health services when an employee’s sick leave will extend beyond a month and occupational health services will step in to assess an employee’s ability to return to work when the three-month threshold is reached. Also, the petition drive in Parliament to force a plenary debate on a member’s bill calling for a gender-neutral definition of marriage (IH 08/10/11) has peaked at 70 signatures, far short of the 100 needed.
Employee leasing measures
Some important rules on agency workers went into effect this month:
- There are no longer any exceptions to the requirement that any employee-leasing entity be licensed.
- An employer who lays off workers and then rehires them through an agency within six months must offer the same pay and benefits.
- Agency workers have a right to access job postings at the enterprise where they are assigned.
- Intracompany transfers and secondments are exempt from these rules.
- A minimum wage for agency workers is under consideration.
Draft Labour Code status; Early retirement, disability pension legislation
MTI, Politics.hu BBJ
Marathon filibuster sessions blocked a plenary vote on the draft Labour Code (IH 11/16/11) last week. The government has since negotiated a tripartite agreement on the legislation with business and union representatives. New amendments will be presented in Parliament this week.
Meanwhile, Parliament has passed measures ending early retirement under numerous privileged pension schemes (mostly public sector), keeping only one exception that allows women to retire after 40 years of employment. People already receiving early retirement pensions will start paying income tax on them next year.
Also, a government-sponsored bill would replace the disability pension when possible with a rehabilitation stipend of up to 50% of the minimum wage for up to three years. Workers with more severe disabilities would receive a rebranded disability support ranging from 30 to 150% of the minimum wage.
Irish Examiner, Irish Independent, Irish Times
The 2012 Budget (IH 12/01/11) was published yesterday. The backlash to budget previews reportedly prompted the government to shelve some of the more austere measures, but it’s still a pretty formidable package:
- Removal of the state subsidy for private health care delivered in public hospitals is likely to be a major cost driver for private health insurance premiums. Legislation on how public hospitals should charge patients with private health insurance coverage is in preparation.
- There will be stakeholder consultations in 2012 on a “sustainable and more equitable” tax regime for supplementary pensions. The consultation will also address boosting domestic investment for pension funds.
- An anomaly in the law that sometimes makes sick leave more rewarding than actual salary would be addressed by ending the tax exemption for the first 36 days of Illness Benefit and Occupational Injury Benefit.
- The base for PRSI (Pay Related Social Insurance) would expand in a few ways, most notably by ending the employer 50% PRSI relief on employee pensions and applying the levy to investment income.
- The salary level exempt from the Universal Social Charge would jump from €4,004 per year to €10,036 from 1 Jan 2012.
- A Special Assignee Relief Programme will help employers compete for highly skilled foreign workers.
- The annual imputed distribution on Approved Retirement Funds (ARFs) with assets valued at over €2 million would rise from 5 to 6% from 31 Dec 2012.
- The employer rebate from the Redundancy and Insolvency Scheme would drop from 60% to 15%.
“Save Italy” austerity package
ANSA, AGI, Financial Times
After securing the Cabinet’s approval, the Prime Minister presented his “Save Italy” fiscal reform decree to Parliament. Among its more notable measures:
- The retirement age would rise in 2012 from 65 to 66 for men, and from 60 to 62 for women. Women's retirement age would reach 66 by 2018.
- The minimum contribution period for early retirement, now 40 years for both sexes, would rise to 42 for men and 41 for women.
- There would be financial incentives for deferring retirement to age 70.
- The state pension would switch from final salary defined benefit plan to defined contribution.
- Pension indexation would freeze for those receiving above € 936 per month in 2012 and 2013.
- Small and medium enterprises would have tax incentives for hiring women and youths.
- The retail sector would have more flexible hours of operation.
One document (Italian only) that accompanied the decree provided greater detail on the pension reforms. Labour market reforms have been deferred but are firmly on this administration’s agenda. The decree became law when the Cabinet approved it on Sunday night, but it will lapse unless Parliament passes it within 60 days.
Dispute resolution, strike limitation measures
Itar-Tass, RIA Novosti
The President has signed a package of Labor Code amendments on more effective workplace dispute resolution. It sets out the roles of both sides in settling a conflict and calls for tripartite arbitration panels to expedite those disputes that reach an impasse. One measure allows a court to declare a strike illegal if the workers perform an essential service and have not made arrangements for minimal coverage while the strike is under way.
Labour reform a top priority
Negocios.com, AFP, El Pais
The Prime Minister-elect met with key social partner representatives to give them a 6 January deadline for finding common ground on key labour reform issues. Along with items already on his agenda (IH 12/01/11), he wants to address absenteeism, dispute resolution and worker training. He expects written proposals by mid-January. If the social partners cannot reach quick resolution, the government may pursue reform without their collaboration.
More on Autumn Statement 2011; Various
Employee Benefits, Professional Pensions, The Guardian
Later coverage of the Chancellor’s Autumn Statement 2011 (IH 12/01/11) uncovered a few more items worth noting:
- A statement that further increases to the retirement age would be “based on demographic evidence” prompted a team of actuaries to forecast a normal retirement age of 74 in 2080.
- CPI-linked gilts, a favorite investment for pension funds, will not be offered in 2012-13.
- There will be a call for evidence on reassessing Transfer of Undertakings (Protection of Employment) (TUPE) regulations.
In other news:
- HM Revenue & Customs (HMRC) has issued guidance for employers and payroll administrators on steps they should take to prepare for compliance with the automatic enrolment requirements.
- The Prime Minister has discussed a trade-off with his German counterpart that would assure the UK’s opt-out from the 48-hour week limit in the Working Time Directive in exchange for support of stricter fiscal rules in the Eurozone.
- The High Court had a hearing last week to investigate the legality of a pension unlocking scheme. The plan in question used a maximizing pension value arrangement (MPVA) in which two schemes avoided tax charges by lending money to each other's members.
- The industry press is reminding stakeholders that the 1 Jan 2012 entry into force of HMRC VAT guidance on employee shopping vouchers (IH 08/03/11) could have wide-ranging impact. The decision that retail vouchers provided as part of a salary sacrifice arrangement should be subject to value-added tax could extend to using salary sacrifice for home computers or bicycles for commuting.
Quebec pension funding relief extension; Supreme Court to hear appeal on pension bankruptcies
Mondaq, Pension & Benefits Law
The National Assembly has passed (French only) Bill 42, legislation extending temporary solvency funding relief for defined benefit plans that was due to lapse at the end of this year. Measures including a doubling of the amortization period to 10 years and a five-year smoothing method for valuing plan assets will now stay in effect through 13 Dec 2013. Incidentally, the Supreme Court has agreed to hear an appeal to the landmark Ontario court ruling that gave pension members top status among creditors in a company bankruptcy (IH 06/15/11).
Ruling on bonus pool tax deductions
CFO, Mondaq, RIA
Internal Revenue Service Revenue Ruling 2011-29 offers companies greater relief on the “all events test” for determining whether a bonus pool can be tax deductible. Provided the actual pool is a fixed amount at the end of the taxable year, the test now needn’t necessarily identify what amount goes to each recipient.
Profit-sharing bill update; Wage negotiations
BAH, Dow Jones, WSJ
Following her re-election, the President has taken a slightly more pro-business stance. She has now come out against the mandatory profit-sharing legislation that was introduced in Congress last year (IH 05/11/11), saying that profit-sharing schemes should be left to collective bargaining. Union federation CGT will nonetheless attempt to force the bill through Congress.
Incidentally, the government statistics agency, still in disrepute (IH 08/05/09), reports inflation at 10% while analysts in the private sector estimate 20 to 25%. For the next round of collective bargaining, the President has proposed an 18% wage hike while union representatives expect to hold out for nothing less than 25%.