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:
Australia: Health reform agreement; Government response to executive pay report
Ireland: Finance Bill passed
Singapore: Flexi-work extension
Spain: Labour market reform plan
UK: More campaign promises
Health reform update; Health insurance, private pension regulations due this year
AME, MEIR, Daily News
Draft health reform legislation (IH 03/11/09) may see a little more momentum now that the administration has tagged new funding sources to help extend coverage to the indigent. The monthly medical insurance contribution would double to 8 Egyptian Pounds (US $1.45) and there would be a 10% tax on cigarette sales.
Also, the Egyptian Financial Supervisory Authority (EFSA) has previewed coming regulations that would improve the market for private health insurance and private pensions. The health insurance regulation would follow passage of the administration’s health reform plan. It would set stronger controls for health maintenance organizations (HMOs) and third party administrators (TPAs). The private pension regulations would come after passage of social security reform. They would encourage private sector defined contribution plans that could be converted to annuities.
GAO report on minimum wage increase
Saipan Tribune, RNZ, In These Times
The US Government Accountability Office has issued Wages, Employment, Employer Actions, Earnings, and Worker Views Since Minimum Wage Increases Began, which assesses the impact – three years in – of legislation that is raising the minimum wage in American Samoa and The Northern Mariana Islands to ultimately harmonize with the US minimum wage. The rise in the minimum hourly wage – now $4.55 on its way to $7.25 – has already cost some jobs and has left many employers threatening to relocate.
Health reform agreement; Government response to executive pay report; Notable labour cases
The Australian, AAP, The Age
Two days into the Council of Australian Governments (COAG) meeting on the Prime Minister’s health reform plan (IH 04/14/10), he secured a preliminary deal with seven states and territories comprising 90% of the nation’s population. The reconfiguration of health resources and funding with the Commonwealth taking on the majority of medical expenses in exchange for one-third of state revenues from consumption tax ultimately appealed to all parties but Western Australia. The administration will continue funding negotiations with that state.
Also, the Treasury has released the government response to the Productivity Commission report on executive remuneration (IH 01/07/10). It endorses most of the recommendations including one that would give nonbinding shareholder votes on executive pay some teeth with a "two-strike" rule that would trigger a board election if at least 25% of shareholders vote against the pay package two years in a row. The Treasury's response added a proposal on clawing back bonuses when they are determined to be based on false information. The administration will release a discussion paper on these proposals in the coming months.
Meanwhile, some recent labour cases have been flagged as important precedents:
- A Fair Work Australia (FWA) decision supported workers who were eager to forego some rights to overtime premium in exchange for more flexible hours.
- The FWA also ruled against a union that sought to include senior managers in collective agreements.
- The Federal Court has fined a company that fired two workers for filing complaints over underpayments and for looking into joining a union.
Minimum wage bill, consultation; Disability discrimination code of practice consultation
The Secretary for Labour and Welfare has provided a status update on efforts to introduce a minimum wage. Examination of the Minimum Wage Bill (IH 07/01/09) has accelerated in the Legislative Council’s Bills Committee. The committee recently passed a non-binding motion calling for annual review of the anticipated minimum wage. Also, the Provisional Minimum Wage Commission is holding a consultation on setting the initial statutory minimum wage rate. Submissions are welcome through May 3, 2010. The legislation is still expected to take effect in the first quarter of 2011.
Meanwhile, the Equal Opportunities Commission (EOC) chairman said that he would be open to minimum wage legislation that set a lower pay threshold for some disabled workers. He said that this would have to involve an “independent assessment system” to determine how severely their impairments affected performance. This coincides, incidentally, with the EOC announcement of a public consultation on Revised Code of Practice on Employment under the Disability Discrimination Ordinance. The document is billed as a modernization of the code and the consultation closes on July 8, 2010.
EPF interest rate decision postponed, life insurance benefit rise proposed
DPB, The Statesman, Times of India
The Central Board of Trustees (CBT) of the Employees’ Provident Fund (EPF) Organisation decided to defer debate on setting the 2010-11 EPF interest rate at last week’s meeting. The trustees will confer with the Finance Minister before returning to this issue. They did, however, agree to support a proposal on raising the maximum life insurance payout when an EPF participant dies from Rs. 60,000 to Rs.100,000 (US $2,256).
Social Security Law explained, defended
Jordan Times, Arab News
The Social Security Corporation (SSC) has posted bulletins offering an explanation, a rationale and a review of the consultation process, all to bolster support of the new Social Security Law (IH 03/31/10). Documents have confirmed that this package includes the introduction of new maternity leave and unemployment insurance schemes (IH 08/27/08). By latest accounts, the full 0.75% maternity leave contribution would be shouldered by the employer and the unemployment insurance would be a “personal account” model designed to cover an employment gap of up to six months. The legislation also strengthens the workers compensation and occupational health laws.
The SSC has had to contend with criticism, including opposition to early retirement curbs and a charge that social partners were not consulted on provisions that redefined wages to include transportation allowances and commissions. While this package is consistently described as a law, with some provisions reportedly due to take effect next month, Senate leaders were among those being debriefed on the plan’s merits, so it may yet have to get through Parliament. Either way, a high-profile graft investigation in the SSC with a press blackout signals that prompt implementation may not be a certainty.
Minimum wage introduced
Reuters, Arab Times
The Minister of Social Affairs and Labor has released a ministerial statement setting the nation’s first private sector minimum wage at KD60 (US $208.90) per month. The Minister also noted that “absconding reports” – notices on immigrant workers who have fled their jobs – are now being audited because many have proven to be “malicious” fabrications.
The employment fees provision of the Law for the Employment of Non-Resident Workers will come into effect on April 26. Employers will pay 200 patacas (US $23.50) for each foreign worker hired, except in the manufacturing sector where the fee will be half that amount.
Unions balk at draft legislation
The Malaysian Trades Union Congress (MTUC) has lashed out at the Human Resource Minister for endorsing “antiquated” draft labour law amendments. These reportedly include unlimited repetition of fixed-term contracts, a one-year probation period for new hires, an employer right to vary one’s working hours at will and permission for employers to challenge a union’s representative status once every five years.
Canada’s EI model considered
The Ministry of Social Development’s Welfare Working Group is preparing to conduct a study of welfare reform. It will examine the entire social security system. One issue under consideration is whether Canada’s Employment Insurance (EI) model is a good fit for New Zealand. Its report is due in December.
Northern Mariana Islands
See: American Samoa
Flexi-work extension; Proposal to restore full employer CPF contribution
Today, CNA, Global Pensions
The Singapore National Employers Federation (SNEF) has posted a press release on extension of the flexi-work scheme from April 1, 2010, to December 31, 2012. The Ministry of Manpower has yet to confirm this. Also, SNEF and its social partner National Trades Union Congress (NTUC) have resumed debate over whether the employer Central Provident Fund contribution that was cut from 16% to 13% in 2003 and raised to 14.5% in 2007 should be fully restored. The Manpower Minister has urged companies to resume the full contribution if they can afford to but he has not committed to making restoration mandatory.
President signs labour reform bill
Enactment of the new labour law (IH 04/07/10) occasioned a summary of its anti-discrimination provisions. Private sector workers are now protected from employment discrimination based on race, skin color, sex, marital status, religion, politics, nationality, social background or whistleblower status.
Minimum wage exemption considered for migrant workers
Taipei Times, CNA
The Prime Minister said that the government may rescind a measure that extends minimum wage entitlements to migrant workers. As both statutory and prevalent illegal employer deductions keep the actual monthly wage for most immigrants well below the current minimum of NT$17,280 (US $546.80), labor groups and the Council of Labor Affairs (CLA) want the measure properly enforced rather than withdrawn.
Job market improvements for expats
The Labour Ministry has forwarded to the Cabinet draft measures for reducing work obstacles for the expatriate community in order to reduce excess reliance on foreign recruitment. Fees for transferring between companies would be cut and women in the UAE under a family member’s sponsorship would be allowed to enter the job market.
DC guarantee deadline
Early distribution of last week’s IH included an Austria item that was removed after its primary source retracted the story. What follows is drawn from a Global Legislative Update revision peer reviewed by Austrian colleagues. The Finance Ministry has published regulations that grant tax deductions to defined contribution plans only if they set a guaranteed minimum benefit. It should be noted that this does not affect Pensionskasse and collective insurance vehicles. The guarantee must be in place by June 30, 2010, to earn tax relief for fiscal 2009.
Employment contract edict; Health insurance system nixed
A 1999 decree set fixed-term contracts of up to five years as the standard for the Belarus job market. The President has now issued an edict creating a framework for employers to reward productive staff with a permanent contract. This would come only after completion of a five-year contract. Also, the Health Minister has come out in opposition to a proposal for a health insurance system. He prefers the current system with a package of free government-provided care complemented by the private health sector, at least until the government is in a position to finance the conversion to a more sophisticated model.
Eurozone entry postponed
Bulgaria had been set to join the Eurozone exchange rate mechanism (ERM) this year and to adopt the Euro in 2013, but economic hardships have forced the administration to suspend these plans.
Austerity tax relief requires Parliament’s approval
The Prime Minister’s recent announcement that the temporary crisis tax will be lifted on July 1 for people earning under HRK6,000 (US $1,170) per month (IH 03/24/10) did not mention that the Finance Ministry would have to submit legislation for Parliament’s approval. A pair of bills is now before Parliament as an urgent priority, and there is no sign of significant opposition.
State pension formula under fire
PDM, Romea.cz, CIA
The Constitutional Court has ruled that the well-off are discriminated against by social security formulas that pay lower benefits in relation to both their incomes and their contributions. The Labor and Social Affairs Ministry (MPSV) is also under attack in a spam e-mail campaign that alleges higher pension benefits for gypsies than for citizens in the formal job market. The MPSV is striving to disprove both charges, but will evidently have to find a way to satisfy the court. Acknowledging that its decision will require detailed legislation, the court has deferred the compliance requirement to September 2011.
Agreement on pension surtax
Esmerk, Copenhagen Post
The three parties of the ruling coalition have agreed on a measure that would set a temporary 6% surtax for pensions over DKK 362,800 (US $65,704 ) per year (IH 01/27/10), ensuring its passage in Parliament. A revised formula now calls for introducing the tax next year, maintaining it at 6% for five years and then phasing it out over the next four. By one account, a later start is under consideration.
Unemployment extension plans; Pension reform talks get under way
AFP, GIDA, Dow Jones
The President has outlined (French only) plans for a safety net for workers who exhaust their unemployment benefits. The idea is that they return to some kind of activity, either a reduced workweek with a government subsidy or a salaried training program. A benefit would continue for those whose circumstances preclude these options. Also, the Finance Minister has met with social partners in preliminary discussion on what pension reform measures (IH 03/31/10) may be necessary to take the state pension system out of deficit. The Conseil d’orientation des retraites has issued a report (French only) that predicts accelerated losses for the system and considers various corrective measures.
Further Kurzarbeit extension; ‘Ossi’ discrimination ruling
The Local, Der Spiegel, Reuters
The Labour Ministry has drafted legislation that would continue the Kurzarbeit short- hours scheme past earlier projections (IH 04/14/10) through March 2012. The Labour Ministry website now features an English-language guide to short-time work, posted for the benefit of other countries that may want to adopt this model. The Economy Minister, while endorsing the extension, cautioned the administration against viewing this scheme as a long-term solution.
Also, a woman’s claim of employment discrimination was dismissed in a Stuttgart labor court because her East German origins did not come under the definition of “ethnic” in the Labor Equality Act. She did otherwise have a compelling case as her CV had been returned to her with the East German slur “Ossi” scrawled over it. Some analysts are recommending an amendment to the law.
Parliament approves tax-reform bill in principle
Kathimerini, ANA, Business Week
Parliament has passed the administration’s tax-reform package (IH 04/14/10) and now must debate it article by article. There has been an important modification: The 90% tax on banking sector bonuses applies only to those bonuses over €80,000; five bands below it range from a 10% tax on less than €6,000 to 80% on €60,000 to 80,000. This would stay in effect through 2013. The bill should pass with few changes very soon and the administration will then devote its attention to social security reform (IH 03/24/10).
The Icelandic Pension Fund Association has released Lessons that pension funds can learn from the crash 2008-2009, a set of proposals covering regulations affecting investment instrument transparency and the roles of institutional investors in corporate governance.
Finance Bill passed; Another deadline extension for funding proposals; Universal health system nixed
Tax Analysts, Irish Times, Irish Examiner
The Finance Bill (IH 02/10/10, 03/31/10) has had final approval in both houses of Parliament, evidently without significant modifications to the provisions we've flagged, and the President signed it on April 3.
Also, the Pensions Board has announced another in a series of extensions on the deadline for defined benefit schemes to submit funding proposals. In light of the National Pensions Framework (IH 03/10/10) and other relevant developments, all submissions that were due in 2010 have been postponed by five months, but there will be no extension for those due in 2011.
Incidentally, the Health Minister has rejected a high-profile proposal from the Adelaide Hospital Society that had outlined an approach for an affordable universal health care system. She insisted that a hefty financing boost from “sin” taxes would not suffice to make so many procedures available for so many people.
Isle of Man
Tax treatment of non-executive directors
The Treasury has issued Practice Note 162/10, which sets out the terms under which a non-executive director’s fees would be exempt from income tax and National Insurance Contributions (NIC).
Constitutional challenge for benefit reduction
The Seimas has approved a resolution to check with the Constitutional Court on the constitutionality of the temporary social benefit cuts in the 2010 Budget (IH 12/16/09). There is already another measure before the Seimas that would restore full benefits at the end of 2010, a year earlier than under the present law.
Deficit reduction package
Expatica, Hello News
The Prime Minister introduced a set of emergency budget-cutting measures (French only) to a tripartite meeting earlier this month. Among those worth knowing:
- State pension benefit increases would be suspended.
- The basket of goods used for the automatic indexing of wages would be revised.
- The private sector meal voucher would be modified (abandoned, by one account).
- The parental leave period would fall from six months to four.
The administration is not optimistic about social partner agreement without some compromises.
SETimes, Balkan Insights, AFP
Parliament has passed an anti-discrimination law that has become known as the “anti-EU law,” because it is viewed as another setback for Macedonia’s EU candidacy. The law mirrored all of the EU criteria for protection from workplace discrimination, except sexual orientation. DUI, the junior party in the ruling coalition, is urging its senior partner to back revisions to the new law.
Tax reform report; Trimming health insurance coverage
An expert group set up by the Finance Ministry has released the report Taxation can be Smarter (Dutch only), a package of tax reform proposals. These include modifying the tax regime for the AOW state pension and drawing up regulations to curb abuses of the levensloop leave scheme.
In addition, the Health Insurance Board (CVZ) has recently removed psychoanalysis from the basic health insurance package, reasoning that there is inadequate proof of its efficacy. People already in psychoanalysis will be grandfathered. Birth control pills and walking sticks are also targeted as is free dental care for people aged 18 to 22. Parliament is expected to declare these proposals “controversial,” which would move them onto the next government’s agenda after the June election.
Pension reform bill advances; Hiring incentive ordinance gazetted, Eurozone entry deferred
Mediafax, Rompres, Euractiv
The Senate Labor Committee has approved the draft pension reform legislation (IH 03/10/10). This came after agreement that the pension point for calculating benefits would be raised from 39.9% of the average gross salary to 45%, a move that the Labor Minister insists is untenable. The committee had earlier rejected proposals to cut the retirement age from 65 to 64 and to maintain the special pensions for some civil servants.
Meanwhile, the Emergency Ordinance No. 13 on waiving six months of employer social security contributions when someone unemployed at least three months is hired for at least a year (IH 02/24/10), has now been gazetted. Also, the Central Bank Governor, citing economic hardship, announced that the government has decided to set aside its timetable for adopting the euro in 2015.
Labour market reform plan
El Pais, AFP, Reuters
The government has posted an outline of its agenda for a Social Dialogue on labour market reform. A document circulating among stakeholders offers some detailed proposals:
- New hires would come under a modified severance pay formula of 33 days’ wages per year of employment.
- Eight of those 33 days would be subsidized by a wage guarantee fund.
- There would be incentives for hiring permanent staff and limits on fixed-term contracts.
- Hiring priority, including a range of incentives, would target workers below age 35 and above 45.
The Prime Minister aims to secure a social partner agreement on these proposals before moving forward.
Insurance wrappers flagged
Business Week, DRE
Financial Regulator FINMA is studying whether insurance “wrappers” are a tax dodge – maybe even a money-laundering instrument – that urgently need to be regulated. Under these schemes, a Swiss insurance company arranges for a client to take out a “private placement life insurance” (PPLI) policy in a jurisdiction with less-rigorous tax laws. The client places premiums in an investment fund and the investment earnings are not taxed because life insurance policies are not considered income-producing assets.
More campaign promises
Professional Pensions, Financial Times, Personnel Today
With the Conservative Party and Liberal Democrat manifestos now posted, there are more opportunities for policy comparisons (IH 04/14/10):
- The Conservatives, like Labour, would restore the peg between the state pension and wage inflation in 2012. The Liberal Democrats would try to do it sooner.
- The Liberal Democrats and the Conservatives would end the requirement to purchase an annuity at age 75.
- Conservatives and Liberal Democrats would completely scrap the mandatory retirement age. Analysts have observed that Labour’s promise to abandon the default retirement age (DRA) of 65 does not rule out setting another DRA.
- Liberal Democrats would limit tax relief on pensions to the basic rate for everyone and they would be more flexible on preretirement withdrawals.
- Liberal Democrats would cap cash bonuses in the banking sector at £2,500, while directors and banks experiencing losses would not be entitled to bonuses. The Conservatives would give the Bank of England authority to intervene on risky incentive compensation schemes and Labour would bolster the Financial Services Authority’s powers for curbing dicey bonuses.
- Labour would peg minimum-wage hikes to the increase in average earnings for each year of its next term.
- Conservatives plan to pioneer innovation in hybrid pension plans and to start NEST scheme auto-enrollment before 2012.
- Labour would guarantee employment or training to anyone out of work for more than six months.
Pension cap proposed
The Prime Minister announced that the Cabinet has decided to back a pension benefit ceiling (IH 03/24/10) of UAH 10,000 (US $1,263 ) per month.
EI contribution hike forecasted
CP, Toronto Sun, HR Reporter
The Office of the Parliamentary Budget Officer has published Projecting Employment Insurance Premium Revenues and Expenses, which estimates that the minimum contribution hike for restoring the Employment Insurance Fund to solvency would be the maximum increase allowable – 15 cents per $100 of insurable earnings. The maximum annual contribution would rise by $535: employee $223, employer $312.
OECS social security harmonization
LTN, Dominican News, Daily Herald
The Organization of Eastern Caribbean States considers harmonization of member state social security programs “essential” to the pursuit of an OECS Economic Union. Member state social security officials will meet to identify the issues involved in this process and determine the first steps toward harmonization.
Benefit extension bill passed; Various
WSJ, Tax Analysts, Boston Globe
Congress has passed and the President has signed HR 4851 Continuing Extension Act of 2010, which commits to the COBRA post-employment health insurance subsidy and the continuation of unemployment benefits past their normal expiration through June 2, 2010. HR 4213 (IH 03/17/10), featuring extension of the benefits through 2010 and some popular pension funding relief proposals, is now due for some attention.
In other news:
- The Department of Health and Human Services (HHS) has posted requests for comment in advance of regulations on some elements of the health reform bill. Medical Loss Ratios details the requirement for health insurers to annually disclose the ratio of premiums to reimbursements and the minimum standards for this ratio. Premium Review Process fleshes out the arrangements for annual reviews of unreasonable insurance premiums. Comments are welcome through May 14 for both documents.
- The Senate Finance Committee held a hearing to explore innovative state models for work-sharing programs and the use of unemployment benefits to preserve jobs.
- Draft rules on protecting social security benefits from creditors have been posted in the Federal Register, with a comment period running through June 18, 2010.
- The Internal Revenue Service (IRS) introduction of payroll tax exemptions for new hires under the HIRE Act features a form for claiming the exemption and an FAQ.
Ruling on profit-sharing formulas
A 2000 law on tax breaks for profit-sharing plans grants a social security exemption only when the employees have met clearly defined production targets. In recent years, tax authorities have been clamping down on companies that do not set rigorous enough terms for their schemes. A construction company has now successfully appealed this strict interpretation of the rules in the tax department’s superior chamber of fiscal appeals. Analysts have hailed this as an important precedent for several pending cases.
Workplace smoking ban
The Examiner, Houston Chronicle, eCanadaNow
A presidential decree that took effect on Saturday, April 10 bans smoking in all public enclosures, including private businesses. There is no mention of any grace period before the Health Ministry starts to charge fines for noncompliance.
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