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: Review of tax regimes for cross-border workers
Ireland: Social Welfare and Pensions bill features DB funding measures
Italy: Compromise brings unity on labor reform
New Zealand: Parental leave extension bill
Portugal: Early retirement suspended
South Africa: Labour reform bills
Pension reform update
Tax Analysts, Eurasia Review, Xinhua, Yabiladi
Pension reforms first outlined in 2003 may be nearing consensus as the administration hosts tripartite meetings to review an outsourced 2010 proposal to replace four poorly financed pension funds with a sustainable unified basic pension for all and a supplementary pension for civil servants. A stopgap measure in the 2012 Finance Bill (French) would set a one-year supplemental social security levy of 1.5% on company profits above MAD 200 million (US$23.5 million).
Labour reform bills
SAPA, Politicsweb, Fin 24, Biz Community
South Africa’s labour minister has briefed the press on some major provisions in Labour Relations Amendment Bill, 2012 and Basic Conditions of Employment Amendment Bill, 2012 (IH 3/28/12). These measures would:
- Increase the responsibilities and authority of the Commission for Conciliation, Mediation and Arbitration (CCMA), limiting the ability of employers to appeal CCMA rulings in court
- Refine the regulatory framework for conducting industrial actions
- Charge an essential services committee with determining which sectors are so vital to public welfare that their right to strike should be curbed
- Exempt workers earning over R172,000 (US$21,900) per year from the equal treatment rule for temporary workers in certain circumstances
- Potentially ease unionization by allowing the labour minister to set thresholds that determine union representation
A measure that would make workers earning above a certain income level ineligible to bring unfair dismissal claims would apply only where employers have complied with employment law requirements, such as providing adequate advance notice.
The Department of Labour is holding public hearings this month before submitting the two bills to Parliament.
Accord on mobility, rights for migrant workers
Phnom Penh Post, Jakarta Post, China Daily
The ASEAN summit’s Phnom Penh Declaration features an agreement on intra-ASEAN worker mobility for the 10 members of the Association of Southeast Asian Nations. There will be a study on both “progressive visa relaxation” within ASEAN and a pan-ASEAN visa for non-ASEAN nationals. A group is already working on a legally binding Framework Instrument to protect the rights of migrant workers. Other ASEAN priorities mentioned during the summit include coordinated evolution of the insurance sector and a campaign against workplace smoking.
Proxy voting rule revision
Law and Tax, Business Spectator
The government is reportedly rushing to draft a measure to remedy an unintended consequence of Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 and will soon attach it to some fast-moving bill. Forbidding executives to vote on their own pay packets sometimes means that a minority of shares are eligible to be counted in votes on executive compensation. The two-strike rule for removing listed company boards when at least 25% of proxy votes are cast against remuneration reports two years in a row is being reached far more often than anticipated.
FWA ruling redefines period of service
Smart Company, Work Force, OHS Alert
Fair Work Australia’s Decision FWA 670 determined that the period a worker spent on workers' compensation leave counted toward the definition of length of service for determining eligibility for protection from unfair dismissal. The worker’s three months of service and one year on workers' compensation leave met the six-month threshold for unfair dismissal protection. The Australian Industry Group has filed an appeal over this ruling, noting that the same definition of period of service would apply for annual leave, carer’s leave and redundancy pay. Moreover, the decision could set a precedent for various other types of leave counting as periods of service
MHRSS issues service provider contract guidelines
Standard service contracts between plan sponsors and service providers will be required under new guidance issued by China’s Ministry of Human Resources and Social Security (MHRSS). Single employer trusts are requested to follow standard contract clauses in principle and any deviation should be stated in writing when filing. Supplementary agreements are prohibited. The notice will standardize industry service agreement practices to some extent, but will likely limit sponsors' flexibility in negotiating service clauses. The extent to which deviations are reviewed and accepted has yet to be determined.
Public holiday harmonization studied
The Standard, AFH
The Federation of Trade Unions (FTU) has been lobbying the government to harmonize the statutory 12 public holidays per year afforded blue-collar workers with the 17 public holiday entitlement of white-collar staff. The secretary for labour and welfare has already commissioned a study on this discrepancy. An FTU submission to the chief executive-elect urges 17 public holidays for all as well as a 44-hour work week (Chinese) and paid paternity leave (IH 10/19/11).
Minimum wage consultation
The Standard, 7th Space
Hong Kong’s Minimum Wage Commission (MWC) will defer judgment on whether to raise the statutory minimum wage until the close of a public consultation on 28 May. The MWC has published its preliminary views, relevant statistics and the results of an earlier stakeholder consultation on the potential minimum wage rise.
EPF rebound ahead
Business Standard, Times of India, Hindustan Times
Soon after settling on a controversial deep cut in the guaranteed interest rate for 2011-12 (IH 3/21/12), the Employees Provident Fund Organisation (EPFO) has assured the press that the sharp dip was a one-time affair. Sources in the EPFO Central Board of Trustees (CBT) have charted the environment under which a rate that plummeted from 9.5% to 8.25% can soon lock in at 8.6%. Next month’s CBT meeting is expected to confirm the 8.6% rate for 2012-13.
Managers barred from union committees
The judicial authority of the Histadrut labor federation has ruled that managers and other executives may not hold posts on their workplace union committees. This was not prompted by the misconduct of someone in a dual role, but by the concern that conflicts of interest couldn’t help but arise.
Parental leave extension bill
NZ Herald, Scoop, Voxy
A private member bill that would extend the 14-week paid parental leave entitlement to 26 weeks has won the parliamentary lottery to be guaranteed plenary debate. Parental Leave and Employment Protection (Six Months Paid Leave) Amendment Bill would bridge the gap in annual four-week increments, reaching six months in 2014 While the labour minister has dismissed the measure as “simply unaffordable,” it has good prospects for passage without the ruling party’s support. Incidentally, the opposition Labour Party aims to double the paid leave to a full year if it wins the election.
Social Security System eases loan penalties
A new amnesty program will waive loan penalties incurred by Filipinos whose pension fund loan repayments were deducted from their salaries but not remitted by their employers to the Social Security System. Starting 1 April, the Loan Penalty Condonation Program for Individual Members will benefit an estimated 5.6 million who are behind on their repayments, discounting penalties from 50 to 100% depending on the reason for the delinquency and the borrower’s history of repayment. The agency will pursue employers that fail to remit employee contributions. Penalties may include fines and criminal charges.
Weekend shift proposal
Q++Studio, Arabian Business, Saudi Gazette
A government committee is nearing completion of a study that in its present draft urges switching the country's weekend from Thursday-Friday to Friday-Saturday. Earlier attempts over the past decade have failed to convince the consultative Shura Council to back the shift, but the committee believes that it has constructed a compelling economic argument for the change.
Sponsorship system withdrawal proposed
Emirates 247, Digital Journal, Arab News
The Ministry of Labor's five-year study of the sponsorship system (IH 1/26/11) for foreign workers has concluded that it should be eliminated. Basing a foreign worker's residency status so fully on the good will of a sponsoring employer proved too much of an opportunity for exploitation. A substitute system would:
- Establish an Expatriate Labor Authority to regulate the status of foreign workers
- Create a mandatory insurance policy that would guarantee plane fare home for deported workers and protect employers from such hazards as embezzlement and theft of trade secrets
- Develop standard contracts for foreign workers
- Entrust management of the foreign worker job market, including recruitment and hiring roles to a small group of regulated intermediary companies
The ministry will deliver its proposal to the Council of Ministers within the next few months.
Income tax for expats rejected
Arabian Business, Trade Arabia, Arab News, Saudi Gazette
The Shura Council has voted down a proposal to tax the income of foreign workers. Backers of the tax saw it as advancing the Saudization of the private-sector work force and curbing the outflow of capital via remittances to overseas families. The argument that development would be set back by a disincentive for skilled foreign workers ultimately prevailed. Incidentally, the administration is still interested in limiting remittances for foreign workers (IH 11/02/11), but the scope has narrowed to those workers whose remittances exceed their salaries, an indication the workers are illegally running a Saudi business with a Saudi national as figurehead.
Taiwan delays national health insurance
Taipei Times, Focus Taiwan
The launch of Taiwan’s second-generation national health insurance system will be postponed to January 2013 to allow more preparation time, the cabinet has announced. In anticipation of the January launch, Premier Sean Chen directed the Department of Health to complete amendments to existing law and related follow-up measures before the end of June. Under the planned “2G” program, salary will be subject to a 4.9% levy while supplemental income such as bonuses, interest and stock dividends will be taxed at 6.9%.
Capital gains tax exemption for foreign pensions
Market Watch, Business Week
A tax committee due to report April 9 on restoration of a capital gains tax on stock trades is expected to explicitly exclude foreign pension funds and institutional investors. The finance minister reported that the committee has ruled out the tax as a disincentive for foreign investment.
Parliament approves second-pillar pension
The Turkmenistan parliament has passed legislation that will introduce a notional defined contribution system (IH 2/02/11) to serve as a compulsory state pension, replacing the current final salary defined benefit model. Both employers and employees will contribute to the accumulative pension system. The UN Development Programme is assisting the government with fleshing out the scheme by drawing on the experiences of other countries with similar models.
Jersey adapts pension scheme to new UK QROPS rules
Tax Analysts, International Adviser, Isle News
Jersey tax authorities have submitted legislation to the State Assembly that would introduce a new international pension, the Recognized Pension Scheme (RPS). The RPS model has the same origins as the international pension scheme proposed in Guernsey a few weeks ago (IH 4/04/12). It aims to keep a popular hub for international pensions compliant with the UK’s tougher new standards for QROPS (Qualifying Recognised Overseas Pension Schemes) eligibility (IH 3/28/12, UK).
Review of tax regimes for cross-border workers
Tax Analysts, Invest in EU, Information Daily
The European Commission has launched a major new initiative to root out member state tax discrimination against cross-border workers. Although this has been addressed through case law on a piecemeal basis, the Commission believes that the remaining tax inequities are a barrier to increasing worker mobility and economic growth. The year-long review will encompass tax regime differentiation of workers posted to another member state, workers splitting their time between more than one state, self-employed workers and pensioners. Rather than gathering evidence for a final report, the Commission will flag discriminatory rules with member states and warns that it may bring legal proceedings.
EP delays electromagnetic law enactment
Deadline for electromagnetic fields directive pushed back
Implementation of the EU electromagnetic fields directive would be delayed to 31 Oct 2013 from the directive’s transposition deadline of 30 April 2012 under a proposal by the European Parliament’s Employment and Social Affairs Committee. The directive covers occupational safety standards for workers at risk of exposure to electromagnetic fields. The delay in implementation will allow the law to be revised to reflect the concerns and conditions of specific sectors, in particular the medical sector. The European Commission had first proposed an extended implementation date of 30 Apr 2014, but the committee wants to minimize delay.
Agreement on pension and benefit reforms
YLE, Helsingin Sanomat, STTK
Finland’s social partners have agreed on measures that are expected to make pensions more sustainable and increase the average working life by one year:
- Employer and employee pension contributions would rise by 0.4% each in both 2015 and 2016.
- The minimum age for part-time pension would rise from 60 to 61 in 2015 and the minimum age for the unemployment pension tube would rise.
- Employees above age 60 would be eligible for training programs and those above age 63 for occupational rehabilitation.
- From 2014, workers would need six months of employment – down from eight – to qualify for unemployment benefits, but entitlement to benefits for 500 days would be reduced to 400 days for those employed fewer than three years.
The social partners will now discuss the more difficult issues of raising retirement age, pension contributions and further reduction of early retirement schemes, aiming to reach agreement by 2017. The latest agreement coincided with the release of a government working group’s report on coping with an ageing workforce, which recommended employer tax breaks for new hires and some boosts for start-up companies.
Candidate eyes health insurance tax cut
The Socialist Party presidential candidate, who maintains a healthy lead over the incumbent with less than two weeks before the first round of voting, has resolved to reverse the recent measure that doubled the tax on complementary health insurance contracts to 7% (IH 11/16/11). He conceded, though, that there would not be enough alternative funding to allow removal of an unpopular medical fee schedule introduced at the start of 2008 (IH 11/29/07).
Share scheme taxation for global employees
Employee share scheme taxation and withholding rules for globally mobile employees are outlined in two new bulletins from France’s public finance authority. Bulletin 14 A-13-12 explains how gains from the exercise of options may be treated as employment income and taxed in proportion to the periods of work employees performed in France or other countries. The guidance is consistent with the OECD’s position and applies to pending cases. The scope of tax withholding non-residents may owe on employee share schemes such as stock options, bonuses and BSPCEs (stock warrants for business creators) is explained in Bulletin 5 B-10-12. The withholding tax applies to gains from French sources as of 1 Apr 2011.
Solidarity tax for demographic spike
Germany’s ruling Christian Democrat party reportedly will soon adopt proposals that would apply a special levy on workers over age 25 to cushion the impact on social security of several million baby boomers leaving the work force by 2025. The “demographic levy” is expected to be about 1% of gross income. Germany has one of Europe’s lowest birthrates, according to official statistics, and its work force is predicted to fall by 7 million by 2025.
Social Welfare and Pensions Bill features DB funding measures
RTE, Irish Independent, IPE
Defined benefit plan funding proposals are a focus of The Social Welfare and Pensions Bill, published recently by the social welfare minister. Under the bill, the defined benefit plan funding standard would be restored with the size of the risk reserve partly determined by the amount of risk in the investment portfolio. The risk reserve would have to be in place by 1 Jan 2016, but pension schemes would be given additional time before full compliance is required.
The bill also would compel schemes to periodically submit actuarial funding reserve certificates to the Pensions Board; those that do not meet funding requirements would have to submit a funding proposal to the board. Unless the scheme negotiated an exception, it would have to restore full funding before the next certificate came due. The bill will be presented to the legislature later this month.
Compromise brings unity on labor reform
Dow Jones, ANSA, Reuters
The Italian prime minister has modified proposed labor market reforms (Italian) and (IH 3/28/12) that would sometimes allow workers to claim reinstatement if a judge rules a dismissal was not caused by financial hardship.. The prime minister emphasized that reinstatement would be ordered only in “very extreme and improbable” circumstances. Other recent changes to the bill would lower the maximum compensation set for unfair dismissal from 27 months to 24 months and impose a 1.4% tax on short-term employment contracts. The changes were introduced to secure the support of the ruling coalition’s rebellious junior partner (IH 4/04/12). The leaders of all major parties have now agreed (Italian) to support and help expedite the reform bill’s passage through Parliament. The government has also posted a press conference (Italian) to help explain the reform to skeptics.
Caution over pension rights merger
The Social Affairs Minister’s plan for moving existing pension rights into new pension contracts (IH 03/28/12) would court legal and administrative disaster, the Dutch pension regulator (DNB) has warned in its 2011 Annual Report (Dutch). The DNB recommends applying a feasibility test to determine whether a pension contract’s premium, investment, risk management and benefit policies offer a viable combination. It expresses support for “equalization reserves” to serve as buffers against volatility and favours a standardized approach to channeling surpluses and supplemental contributions into these reserves.
Cluster bomb investments banned
The Dutch Finance Minister has advised (Dutch) the Senate that Dutch financial institutions – expressly including institutional investors – will be banned from direct investment in any enterprises that manufacture or sell cluster bombs. The ban will take effect on 1 Jan 2013 and is not retroactive. The Financial Markets Authority (AFM) will monitor compliance and may levy fines for breaches of the ban.
Early retirement suspended
Portugal Daily View, Delta World, Agencia EFE
Citing economic necessity, Portugal’s cabinet quickly approved (Portuguese) and promulgated a measure suspending early retirement until 2014 – when the country's financial and economic assistance program ends. While normal retirement age is 65, it has been possible to retire at 55 with 30 years of service. The only exception during this suspension will be for the long-term involuntarily unemployed.
Social tax cut proposed
A further reduction in the social insurance premium (IH 12/14/11) from 30% to 28% has been proposed by the economic development minister. The finance minister fundamentally supports this, but only if offset by a rise in the pensionable salary from 512,000 rubles to 1.2 million rubles (US$40,232.57 ). He noted that this rise would disproportionately affect high-income growth industries such as the high-tech sector.
Social security developments
Oreanda, Kyiv Post, ForUm
The Ukrainian government has set out an ambitious agenda for the state pension fund:
- The minimum monthly pension is expected to come within striking distance of the living wage (itself just recently eclipsed by the minimum wage) by an undisclosed rise that is set for 1 May. When the pension reaches subsistence level, it will then be pegged to that amount.
- The pension fund is expected to be in the black by 2013, according to the deputy prime minister, which would allow the government to proceed with introducing a second-pillar statutory defined contribution scheme (IH 12/22/10).
- An imminent package of job creation incentives would reduce social security contributions for (i) employers that hire “vulnerable” workers, e.g., those aged under 24 and over 40, and (ii) companies that keep salaries at least triple the minimum wage.
Insurers develop drug pooling framework
Benefits Canada, Market Watch, Chronicle Herald
Twenty-three insurance companies, comprising 100% of the supplementary drug market in Canada, have united in an agreement to share the cost of very expensive, recurrent drug claims for fully insured group benefits plans, according to the Canadian Life and Health Insurance Association (CLHIA). As high-cost drug therapies become more common, the pooling approach will allow insurers to exclude these claims when setting company premiums, easing employer temptation to drop certain specialty drugs from their coverage in order to contain costs.
Pension Act changes passed
BNamericas, Central America Data, La Pagina, Estrategia Y Negocios
The legislative assembly of El Salvador has approved (Spanish) a package of Pension Act amendments featuring a few notable measures:
- Pension fund administrators’ commissions will be reduced from 2.7% to 2.2%.
- Employers will have to continue contributions for workers who have reached the statutory retirement age (55 for women and 60 for men) until a 60% minimum pension threshold is reached, whether or not the employee meets the minimum 25-year contribution history.
- The investment ceiling on Pension Investment Certificates, the low-yield bonds that the government issues to meet obligations under the old state pension system, will rise from 30% to 45%.
- A Social Housing Fund with guaranteed returns of 3% will be added to the investment menu.
Public holiday legislation
A bill before the lower house of congress would cap the annual allotment of public holidays at 15. It arrived a week before a measure that would create two new one-off public holidays – 24 Sep 2012 and 3 Feb 2013 – to celebrate the bicentennials of two famous battles. Other proposals for creation of additional public holidays are before congress, but they are reportedly unlikely to pass.