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: Inconclusive election
Ireland: PRSI contribution base may expand
Malaysia: Part-time worker regulations
Netherlands: Benefit cuts ordered
New Zealand: Labour reform bills
US: Social Security reform
EAC draft text on pension and insurance harmonization
The Monitor, The Citizen
The East African Community Capital Markets Development, Insurance and Pension Committee (CMIPC) met last week to discuss amendments to the EAC treaty that would confirm a commitment to harmonizing policies in the pension and insurance sectors. Stakeholders in member states have submitted their positions on the issue of harmonization and further submissions will be accepted through the end of September.
New health fees suspended
The Standard, The Nation, KBC
The National Health Insurance Fund (NHIF) premium increase (IH 07/28/10), almost seven-fold for high-income participants, has been placed on hold pending government negotiations with the Central Organisation of Trade Unions (COTU). The rate hikes would fund the universal health care called for in Kenya's new constitution (IH 08/11/10), but bypassing Parliament to introduce the tax is unconstitutional and a High Court challenge on those grounds is in preparation.
See Singapore: Bullet 3
AAP, Global Pensions, AFR
Last Saturday’s national election resulted in a hung parliament. It could take weeks for a (probably weak) government to emerge. A few more elements to consider in the interim:
- The superannuation industry and the Labour Party criticized the Liberal Party for failure to deliver a promised report on superannuation policy in advance of the election. (IH 08/11/10).
- Another missed deadline was the Labor Party’s policy statement on gender pay equity.
- The Labour Party has announced plans to add a two-week paid paternity leave to the 18-week paid parental leave benefit. From July 1, 2012, fathers would be paid the federal minimum wage for this period.
- The head of the Liberal Party has now stated that the temporary levy to fund paid parental leave (IH 08/11/10) would end “eventually” and he would not commit to a 10-year limit for it.
Minimum wage stalemate
Social partners have reported that over a month after passage of the Minimum Wage Ordinance (IH 07/21/10), they cannot agree on a minimum wage level. Employers and unions have narrowed their differences to HK$28 (US$3.60) per hour and HK$30 respectively, but they have internal divisions over this level of compromise and are wary of further concessions.
Committee report on Employees’ Pension Scheme; Various
Economic Times, Hindustan Times, Times of India
The Expert Committee on Employees’ Pension Scheme 1995 (EPS) has delivered its report to the Labour Ministry. Convened in response to a 10-year freeze on the minimum pension, the committee has laid out two options: re-designing the existing EPS or creating a Provident Fund-cum-Pension Annuity Scheme. The government has yet to publish or respond to these recommendations.
In other news:
- While there has been further confirmation on momentum toward a totalization agreement with the US (IH 08/18/10, US), India is prepared to retaliate against the H-1B visa fee hike with draft legislation that would ban Employees Provident Fund (EPF) withdrawals for expatriates posted in India until age 58. Also, the Commerce Secretary has recommended taking the US before the World Trade Organization for “protectionist” fee increases.
- The Employee Provident Fund Organization’s (EPFO) Finance and Investment Committee (FIC) has proposed suspending interest payments to “inoperative” provident fund accounts. An account would qualify as inoperative if there had been no contributions in three years. The EPFO Central Board of Trustees (CBT) will discuss the issue in its September meeting.
- The cashless claim negotiations (IH 08/18/10) are now underway between health insurers and hospitals. Some have already concluded. The Insurance Regulatory and Development Authority (IRDA), a bystander through most of this dispute, has now issued a circular instructing insurers on maintaining patient access to cashless facility.
Occupational safety law
The Presidium of the Supreme People’s Assembly has approved a set of occupational safety measures covering safety training, protective gear, safe workplace standards and rest periods.
Parliament approved Palestinian worker rights
The Star, Zawya, TNA
Parliament has passed legislation granting extensive – but not complete – employment rights to Palestinian refugees (IH 06/30/10). They will now qualify for work permits, severance pay, social security coverage and private sector employment, excluding a handful of professions that are not open to foreigners.
Part-time worker regulations
NST, HRO, Bidayuh
The Human Resource Minister has introduced Regulations (Part Time Workers) 2010, which will establish a regulatory framework for part-time employment (IH 02/03/10). From October 1, 2010, part-time workers will have social security coverage, Employees Provident Fund contributions, medical benefits and leaves pro-rated according to formulas included in the regulations.
Labour reform bills; Various
NZH, Tax Analysts, Scoop
Holidays Amendment Bill and Employment Relations Amendment Bill (No 2) (IH 07/21/10) have been introduced in Parliament. One late development is the Labour Minister’s concession that the 90-day trial periods for new hires are not really voluntary. Companies could make it a pre-condition in an advertisement for a position and someone on unemployment benefits who turns down a job with a trial period would risk loss of benefits. The minister pointed out that one of the Holidays Act amendments reverses a recent Employment Court decision that counted the Christmas and New Year's holidays as part of annual leave rather than the holiday entitlement at companies that shut down over the holidays. The Department of Labour has published regulatory impact statements for both bills.
In other news:
- Social Security (New Work Tests, Incentives, and Obligations) Amendment Bill received Royal Assent on Monday. It is the vanguard of the administration’s return-to-work approach to welfare benefits (IH 08/18/10), introducing work tests for people on sickness benefits and screenings for renewal of unemployment benefits.
- The opposition Labour Party has committed to a compulsory KiwiSaver scheme and contends that the administration’s decision to study the issue is just playing for time. The government has agreed to have a working group on retirement income policy include the compulsory super option in its study and report back in January 2011, in time to make this an issue in next year’s election.
- Inland Revenue announced the presentation of Taxation (Income-sharing Tax Credit) Bill to Parliament. The flexibility on reporting income for tax purposes would support a better work/life balance by making it easier for parents to adjust their hours or take time off for child raising.
Incentives for hiring seniors
The Revenue Regulation supporting the Expanded Senior Citizen Act of 2010 (IH 07/28/10) includes tax incentives for companies that hire senior citizens. A recent Department of Labor and Employment (DOLE) circular offers citations and other tokens of recognition to companies that meet a 3% quota for senior staff levels.
CPF amendments passed; Various
Straits Times, Today, Business Times
Central Provident Fund (Amendment) Bill cleared Parliament last week. The CPF Life annuity scheme, now open to people over age 55 with $40,000 (US$32,284 ) in their retirement accounts, would expand to allow people aged 65 with $60,000 in their accounts. The new law also makes provision for a deceased CPF member’s Medisave funds and other dormant accounts.
In other news:
- The Minister of Community Development revealed that the administration is studying a plan to allow new parents to treat the fourth month of maternity leave as parental leave available in whole or in part to the father.
- The Prime Minister has rejected a proposal for eliminating the default retirement age, reasoning that the law on re-employment of older workers (IH 03/17/10) is a more prudent approach to keeping them in the workforce.
- The Foreign Minister has placed Singapore at odds with a core provision of the Asean Charter. The 2015 Asean integration plan calls for free movement of goods, services and people. The minister noted that Singapore is too small to ever agree to free movement of workers.
Legislative Yuan to review 2G health bill
A special legislative session is scheduled to review the “second generation” health insurance reform bill (IH 04/14/10) next week. The Department of Health understands that there is considerable resistance to this package and has made efforts in recent weeks to both dispel myths and generate enthusiasm.
Maternity leave extension
The Ministry of Labor, concerned about the high rate of underweight children, is drawing up legislation to promote breastfeeding among women in the workforce by raising the four-month maternity leave to six months.
Revised Labor Code comes into force
Armenpress, PRA, ARKA
A major set of Labor Code amendments was quickly passed last month and came into force on August 7. Among the highlights:
- Overtime is capped at 180 hours per year.
- Overtime in the course of a five-day week merits a 50% premium and work hours on day six earn double pay plus a 30% bonus. Employees will receive 30% extra pay for night work.
- Hazardous work pays 30-50% more per hour.
- Statutory leave may not be carried over for more than 18 months.
- A five-year cap on fixed-term employment contracts is lifted.
- Workers may not be terminated during pregnancy.
- The measure allowing verbal employment agreements (IH 05/05/10) did not make it into the final draft.
- When salary payment is delayed, an employer will have to pay each worker an extra 0.15% of monthly salary per day.
Cabinet approves immigration law amendments
The Cabinet has endorsed a package of measures to tighten the rules for importing labour:
- Foreign workers would be issued residence permits with biometric data.
- Some responsibility for foreign workers will be shifted to the agencies that import them and the companies that hire them. Most notably, the employer would pay for post-employment medical care for workers fired before their visas expired as well as the cost of expulsion for those who overstay their visas.
- The EU “blue card “model would be adopted for highly skilled foreign workers.
Debate on accounting for pension reform
Reuters, MTI, Euractiv
The nine countries that asked to have pension reform expenses exempted from their public debt have been campaigning hard for this break, but there has been significant pushback. Germany’s Finance Ministry is averse to narrowing the definition of public debt and Hungary is divided over the issue. The Chairman of Hungary’s Budget Council has determined that the exemption “is not viable … (and) would lack market credibility.”
Pension portability expansion
Deutsche Welle, Spiegel, IPE
Existing rules on benefit portability between Pensionskassen and direct insurance contracts have been revised to include insurance-based Pensionsfonds. Transfer of accrued benefits is tax exempt and employees are entitled to request an estimate of the benefits that would result from a transfer.
In other news:
- The Constitutional Court recently ruled (German only) that strict limits on tax deductions for home office use are unconstitutional. There will be legislation in response to this ruling and it is likely to be retroactive to January 1, 2007. Meanwhile, the Ministry of Finance has produced an FAQ (German only) on the ruling’s impact.
- The Constitutional Court has also found that gay partners are entitled to the same inheritance tax treatment as married couples. Observers have noted that the decision lays a foundation for future cases supporting equal tax treatment for same-sex couples.
- The Finance Ministry announced that various stimulus measures are “gently coming to an end” at the close of 2010. The Kurzarbeit short-time working scheme (IH 04/28/10) will stop accepting new applicants on January 1, 2011, but it will run a full 18-month term for late applicants, carrying the program into mid-2012.
Three-year maternity leave may return
The new administration aims to restore the three-year maternity leave that was trimmed to two years under the previous government. Legislation due this fall would extend the right retroactively to children born since May 1, 2010.
PRSI contribution base may expand
Irish Times, Irish Examiner, RTE
The next budget may include a proposal circulating in the Department of Social Protection for a “universal social contribution” that would supersede the PRSI (Pay Related Social Insurance). The new levy would extend to unearned income including investments and stock options. The minimum and maximum income thresholds for PRSI contributions would be removed, but there would be a smaller employer contribution for low-income workers.
Benefits cuts ordered; Various
DutchNews.nl, Expatica, IPE
The Social Affairs Minister has flagged (Dutch only), but not identified, 14 pension funds that should cut benefits by January 1, 2011, because they are too severely underfunded to wait for the initial deadline of April 1, 2012. All other schemes with recovery plans would have to implement their modifications by January 1, 2012. Parliament is holding an emergency session to address this development and pension industry lobbyists have urged postponing radical action because a proposed review of the financial assessment framework (FTK) may improve the prospects for these schemes.
In other news:
- A measure that went into effect last month gives works councils of publicly traded companies the right to express their opinions on certain topics at company board meetings. These include executive remuneration policy, change in control and appointment of a board member. The works council does not have veto power.
- Another new law temporarily extends the maximum fixed-term contract period for people below age 27 from 36 months to 48. This is set to end on January 1, 2012, but there are provisions for continuing it until January 1, 2014.
- The Netherlands Competition Authority (NMa) has advised the private sector that individual executives will face financial penalties or disqualification from a board of directors if found complicit in a company’s anticompetitive policies. Legislation now before Parliament would allow criminal penalties for errant executives.
Labor law amendments top legislative agenda
Mediafax, Rompres, RBI
A government press release indicates that following the urgent passage of pension reform legislation next month (IH 08/11/10), the administration will publish a major set of measures amending the Labor Code and related laws. The chief aim is more flexible work contracts with greater opportunity for part-time work. The Prime Minister aims to expedite this package and may rush it through in a confidence vote as early as this month.
The Manifesto of the Government of the Slovak Republic for the period of 2010-2014 and a package (Slovak only) of health reform proposals (scheduled to take effect in January) give the administration a substantial workload:
- Public hospitals would become joint stock companies in the interest of greater transparency.
- There would be a market for supplementary health insurers and the insurers would be allowed to keep some of their profits.
- Prescriptions would be based on a drug’s active ingredient to promote generic substitution.
- General practitioners would no longer play the gatekeeper role between patients and specialists.
- Health insurance companies would face stricter solvency tests.
- Individual contract negotiations would be introduced as an alternative to collective bargaining.
- The long-term unemployed would be placed in work programs while awaiting jobs and there would be incentives for the private sector to hire them.
- Discussion of a thorough review of personal income tax exemptions suggests that benefits-in-kind will come under scrutiny.
Voluntary pension contributions lose their tax break; Meals as tax-free perks
A recently-introduced tax break on up to BAM1,200 (US$783) per year in voluntary pension contributions was rescinded in an amendment to the Law of Individual Income Taxes that went into effect on August 1. Another amendment set the terms under which employer-provided meals are tax exempt up to BAM3.50 per day. They must be prepared in canteens or provided by a registered catering service.
Pension reform misgivings
Money Marketing, Professional Pensions, IPE
As the new coalition government displays ambivalence toward its predecessor’s 2012 auto-enrolment scheme, its own pension reform plans are coming under scrutiny:
- The administration’s review of the National Employment Savings Trust (NEST) scheme (IH 06/30/10), due next month, includes consideration of a private sector alternative to NEST. Stakeholders have warned that the private sector is not up to the task.
- Another high-profile aspect of the NEST consultation was the NAPF (National Association of Pension Funds) request that auto-enrolment be deferred until a worker has been on the job for six months. The Institute of Directors (IOD) would settle for three with an exemption for firms with fewer than five employees.
- The switch to the Consumer Price Index (CPI) for pension indexing (IH 07/14/10) will require revisions to Pensions Act 2005 if it is to have significant impact. Stakeholders have warned that pension funds will need an ample supply of CPI-linked hedges.
- The Association of Consulting Actuaries (ACA) has noted that a rise in the retirement age (IH 06/30/10) would disproportionately affect low-income workers, who have a lower life expectancy.
- Pension funds have complained that the April 2011 removal of the requirement to take out an annuity at age 75 is coming too soon and may not give companies adequate time for compliance.
TFW program refinements; Ontario class action case on overtime pay
PNP, National Post, Toronto Sun
The Immigration Minister has introduced final rules for curbing the exploitation of temporary foreign workers (IH 10/21/09). The improvements do not differ substantially from the draft released in October 2009. Highlights include a four-year limit on TFW status and two-year suspension from the TFW program for employers found to have violated their workers’ rights. Also, the Ontario Superior Court has agreed to hear the case of over 1,500 railway workers who contend that their status as first-line supervisors was a false basis for overtime pay exemption.
Part-time work legislation
Revista Summa, Siglo Vientiuno
Congress has adopted International Labour Organization convention 175 Part-time Work. Unions expressed concern that the embrace of this model could be harmful absent a regulatory framework. The Labor Ministry has now drafted a bill that would address employee rights, leave entitlements and employer social security contributions for part-time workers.
Minimum wage dispute
EFE, Inside Costa Rica
The business sector managed to delay a minimum wage increase that was scheduled for last April and the CUTH labor federation later set an August 15 deadline for a minimum wage hike. The date lapsed and CUTH launched protests that could evolve into a national strike. CUTH has proposed a 30% increase while the employers are offering 3.7%. A Labor Ministry official has noted that minimum wage rules are widely ignored.
See also; India, bullet 1
Social Security reform
WSJ, IHT, CNN
The opposition plan to privatize Social Security (IH 07/28/10) is giving the President leverage for the “modest” changes likely to appear in the December 1 report from the National Commission on Fiscal Responsibility. Options before the commission include raising the ceiling on income subject to Social Security taxes, reducing benefits for the wealthy and continuing increases to the retirement age, which is scheduled to plateau at 67 in 2027.
House approves pension peg; Bankruptcy bill boosts employee ownership
BAH, IPS, Telam
The lower house of Congress has passed the opposition-sponsored state pension increase measure that the administration tried to derail with its own benefit hikes (IH 08/04/10). If the Senate okays the bill and the President backs off on her threatened veto, the minimum pension will have a permanent link to 82% of the minimum wage, which is now 1,740 pesos (US$443) and set to reach 1,840 in January.
In addition, the Minister of Economy and Public Finance conferred (Spanish only) with members of three legislative committees on administration-backed amendments to the Bankruptcy Act that would set a legislative framework for employees of bankrupt enterprises converting them to employee-owned cooperative companies. This has been a common practice for the past decade, but the administration feels that more formal arrangements are in order.
Workplace safety review, RBS delay
BNamericas, La Nacion, La Estrella
Following a high-profile mine disaster, the President charged (Spanish only) the Ministry of the Interior with preparing a report on the administrative and legislative changes that would prevent such accidents in the future. The outcome will affect all sectors, but there will be particular emphasis on mining, agriculture and manufacturing.
Also, the risk-based supervision model that was introduced for AFP private pensions in June (IH 06/23/10) was meant to be fully implemented in October 2010. The Superintendent of Pensions (SP) announced last week that this timeframe was determined to be too tight and that RBS implementation will be pushed back to April 2011. The sector is invited to submit comments and queries to SP in the interim.
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