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:
EU: Single Permit Directive advances
Hong Kong: MPF pensionable salary level rises
India: EPF changes mulled
Mexico: Afores developments
New Zealand: Flexible super proposal
Russia: Social tax on some foreign workers from January 1
UK: Finance Bill 2012
Status of labour bill review disputed
Biz-Community, IOL, Citizen Online
The newswires were humming last week with accounts of Labour Ministry officials advising the press of near-breakthrough progress in the tripartite National Economic Development and Labour Council (NEDLAC) review of four major labour reform bills (IH 07/14/11). Press assertions that under revisions to the draft legislation a court would review an employer’s application to hire people on fixed-term contract and that failure to pay overtime premiums would be a criminal offense were refuted by one of NEDLAC’s negotiators as were reports that members were on the verge of agreeing that labour broking is a crime. NEDLAC still aims to complete at least two of the revisions by the end of this year.
FWA rules on urine testing
The Australian, Australia Mining
Fair Work Australia Decision 8288 endorsed the position of an employer that had committed to switching its cannabis screening program from urine testing to the less invasive saliva testing once government standards for saliva testing were released, then decided against the switch. The court held that the relative efficacy of urine testing trumped privacy concerns and that the company’s drug policy statement, despite being part of the industrial settlement, was not binding.
FNPF reform detailed, armored
Fiji Times, RNZ Fiji Village
The Fiji National Provident Fund has released details including a fact sheet and an FAQ on the reforms coming under the FNPF Transition Decree (IH 12/07/11). Alarmed over the benefit reductions, stakeholders sought redress, one group with a petition to the Fiji High Court. They have since learned that an innocuous-looking passage in the decree effectively states that legal challenges to these reforms are not allowed.
MPF pensionable salary level rises; MPF intermediary bill
7th Space, ACC, Go Wealthy
The Mandatory Provident Fund Authority has reported that measures raising the minimum and maximum salary levels subject to MPF contributions (IH 06/22/11) were approved in the Legislative Council. The minimum pensionable monthly income rose from $5,000 (US$642.67) to $6,500, effective 1 November. The maximum monthly level will jump $20,000 to $25,000 on 1 Jun 2012.
Also, legislation tightening the regulatory framework for MPF intermediary activities (IH 08/10/11) was gazetted last week and will be presented to the Legislative Council this week. It would help pave the way for the Employee Choice Arrangement (ECA). Enforcement and registration mechanisms would be in place to protect consumers when ECA arrives to amp up the MPF marketplace on 1 Nov 2012.
EPF changes mulled
Economic Times, FinGyan
An insider at the Employee Provident Fund Organisation (EPFO) has advised the press that the EPFO Central Board of Trustees (CBT) will be meeting on 23 December to consider a proposal to cut the 9.5% EPF guarantee rate down to 8.25% for 2012-13. The 9.5% rate for the current cycle was attributed to an unexpected windfall (IH 03/23/11) that proved significantly smaller than initially believed. One proposal that the EPFO Pension Implementation Committee (PIC) is openly reviewing would raise the monthly minimum pension to Rs.1,000 (US$19.22). This would be financed by a 0.63% increase in the 8.33% employer EPF contribution.
Exec pay disclosure may be broken out by individual
Korea Times, Yonhap, Asia Pulse
After initially denying it, the Financial Services Commission admitted that a proposal to require that disclosure of executive pay in publicly traded companies be detailed person-by-person is “under review.” One opposition party plans to produce legislation on mandatory posting of individual executive pay, which is also called for by a capital market law revision that has been in the National Assembly for over two years.
Flexible super proposal; Ruling on 90-day trial period
Nelson Mail, Waikato Times
A confidence and supply agreement between the governing National Party and United Future features plans to consult on a “flexible superannuation” proposal ostensibly close to the scheme outlined on the United Future website. It would allow superannuation members to retire any time between ages 60 and 70, with a corresponding range of deferral incentives and early retirement benefit cuts. The agreement also mentions a few health reform measures, notably reducing queues for surgery and offering free annual medical exams to people above age 65.
Meanwhile, a recent Employment Court ruling provides a reminder that the new option to give workers a 90-day trial period needs to be exercised with care. The trial period must be a negotiated part of the employment agreement and cannot legitimately be launched unilaterally after the employment contract has been drawn up.
Labor Law amendments come into force
Oman Tribune, Times of Oman
Last month, the Manpower Ministry announced the entry into force of a major set of Labor Law amendments:
- Workers are entitled to two consecutive days off per week. They needn’t necessarily be the traditional Thursday and Friday.
- A maximum normal work day is nine hours with a meal break of at least half an hour. The standard work week will be capped at 45 hours. During Ramadhan, it’s six hours per day and 30 per week.
- During peak periods, overtime with days totaling up to 12 hours is allowed. The overtime premium is 25% for day shifts and 50% for night shifts.
- One becomes eligible for the minimum annual leave period of 30 days after six months on the job. This is complemented by six days’ emergency leave.
- A woman is entitled to 50 days’ maternity leave at full pay but not more than three times during her service.
- When a court has determined wrongful termination, the worker is entitled to either reinstatement or an award of no less than three months’ pay.
- Women may not work between 9 pm and 6 am, with few sectors exempt.
The Oman Society of Contractors (OSC) secured an assurance from the Minister of Manpower that he would review its report on legislative provisions that it found confusing and/or problematic.
Papua New Guinea
IBFD, PNG Post Courier
The 2012 Budget boasts a new tax regime for severance pay. From 1 Jul 2012, payments under an approved redundancy scheme would be taxed at 15% up to the lesser of PGK50,000 (US$23,320) or PGK5,000 plus PGK2,000 for each continuous year of unemployment. An aside mentions that the new minimum wage (IH 09/28/11) is still in development, but notes that the government has promised to raise the hourly minimum from PGK2.29 to PGK3.50.
Clarification -- and obfuscation -- on excess contributions
Manila Bulletin, Business Mirror, Tempo
The Bureau of Internal Revenue (BIR) is still battling press misinformation on its taxation of excess contributions to statutory benefit programs (IH 12/01/11). Contrary to several inflammatory newswire accounts, overseas foreign workers (OFWs) and minimum wage workers are exempt from the recognition of excess contributions as taxable income because they are exempt from income tax. Nonetheless, there is already one bill before Congress (HB 5609, due here soon) that would make excess contributions tax exempt.
Labor Code amendments
The lower house of Parliament has approved a set of major amendments to the Labor Code:
- New hires would need to have written employment contracts for a minimum duration of one year.
- There would be premiums for overtime, weekend and holiday hours. By one account, all would be double normal salary.
- An employer would have very limited capacity to dismiss workers. The inability to perform would have to be documented by a “medical certificate of incapacity.”
It is unclear whether this was the final vote.
Pension reform feedback
Austrian Independent, IPE
Mercer delivered a mixed response to the consultation on draft Pensionskassen Law revisions. The lifecycle model is appreciated but a guaranteed return on the conservative “safety” option investment could lead to higher costs for participants. Also, the Austrian press is reporting on a leaked Moody’s report that takes the government to task for insufficient action to curb early retirement.
Pension reform bill passed, vetoed
BTA, Sofia Echo, SNA
The version of the Public Insurance Budget Bill that cleared Parliament would raise the retirement age in annual four-month increments starting on 1 Jan 2012 (IH 12/07/11). It would rise from 60 to 63 for women and 63 to 65 for men. The outgoing President vetoed the bill and sent it back for a rewrite, but that is largely a symbolic gesture because another majority vote in Parliament would suffice to override the veto.
New government’s agenda; Accession treaty signed
The new “Kukuriku (Croatian only)” (literally “cock-a-doodle-doo") center-left coalition government has posted an ambitious agenda:
- Privileged pensions would be eliminated.
- The gulf between the average pension and the average wage would narrow, possibly via a retirement age hike or higher contributions.
- Supporting “a market economy but not a market society” would involve addressing income inequality.
- There would be life-long learning programs with particular attention to new skills for the unemployed.
- Worker participation and co-determination are top priorities.
- Work/life balance measures would include enhancement of parental leave benefits.
- The coalition backs greater occupational safety oversight and the extension of workplace protections to atypical workers.
Also, Croatia has signed the European Union Accession Treaty and will become the 28th EU member on 1 Jul 2013. Other states may place access restrictions on Croatian workers for up to two years from that date but successful appeals for extension could give some a seven-year deferral. Croatia would be free to reciprocate the movement restrictions.
New discount yield curve; Yellow health card retired
Financial regulator Finanstilsynet (FSA) has notified (Danish only) pension funds and insurance companies of an alternative discount yield curve that would allow them to correct a harmful accounting “anomaly” caused by “abnormal financial market conditions.” Companies wishing to take advantage of this option have a very small window. The deadline for notifying the FSA is 16 Dec 2011. Incidentally, the 2012 Budget (IH 11/16/11) measure shelving the yellow national health system card is now in force. The blue European Health Insurance Card will suffice for Danish citizens but will not help Danish residents who are not EU citizens.
See also: Croatia
Single Permit Directive advances
Daily Express, Europolitics, New Europe
Following a co-decision by the European Council and Parliament, the two relevant committees of Parliament have approved the draft “Single Permit” Directive (IH 03/30/11). A single work permit would allow third-country workers posted legally in one member state to work in any other state without a new permit. There would be roughly equal rights in employment conditions, social security and access to public services; “all persons working legally in Europe [would have] the same rights as European workers.” There has already been some chafing in member states about migrant workers being granted a license for welfare benefit shopping. Parliament’s final plenary vote on the directive is scheduled for this week.
Ramifications of 2012 Budget debated; AW transposition bill due
RTE, Irish Examiner, IPE
The pensions sector greeted the 2012 Budget (IH 12/07/11) with considerable trepidation, asserting that both the concrete measures such as removing the employer 50% relief on pay-related social insurance (PRSI) and the thorough review of the tax regime promised for next year could “significantly damage the sustainability” of private pensions. This was overshadowed, though, by health insurer VHI’s allegation that ending the subsidy for private health insurance in public hospitals would drive premiums up by over 50%. The Health Minister disputes this and plans to carry out a review of cost containment opportunities in the private health sector.
Also, Ireland did not meet the deadline for transposition of the Temporary Agency Workers Directive. The sticking point is reportedly social partner disagreement over the qualifying period for temporary workers to receive equal rights. Employers are holding out for a period of a year and unions don’t think there should be one at all. The government, meanwhile, is completing draft legislation that it aims to publish by the end of this month.
Tax break on EEA statutory benefits
The Cabinet has approved a set of Income Tax Act amendments that would plug gaps in Latvia’s compliance with EU free movement of worker bills. The measures would recognize statutory benefits paid by other EEA (European Economic Area) states as tax-exempt.
Temporary social benefit reduction targeted
ELTA, Baltic Daily, BBD
A parliamentary panel is debating whether the already deferred restoration of the social benefits temporarily cut in 2009 (IH 02/16/11) should come in stages. Only 50% of the difference can be restored at the start of next year unless the government fully suspends the transfer of first-pillar retirement scheme (Sodra) contributions to the second-pillar scheme. The President and the speaker of Parliament are among those backing this option and a bill calling for the suspension was introduced yesterday.
Retirement age compromise, other pension reform fallout
DutchNews.nl, Financial Times, IPE
The Social Affairs and Employment Minister has introduced (Dutch only) measures to keep low-income seniors in the workforce longer with a supplementary work bonus while smoothing their path to early retirement by sharply reducing benefit cuts for retirement at age 65. The idea is that entitlement to early retirement for “heavy work” is difficult to pin down but that people earning up to 150% of the minimum wage would generally be those who are physically worn down by strenuous work.
One interesting observation on the pension agreement is that participants would be entitled to veto value transfers. This would make merging benefit plans, particularly in cases where an older plan with a firmly guaranteed benefit is matched with a plan offering weaker guarantees -- now possible because the agreement allows benefits to be conditioned on longevity or stock market performance -- much more difficult.
2012 Budget passed
BBC, Expatica, Tax Analysts
The 2012 Budget (Portuguese only) (IH 11/09/11) got through Parliament with most major provisions intact. By one account, the salary threshold for the 13th and 14th month bonuses (IH 11/16/11) dipped from €1,000 to €600 per month for pensioners.
Social tax on some foreign workers from January 1; Occupational safety reform
Moscow Times, Skrin, Prime-Tass
The Senate has passed and the President has signed a package of social insurance measures that will oblige many expatriates temporarily posted in Russia and their employers to pay a social insurance tax (IH 12/01/11), effective 1 Jan 2012. Foreign workers who do not have residency status and are on temporary assignment for at least six months or for an open-ended period will be subject to a social insurance levy from which they are not likely to ever benefit. For fiscal 2012-13, the premium for affected foreign workers will be 22% on income up to 512,000 rubles (US$16,268) and 10% on higher salaries. Unskilled laborers and “highly qualified specialists” earning at least 2 million rubles per year will be exempt. Under the same law, Russian citizens will see a drop in the total social insurance premium from 34% to 30%.
Also, the Health Ministry has outlined (Russian only) a number of recent and forthcoming measures to strengthen occupational safety standards:
- The ministry has drafted legislation that would increase the maximum fines for occupational safety violations 100-fold and if two or more people die in a preventable workplace accident, the party found culpable could face a jail term.
- A website identifying a broad range of “professional risks” will be accessible to all by the end of this month.
- There will soon be social partner consultation on draft rules for workplace risk management.
Bonus tax bill defeated
Swiss Info, LTN
A measure to end corporate tax deductions on bonuses above CHF3m (US$3.2m) and to ban bonuses in that range in years that a company has suffered losses cleared the Senate but was narrowly defeated in the House of Representatives. The Social Democratic Party – the second largest party in Parliament – is committed to finding an alternative route to capping excess bonuses.
Finance Bill 2012; TPR’s principles for DC schemes; Curbs on executive pay planned; Various
Citywire, Pensions Age, Professional Pensions
HM Revenue & Customs has opened a consultation on Finance Bill 2012. The package has a few highlights:
- Measures reflecting the Autumn Statement’s rules on shutting down loopholes granting excessive relief on asset-backed pension contributions (IH 12/01/11) are accompanied by the responses to a summer consultation on the topic.
- There is a separate consultation on draft legislation tightening the eligibility and disclosure requirements for the QROPS (qualifying recognized overseas pension schemes) tax regime. The consultation runs through 31 Jan 2012.
- Draft legislation on commuting small pension pots (£2,000 or less) also has a consultation closing on 31 January. The lump-sum option would be open to people age 60 and over and would take effect on 6 Apr 2012.
- There is refinement of the tax regime for “security enhanced” cars to reflect that this feature isn’t always just a luxury perk.
Meanwhile, the Pensions Regulator (TPR) is opening a stakeholder “dialogue” on Six principles for good workplace DC, a statement setting six broad standards for defined contribution scheme operations. It addresses scheme governance, member communications, plan administration, fiduciary responsibility and steps to help ensure good outcomes.
Also, the administration has signaled some imminent responses to the High Pay Commission’s final report (IH 12/01/11) and other evidence of excess remuneration. The Deputy Prime Minister has advised the press that “firm proposals” on curbing this “abhorrent practice" will arrive next month and that legislation on worker participation in remuneration committees is one option under consideration. The Bank of England has not commented on press reports that it is preparing new rules to rein in executive bonuses in the banking sector. Last week, the bank’s Financial Stability Report warned against performance-based incentive compensation schemes that encourage excess risk. On a separate track, HM Revenue and Customs has opened Merlin Executive Remuneration Disclosure consultation, which proposes detailed compensation disclosure of the eight best-paid individuals (names omitted) at the 15 largest banks. The consultation will run through 14 Feb 2012.
In other news:
- The Treasury has opened a public consultation on how the UK should respond to the European Court of Justice (ECJ) ruling on gender-neutral insurance premiums. It pairs a legal interpretation of the ruling with draft regulations amending Equality Act 2010. The consultation closes on 1 Mar 2012.
- The Office of Fair Trade (OFT) has referred the private health sector to the Competition Commission following a study that flagged a number of anti-competitive practices, including market dominance by a few large players.
- The Pensions Minister has noted in some recent speeches that pension buyouts, which he characterizes as bribing people to act against their own self-interest, need some sector self-regulation. A code of practice for “enhanced transfers” is already in production and should be published next summer.
Ontario caregiver leave measure
Dow Jones, CTV, ACC
Ontario's ruling party has submitted the Family Caregiver Leave Act to Parliament. It would complement coverage under the Family Medical Leave Act to afford up to eight weeks of unpaid leave to employees who are caring for a sick or injured relative. A doctor’s note would be mandatory. The administration has asked the federal government to extend Employment Insurance coverage to those who take family caregiver leave.
Dow Jones, Bloomberg, Milenio
Under the 2007 pension reforms, PensionISSSTE, the public sector counterpart to the Afores private pension funds, became authorized to compete in the private sector earlier this month. This transformation of the Afores marketplace is designed to boost competition and make these savings vehicles more appealing. There are some complementary measures serving the same goals:
- Pension regulator Consar has announced (Spanish only) another round of commission cuts. With the PensionISSSTE commission rate undercutting the field at 0.99%, the others, which averaged over 1.5% this year, will see their 2012 commissions cut by several percent on average.
- Consar has also issued (Spanish only) regulations on the governance of Afores. They cover certification of officials, communications to members, valuation of assets, the content of a mandatory investment policy manual and the roles of independent directors and the compliance officer.
- An imminent notice on the Central Bank website (Spanish only) will flesh out the rules on investment in commodities. An 8% cap on investment in commodities was part of the Afores regulations released last summer (IH 08/03/11). These rules will specify which commodities are fair game.
Draft regs on MEWAs; Various
NYT, Market Watch, INN
One long-neglected flaw in the Employee Retirement Income Security Act of 1974 (ERISA) is a jurisdictional loophole for multiple employer welfare arrangements (MEWAs). Small businesses that go to a MEWA for economy of scale in health insurance or other welfare benefits are often victims of fraud. The Department of Labor (DOL) has unveiled a pair of proposed regulations that would tighten MEWA reporting requirements and give the DOL far more enforcement authority, including the option of shutting a MEWA down. Feedback is welcome through 5 Mar 2012.
In other news:
- The Department of Labor is requesting public comment on proposed rules that would require federal contractors to have a “hiring goal” of a 7% disabled workforce. This would upgrade regulations calling for contractors to make a “good faith effort” in hiring disabled workers. Comments are welcome through 7 Feb 2012.
- There has been partisan dispute over the past several weeks on fast-mutating legislation that would give a one-year reprieve and a sharper decrease to the Social Security payroll tax cut that was set to expire on 31 December (normally 6.2%, the rate was 4.2% this year and would drop to 3.1% next year). It rates a mention this week because the Social Security Administration’s Chief Actuary has weighed in on whether the contribution holiday would significantly affect program funding, stating his belief that it would not.
- An Internal Revenue Service official has advised stakeholders that draft regulations for the controversial Foreign Account Tax Compliance Act (FATCA, IH 07/27/11) will be released for consultation by the end of this month.
Health reform measures
EIU, Santiago Times
The AUGE health reform plan (IH 12/15/10) has reached (Spanish only) one of its key goals ahead of time by capping the waiting period for treating 69 common diseases. A new government-backed health reform package, now before Parliament, includes measures that would:
- Require generic substitution when available
- Establish a basic package of universal coverage
- Tighten controls on sick leave to curb abuse
- Advance preventive medicine and give primary care physicians a more central role.