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International Headlines - 17 November 2010


Written by: Patrick Sweeney

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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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: Only formalities remain for AIFM Directive
Germany: Parliament passes health reform bills
Hong Kong: Minimum wage agreement
India: NPS is due for a tune-up
South Africa: Parliament approves tax package
UK: Welfare reform white paper
US: Fiscal reform proposals previewed

 

Africa

 

South Africa

 

Parliament approves tax package
Business Day, ACC

Taxation Laws Amendment Act (IH 09/01/10) was gazetted earlier this month. Among the important provisions set to take effect on January 1 (unless otherwise noted):

  • The terms for deductible key person insurance schemes are revised so that the executive only gets a payout upon disability or death.

  • Lump-sum severance pay will be subject to the same tax regime as lump-sum pension payments.

  • If an employer is confident that at least 80% of an employee’s use of a company-provided vehicle is work-related, only 20% of the travel allowance will count as compensation for PAYE purposes.

  • From March 1, 2011, a standard regime will be in place for commutation of annuities into lump sums.

  • Rules on executive stock compensation are revised to prevent certain “anomalies” with restricted stock schemes.

Asia/Pacific

 

Australia

 

Banking sector pay reform
Banking Day

The Treasurer has advised the press that he will release a set of banking sector reform proposals next month. These are said to include changes in the remuneration mix for top executives and greater shareholder say in awarding management salary. The administration is behind schedule with delivery of a discussion paper of executive pay issues throughout the private sector (IH 04/21/10).


 

China

 

Employee representation measure withdrawn
SCMP, GIDA, IPS

The Development and Reform Commission in the employee rights bellwether province of Guangdong has at least temporarily set aside a package of employee representation proposals in another sign that the sea change in employment relations (IH 09/29/10) is de-accelerating. The proposals would have reserved at least a third of board seats for employee representatives and they would have given workers a say in decisions affecting them, such as wages and working conditions.


 

Hong Kong

 

Minimum wage agreement; 2010-2011 Policy Address; Data privacy consultation
SCMP, AFP, GIDA

The Provisional Minimum Wage Commission has proposed and the Chief Executive has accepted an introductory rate of HK$28 (US$3.60) per hour for the statutory minimum wage (IH 09/09/10). An amended Minimum Wage Ordinance is scheduled to reach the Legislative Council today. The legislation should come into effect in May 2011.

Also, the Chief Executive has delivered the Policy Address 2010-2011, an agenda for the coming year featuring:

  • The voluntary supplemental Health Insurance Scheme (IH 10/12/10)

  • An elderly healthcare voucher pilot scheme

  • A Workplace Transport Subsidy Scheme defraying HK$600 in commuting costs per month.

  • An expanded role for the Insolvency Fund, covering holiday pay and untaken annual leave


Incidentally, while workplace privacy is not the focus of the government’s consultation on its response to an earlier consultation on data privacy, stakeholders may want to check it for implications. Report on Public Consultation on Review of the Personal Data (Privacy) Ordinance includes several proposals on the maintenance and transmission of personal data and Proposal 27 recommends a partial exemption from privacy rules in mergers and acquisitions.


 

India

 

NPS is due for a tune-up; Various
Business Standard, Financial Express, Economic Times

The Pension Fund Regulatory and Development Authority (PFRDA) announced that a committee report on the New Pension Scheme (NPS) is imminent. Its findings should reflect PFRDA concerns that more funds should be offering these schemes and that the 0.0009% of assets limit on management fees is too low. The Insurance Regulatory and Development Authority (IRDA) meanwhile is developing a pair of pension products to challenge the NPS. One will guarantee a 5% return plus a “large portion” of the actuarial surplus. The other will more closely resemble the NPS, but with a lifecycle investment program that starts at 60% equities for young members and gradually shifts to a modest guaranteed return.

In other news:

  • An official with the National Advisory Committee on Accounting Standards has announced that India will stray from International Financial Reporting Standards (IFRS) by allowing companies to disclose their employee benefits financials in a reserve account rather than on the balance sheet.

  • The IRDA is now reportedly in favor of health insurance portability (IH 03/24/10) and preparing to issue a formal proposal on it in the next few months.

  • The Employees’ Provident Fund Organisation (EPFO) is preparing formal notification to affected provident fund trusts that those facing difficulty in meeting the 9.5% interest rate for 2010-2011 (IH 09/22/10) may dip into their trust reserves.

 

Indonesia

 

Language requirement for foreign workers
Bisnis Indonesia
A regulation implementing parts of Law 24/2009 on National Flag, Language, Symbol and Anthem will introduce an Indonesian language proficiency test for foreign workers. Those who fail will be required to take classes while those who pass will receive a certificate.Due by July 9, 2011, the new rules will also require using the language in all business contracts (not retroactive) and government documents.


 

Kuwait

 

Unemployment insurance bill
Kuna, Kuwait Times

The Cabinet has approved a proposal to create a voluntary unemployment insurance scheme for Kuwaiti citizens in the private sector (IH 07/29/09). It would be funded by member contributions with a small government match. The Manpower and Government Restructuring Program (MGRP), which drafted the proposal, has asked the Cabinet to continue payments under the unemployment benefit scheme (IH 09/03/09) to those who are now collecting benefits, but prospects are not clear for retention of the statutory benefit upon introduction of the voluntary scheme. The bill must still get through the National Assembly.


 

New Zealand

 

Employment bill; Financial adviser disclosure rules
Scoop, NZP, NZH

Second reading debate for Employment Relations Amendment Bill (No. 2) was held yesterday. The unions have been campaigning against expansion of the bill’s measure on expanding the 90-day probation arrangement with a sampling of lurid instances of capricious firings under the existing 90-day window. Also, Financial Advisers (Disclosure) Regulations 2010 are depicted as part of an effort to “improve investor confidence in our financial markets.” From July 1, 2011, they will set detailed requirements for financial adviser disclosure statements.


 

Philippines

 

Compulsory insurance for OFWs
AIR, PDI, Manila Bulletin

Legislation that passed last month made some additional insurance coverages mandatory for overseas foreign workers hired through agencies.

These include:

  • US$15,000 in accidental death coverage

  • US$10,000 for natural death

  • US$7,500 for permanent disability

The insurance, available only from a menu of approved insurers, costs approximately US$116 for two years. There are safeguards against the agency passing the cost along to the workers, but not all stakeholders are convinced of their adequacy.


 

Qatar

 

Reconsidering worker sponsorship system
Gulf Times, AFP

The Council of Ministers is reported to be “seriously studying” a proposal to eliminate the worker sponsorship system that fundamentally tethers foreign workers to the employers that bring them into the country. The Prime Minister noted that the administration has introduced reforms to the system in recent years and that if the system were removed it would be a gradual process.


 

Singapore

 

Dispute resolution bill; Re-employment compensation to be pro-rated for part-timers
Today

Industrial Relations (Amendment) Bill, the government-sponsored legislation arising from the recent consultation on white-collar dispute resolution (IH 09/01/10), had its first reading in Parliament on October 18. It sets out a range of grievances that would be settled with management or professional employees by a tripartite mediation process.

Also, the tripartite partners agreed during a recent public consultation on the re-employment legislation (IH 09/22/10) that part-time workers should be eligible for the compensation due to those workers who are not re-employed at retirement age. The payments would be pro-rated based on their hours. The Manpower Minister confirmed that the legislation will reach Parliament in the next few months and should enter into force in 2012.


 

Sri Lanka

 

EPF re-registration drive
Daily News, Sunday Observer

In order to maintain a centralized information system on participants, the Employees’ Provident Fund has set out to re-register all members.


 

Taiwan

 

Health insurance initiatives
CNA, Taipei Times, Taiwan Today

The Legislative Yuan resumes its review of the 2G health reform bill (IH 08/26/10) next month and the Health Minister has started exhorting legislators to quickly complete its passage. Prominent sidebars to the legislative struggle include a pilot program for healthcare capitation and the Disadvantaged Medical Care Program, a one-year waiver of health insurance card suspensions for low-income people who have fallen behind in their payments.

Europe

 

EU

 

Only formalities remain for AIFM Directive; Cross-border health care advances in Parliament
LTN, Global Pensions, Euractiv
A plenary vote in Parliament approved the Alternative Investment Fund Managers Directive (AIFM, IH 11/04/10) last week and the European Council will rubberstamp it within a few weeks. It should come into effect in early 2011, setting a 2013 transposition deadline. An FAQ and a background note marked the occasion.

Also, Parliament’s Committee on the Environment, Public Health and Food Safety endorsed (agenda Item #4) draft legislation on patients’ rights in cross-border healthcare. The committee reached consensus on when prior authorization would be necessary and on when it could be refused. In an interview, the legislation’s rapporteur noted that member states would have centers where patients could learn about health resources in other countries. A plenary reading is set for January 18, 2011.


 

Finland

 

Health insurance contributions to rise
IBFD

The government has issued a decree (Finnish only) setting national health insurance contributions for calendar year 2011. The employer contribution will drop from 2.23% to 2.12%, the 1.47% employee levy will fall to 1.19% and pensioners will see their 1.64% premium dip to 1.36%.


 

France

 

Occupational medicine measures rejected
BNM, Newspulse, Reuters
When the Constitutional Council cleared the pension reform law (French only) last week, it did excise a set of articles on occupational medicine reform that had been added during the debate. The language in those provisions had raised concerns about occupational physicians having sufficient autonomy from employers. The Labour Minister said that an occupational medicine bill with revisions to allay the council’s concerns is in preparation.


 

Germany

 

Parliament passes health reform bills; Insolvency fund levy drops
Deutsche Welle, Financial Times, IPE

Parliament has approved (German only) the administration-sponsored health reform bill (IH 09/22/10) featuring a levy rise from 14.9% to 15.5% (effective January 1, 2011) and a shift in any further contribution increase to employees only. The Health Ministry has posted an FAQ (German only) on the new law. A companion bill to reform the pharmaceutical marketplace (German only) passed a day earlier. A drug company’s prices for new medicines will reflect whether it actually provides any new medical value.

Also, the pension insolvency guarantee fund PSV has sharply reduced (German only) its levy on occupational pensions in light of a strong financial recovery. Last year’s record high rate of €14.2 per €1,000 has plummeted to €1.9 per €1,000. However, an annual surcharge of €1.5 that was introduced last year will stay through 2013.


 

Hungary

 

Pension contribution hike to preserve early retirement for women; Severance pay cap - Correction
Global Pensions, MTI, Reuters
The Parliament has approved a bill that will raise the employee pension contributions from 9.5% to 10% to offset an early retirement option for women. Some accounts report that the levy increase is temporary – for 2011 only – but the opportunity for women to retire early after 40 years of contributions is meant to be permanent, so there will have to be some kind of offset from 2012 forward. Also, one of the press reports on the new tax for high severance pay (IH 11/04/10) indicated that this levy was introduced only for the public sector. A government press release has confirmed this. Incidentally, Parliament quickly passed the government measure restricting the cases in which the Constitutional Court may deliver a ruling. This should neutralize the court on both the public sector severance pay levy and – if necessary – the diversion of second-pillar contributions to the state pension (IH 11/10/10).


 

Ireland

 

Reports of pension cuts in 2011 Budget; Consultation on agency directive
Irish Times, Global Pensions, Irish Examiner
There has been much brinksmanship in Parliament over reports that the 2011 Budget (due on December 7) will introduce benefit cuts and/or means testing for the state pension. The Finance Ministry's response to the reports was "Nothing has been ruled in or out. Everything you read in the paper is speculation.”

Also, the Minister for Labour Affairs has posted a consultation document on the draft transposition of the Temporary Agency Workers Directive. The staffing sector has so far raised no red flags over it. The consultation runs through November 30 and the directive must be transposed by December 5, 2011.


 

Latvia

 

Second pillar contribution may drop again
LNA

After attempting to schedule a return to robust second-pillar contributions (IH 04/14/10), the Welfare Minister announced plans to halve the 2% allotment in the 2011 Budget. The Cabinet may vote on the proposal this week.


 

Lithuania

 

Proposal to make Christmas Eve a public holiday
Baltic Course, Q++
The Social Democrats, the main opposition party, have submitted a Labour Code amendment to the Seimas that would make Christmas Eve – December 24 – a public holiday. The wind may be at their back this year as Christmas Day itself falls on a non-transferable weekend day in both 2010 and 2011.


 

Romania

 

Senate decides against pension reform bill review
Rompres
A plenary vote of the Senate narrowly defeated a proposal to re-exam the entire pension reform bill (IH 11/04/10). A subsequent vote on the President’s proposal to cap the retirement age for women at 63 failed because there was no longer a quorum present.


 

Russia

 

Deductions for employees posted abroad are clarified
IBFD

The Finance Ministry has released Letter N 03-03-06/1/671 to explain the tax treatment of certain expenses a company may incur for employees posted abroad:

  • Rents costs are deductible up to 20% of salary.

  • Visa and work permit costs are deductible provided they are adequately documented.

  • Travel and education expenses for an employee’s children are not deductible.

  • The Tax Code already sets out criteria for determining whether homeowners' insurance or host country social security costs would qualify for a deduction.

 

Serbia

 

Pension reform update
SeeNews, Balkans.com, B92

With the unions (IH 09/29/10) and the International Monetary Fund (IMF) showing little flexibility on pension reform, the government is preparing new revisions for release this month. The government found common ground with the unions on keeping the minimum pension no lower than 27% of average salary and on deferring the climb to a 38-year minimum contribution for women until 2013, but turned down a union demand to peg the average pension to 60% of the average wage. The administration has agreed to continue negotiations with the IMF, but it has served notice that its need to borrow from the fund is greatly reduced and that it is undecided over whether to maintain the current loan agreement.


 

Slovenia

 

Pension reform bill weakened in committee
STA

The government’s pension reform legislation (IH 09/15/10) was significantly diluted in Parliament’s Labour, Family and Social Affairs Committee last week. Men would be able to retire after 40 years of service rather than 43 years of service plus minimum age of 60. Women would need 38 years of service, down from 41 with minimum age of 58. The benefit formula would reflect the best 30 years of service, rather than 33.


 

Spain

 

Tax break proposed for mass transit perk
Tax Analysts
A draft decree (Spanish only) recently circulated for consultation features a measure that would grant an income tax exemption on the “cheque transporte,” an electronic card for commuting via public transportation. The tax break would be capped at €1,500 per year.


 

Ukraine

 

Unified social contribution
IBFD
Tax legislation that was passed last July includes measures that will consolidate the four existing social security contributions into a single levy, effective January 1, 2011. This will simplify the payment of social security contributions and entails no changes in the tax level.


 

UK

 

Welfare reform white paper; Various
Professional Pensions, Dow Jones, IPE

The white paper Universal Credit: welfare that works sets out the coalition’s plans for a welfare reform that would make it harder to stay on the dole and more appealing to find a job. A variety of welfare benefits would consolidate into a basic universal credit with a menu of supplements and a “tapering clause” would help those newly returned to the workforce transition off benefits. Those who turn down job offers or make no effort to find work would get a three-month benefit suspension for the first offense, six months for the second and three years for the third. The administration aims to introduce the Welfare Reform Bill in January 2011 and to phase in this system from 2013-2017. The concurrent releases 21st Century Welfare: Government response (IH 08/04/10) and DWP Business Plan, 2011-2015 provide additional information on the plan.

In other news:

  • The Pension Regulator (TPR) has issued Statement on employer related investments (ERI) (IH 09/09/10), guidance that cautions trustees against a new generation of “complex funding arrangements” that risk violation of the ERI rules.

  • Statutory Instrument 2010/2659 The Occupational, Personal and Stakeholder Pension Schemes (Disclosure of Information) (Amendment) Regulations 2010 aim to ease the administrative burden of pension schemes by providing a firm regulatory framework for permissible electronic communications to plan members.

  • The Prime Minister has advised Parliament that intra-company transfers (IH 10/06/10) will not be subject to the planned immigration caps. The Home Secretary added that there is likely to be a minimum salary level to ensure that the transfers are limited to professional staff.

  • The Financial Services Authority (FSA) has opened a consultation on draft revisions to its handbook in light of the government’s pension reform. The main topics are refining consumer protection in the new environment and considering the implications of automatic enrolment for group personal pension schemes (GPP). The consultation will close on February 9, 2011.

  • Last week’s FSA consultation on remuneration disclosure (IH 11/10/10) is drawing some attention with a request for feedback on whether the requirements should extend to firms headquartered outside of the EEA (European Economic Area).

  • The Department of Business, Innovation and Skills (BIS) has published Lightening the Load: The Regulatory Impact on UK’s Smallest Businesses a report on the regulations that small businesses find most oppressive. It has alarmed stakeholders by making the case that small companies would benefit from exemptions to certain employee protection laws.

  • BIS has announced that there will be no further amendments to the Agency Worker Regulations (IH 01/27/10) and that the regulations will take effect in October 2011. Draft guidance should appear early next year.

North America

 

Antigua and Barbuda

 

Obligation to work on public holidays debated
Caribarena
The tripartite National Labour Board has proposed an amendment to the Labour Code that would require workers to accept the assignment when they are scheduled to work on public holidays. The Antigua Trades and Labour Union (AT&LU) has objected that no worker representatives were party to this decision and has threatened to stage protests. The Labour Minister has yet to respond to the proposal. AT&LU has noted that this would run counter to the long-term Caricom goal of harmonizing regional labour laws.


 

Barbados

 

Labour law reform measures
BSJ, Nation News
The Labour Minister has presented a set of draft laws on worker rights and occupational safety to a cabinet committee:

  • Holiday with Pay (Amendment) Act would clarify the pay calculations for public holidays.

  • Amendment to the Shops Act would liberalize hours of business in the retail sector but set requirements for rest breaks and worker transportation arrangements.

  • Employment Rights Bill would set minimum notice periods for termination, curb the practice of dismissal without cause and create an Employment Rights Tribunal.

  • Safety and Health at Work Regulations are fast-tracked to set minimum occupational safety requirements.

 

British Virgin Islands

 

New Labour Code launched, explained
BCI Beacon, BVI News, Platinum News
Labour Code, 2010, which was tentatively set for entry into force on November 4 (IH 09/01/10), became law on October 4, but observers have suggested that the administration should have taken the extra time to polish the final draft. Officials have started a campaign to publicize the new law and they have spent some time explaining unclear provisions in the public meetings. Most notably, section 111 outlines a default retirement benefit on which the business sector has asked to see more guidance.


 

Canada

 

Consultation on tax package; Remedy in age discrimination case
The Finance Ministry has opened a consultation, Legislative Proposals Relating to the Income Tax Act. This is fundamentally a set of technical amendments, but some notable provisions address:

  • The treatment of a Registered Pension Plan (RPP) in an acquisition (clause 29) or a transfer of funds (clause 30)

  • Calculating RPP benefit when part of pensionable service was with a previous employer (clause 44)

  • Inheritance issues for Tax-Free Savings Accounts (TFSA, clause 27)

  • An addition to the list of prescribed plans for retirement compensation arrangements (clause 40)

  • Protection from double taxation in leave of absence plans (clause 14)


The comment period closes on December 5.

Also, the Human Rights Tribunal delivered a pair of decisions on November 8 following up on its 2009 determination that an airline’s policy of retirement at age 60 is discriminatory (IH 09/03/09). These decisions set the terms for reinstatement of the pilots (now 65 and 67) and awarded payments for lost income but not for pain and suffering.


 

Mexico

 

House backs same-sex benefits; Pension fund investment menu to expand
AP, Global Pensions
The House of Representatives has voted to approve legislation based on a Supreme Court ruling (IH 09/09/10) that called for extending social security benefits to same-sex couples. The bill must still get through the Senate. Also, pension regulator CONSAR is planning a revision of Afores private pension fund investment rules for publication in the first quarter of 2011. The most likely beneficiaries are global commodities and other foreign investment products.


 

US

 

Fiscal reform proposals previewed; Various
Washington Post, NYT, Bloomberg
The National Commission on Fiscal Responsibility and Reform has released a Co-chairs’ Proposal in advance of its formal report. It urges a number of strong measures to restore the government’s financial health, including:

  • Tax breaks on employer-sponsored medical and retirement plans are among the itemized deductions thought due for a “haircut.”

  • Medicare cost containment measures would include more cost sharing and lower physician fees.

  • The pensionable income threshold would rise more quickly under social security, the peg for benefit increases would be modified and the normal retirement age would be linked to longevity. There would also be greater flexibility in phased retirement.

It is not guaranteed, or even likely, that a majority of the commission will endorse all of these proposals in its final report.

In other news:

  • The Equal Employment Opportunity Commission has posted the Regulations Under the Genetic Information Nondiscrimination Act of 2008: Final Rule. There is an exception to the ban on access to genetic information for employers sponsoring voluntary wellness programs. The regulations will take effect on January 8, 2011.

  • The Financial Accounting Standards Board (FASB) standard on multi-employer scheme disclosure (IH 09/09/10) has been delayed so it will not apply to the 2010 year-end reporting period. A review of exposure draft responses will continue in March and a final standard is expected in the second quarter.

  • Foreign pension providers have been corresponding with the Internal Revenue Service (IRS) over the passage in IRS Notice 2010-60 (IH 09/09/10) referring to those foreign retirement plans that may face reporting and withholding requirements as foreign financial institutions (FFI). Most notably, the European Federation for Retirement Provision (EFRP) sent a note explaining the Institutions for Occupational Retirement Provision (IORP) Directive and requesting an exemption for the schemes subject to it.

South America

 

Argentina

 

Pension hike vetoed; Profit-sharing bill olive branch
BAH, NASDAQ, Bloomberg
Last month, the Senate passed the controversial bill (IH 08/26/10) setting a minimum state pension link at 82% of the minimum wage. As promised, the President vetoed (Spanish only) the law, branding it an act of bankruptcy. Meanwhile, the sponsor of the profit-sharing bill (IH 11/10/10) has announced that he will offer compromises in order to reach a consensus on the legislation. He specified that the 10% figure for redistribution of company profits is negotiable and noted that a heavy legislative agenda is likely to defer passage until next year.


 

Brazil

 

Ruling on management liability
DRE, Tax Analysts

The Supreme Court has determined that a 1993 law holding a company’s top executives personally responsible for a company’s debt to the social security system is unconstitutional. A 2008 law released management from this liability moving forward, but it had not been retroactive.

Worldwide

 

IASB

 

Statutory profit-sharing scheme comes under IAS 19

The International Financial Reporting Standard Interpretations Committee (IFRIC) concluded earlier this month that a statutory employee profit-sharing arrangement fits comfortably within the definition of an "employee benefit" and is thus subject to IAS 19. Moreover, the committee was satisfied that IAS 19 provided adequate guidance for this scenario so it need not be added to the IFRIC agenda.



Mercer International Headlines is published by the US international consulting practice library of Mercer. Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.

 


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