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: Equal opportunity law revision
EU: Responses to pension reform green paper
Ireland: Coalition agreement; Minimum wage ruling
Mexico: Labor reform proposal
Poland: Cabinet approves pension reform plan
Singapore: Committee of Supply speech
UK: State pension reform
Expat Cairo, Zawya
At the dawn of the post-Mubarek era, the newly minted Egyptian Federation of Independent Labor Unions is pressing to keep its agenda (IH 02/09/11) central to the nation’s reforms. By current accounts, its objectives include:
- Formally establishing rights to industrial action and to conduct collective bargaining
- Tripling the minimum wage to LE1200 (US$205) per month
- Converting temporary contracts to permanent employment
Equal opportunity law revision; Consultation on standard deduction for work-related expenses; Medicare surcharge on overseas visitor's health insurance
ABC, The Australian, Tax Analysts
The Minister for the Status of Women announced the initiative Retaining and Improving the Equal Opportunity for Women in the Workplace Act 1999, which will feature a stakeholder consultation on the law. The administration has already produced some proposals based on a 2009 consultation:
- Companies with more than 100 workers would be required to report on the gender composition of their workforce and their boards. They would be periodically checked on the accuracy of their data and on their progress toward parity.
- There would also be mandatory statements on flexible workplace policies and on equality initiatives.
- Protection would extend to men, with particular sensitivity for those in caregiver roles.
- Noncompliant employers would be named and shamed.
The administration aims to have the revised law passed by the end of this year with the first employer reports coming due in 2013.
The Treasury recently opened a consultation on Making tax times simpler: Standard deduction for the cost of work-related expenses and the costs of managing tax affairs. A standard deduction for work-related expenses would be phased in, at A$500 for fiscal year 2012-13 and A$1,000 thereafter. Qualifying expenses include home offices, purchase and upkeep of work-related clothing, professional memberships and subscriptions, job-related training, conference attendance and relevant travel or personal vehicle costs. Submissions are welcome through April 8.
Also, the Australian Taxation Office (ATO) ruled in Interpretative Decision ID 2011/21 on the application of the Medicare Surcharge to someone with private health insurance under an overseas visitors policy. As the person was a resident of Australia for tax purposes, earning above the income threshold, single and holding a health insurance policy that was not compliant with Private Health Insurance Act 2007, the surcharge must be paid.
More liberal investment policy proposed; Employee representation in Shanghai
Global Pensions, JHL, BMC
An official with the China Securities Regulatory Commission (CSRC) has said that the nation’s economic development requires higher pension fund investments in domestic stock markets. Investment rules that are already in the pipeline (IH 03/02/11) are not keeping up with the pace of initial public offerings.
Also, the Shanghai Employee Representative Council Regulations, which come into effect on May 1, 2011, include a requirement that enterprises with over 100 employees create employee representative councils (ERC). The councils will have to be consulted on major company decisions, particularly those affecting worker rights. Analysts have noted that there is so far no mention of any sanction for failure to create an ERC.
Guarantee menu for unit-linked pensions; Health services tax contested; EPF hike blocked
Business Standard, Economic Times, IBN
The Insurance Regulatory and Development Authority (IRDA) has yet to issue its new rules on unit-linked pensions (IH 03/02/11), but officials have started giving previews. The remedy to the controversial 4.5% guarantee will be a variety of pensions with four or five different guarantees, “a spectrum of guarantees.” The regulator is also favoring – but not committed to – setting a minimum annuity of Rs1,000 (US$21.63) per month.
Also, the 2011-12 Budget (IH 03/09/11) has one stealth provision that has angered stakeholders. It proposes a 10% service tax on private hospitals with central air conditioning and at least 25 beds. The tax would also apply to tests conducted in diagnostic laboratories. The private health sector has pushed back hard on this and unnamed sources in the Finance Ministry have given assurances that the provision will not be in the Finance Bill when it reaches Parliament next week.
Meanwhile, the Finance Minister has advised Parliament that the 1% increase in the Employees Provident Fund (EPF) interest rate (IH 02/24/11) is unacceptable. The dispute will now be referred to the Prime Minister’s Court.
Work culture project features reduced hours
The Ministry of Employment and Labor (MOEL) has unveiled its Good Workplace Project featuring a sharp cut in annual working hours. In the interest of both work/life balance and occupational safety, the annual average of 2,111 hours is set to reach 1,950 next year and settle in at 1,800 by 2020. Inspection squads will ensure small enterprise compliance with the 40-hour week limit when it takes effect for them on July 1 (IH 01/06/11). The project also aims to promote conflict resolution and discourage common infractions such as pay delays, minimum wage violations and foregoing written employment contracts.
Welfare reform report
NZ Herald, Stuff, Scoop
Last month, the Welfare Working Group released its final report Reducing Long-Term Benefit Dependency: The Options. It offers 43 proposals reflecting the theme that the dole must be rebranded as a jobseeker’s allowance. Some members of the administration are among those flagging human rights concerns with a number of these proposals. One would put women back in the job market 14 weeks after giving birth and another sets a quota for the number of people to remove from the welfare rolls without setting a corresponding target for job creation.
Revised draft tax regulations for PERA
Business World, Manila Standard
The Capital Market Development Council (CMDC) has revised its draft regulations on the taxation of Personal Equity Retirement Accounts (PERA, IH 04/14/10). The standard tax caps on contributions have not changed in this draft, but there are no longer any exemptions to them. There is a 5% tax credit on contributions and there are some tax breaks on investment income. The Bureau of Internal Revenue is now reviewing this draft.
Committee of Supply speech
Today, Business Times, Straits Times
The Minister of Manpower delivered his annual Committee of Supply speeches last Wednesday. They covered a number of new and ongoing initiatives:
- There is an extensive account of the foreign worker levies (IH 02/24/11) that would phase in over the next two years.
- From July 1, 2011, the salary threshold for S Pass and other skilled foreign worker permits would rise significantly.
- The definition of full-time local worker under the dependency ratio framework to qualify for hiring foreign workers would be tightened, to ensure that employers are not padding the figures. From July 1, a worker would have to earn at least $850 (US$670) per month to be counted as full-time under the terms of the dependency ratio.
During subsequent debate, he expressed support for eldercare leave but noted his misgivings about making it a statutory right.
Cabinet approves pension fund proposals
Daily News, Colombo Page
The trio of pension funds that were featured in the 2011 Budget (IH 12/08/10) now have the Cabinet’s approval and are on a tight timetable for May 1, 2011, implementation. Private sector workers who are not members of the Employees’ Provident Fund (EPF) would join the Employees’ Pension Benefits Fund. Workers and employers would each contribute 2% of monthly salary. A minimum contribution period of 10 years would yield a minimum benefit equal to 25% of average salary from the last 10 years of employment.
Pension splitting in divorce; Parental leave means testing
China Post, Taipei Times, CNA
The Council of Labor Affairs (CLA) has determined that pensions and labor insurance should be among the assets split up in a divorce settlement. It has not yet settled on a fair formula for the distribution, but one top contender would be to split the benefit equally and start sending checks to both spouses as soon as the entitled spouse retires. Also, the President has asked the Executive Yuan to flesh out a proposal for a means-based parental leave subsidy. Rather than 60% of monthly pay for up to six months, the salary replacement level would range at least from 50-70%, better reflecting actual need.
Cabinet rejects health funding increase
A little footnote to last week’s item (IH 03/09/11): The National Health Security Office (NHSO) delivered an urgent appeal to the Cabinet for a robust 20% increase in the universal healthcare scheme budget for 2012. The Cabinet rejected the proposal but indicated that it would meet the NHSO again if it could reconcile its health funding figures with the less dire forecast prepared by the Budget Bureau.
Guidelines on finalization of 2010 Corporate Income Tax
Last month, the General Department of Taxation (GDT) issued guidelines on the finalization of 2010 Corporate Income Tax featuring some key distinctions:
- Employee bonuses are deductible only when the terms of bonus awards and their rates are fully disclosed in either the labour contract, the collective agreement or the bonus policy document.
- Tuition fees for a foreign employee’s children are deductible providing they are adequately documented and the worker’s contract describes them as part of salary.
- The maximum deductible per diem is twice the maximum set for state employees, topping out at US$60 per day for overseas travel.
Government approves draft pension reform
The coalition government has now endorsed a draft of the administration’s pension reform legislation with some modifications to the original outline (IH 02/24/11). The value-added tax (VAT), now 20% with many essential items set at 10%, would gradually become 17.5% with no exemptions. This draft is now billed as a work in progress and a final draft should be ready for Parliament by mid-year.
BBD, ERR, Tax Analysts
The right-wing coalition government has been restored to power with a stronger mandate. Among the goals emphasized during the campaign:
- Setting a €6,391 ceiling on company tax breaks for contributions to employee pensions and medical plans
- Cutting back on unemployment insurance benefits
- Granting mothers who reach retirement age three years of contribution credit on their state pensions
- Establishing a widow’s pension
- Adjusting the indexation formula for the state pension to prevent negative growth
Responses to pension reform green paper; Various
AFP, Global Pensions, Financial Times
The Employment and Social Policy Council fielded responses to the consultation over the pension reform green paper Towards adequate, sustainable and safe European pension systems (IH 07/08/10) in last week’s meeting. Member state employment ministers affirmed that the details of pension reform should be decided on the national level, but that a policy coordination role would be appropriate for the EU. They agreed that:
- A higher effective retirement age is a shared goal.
- Pension tracking services are needed to support mobile workers.
- The Institutes of Retirement Provision (IORP) Directive and other occupational pension rules would benefit from revisions.
Occupational pension portability and employer insolvency came up in many responses, but there was little consensus on how to approach them. The pension reform white paper is due in the third quarter of this year and a review of the IORP Directive will be published in the fourth quarter.
In other news:
- The Employment and Social Policy Council has adopted Council conclusions on the European Pact for gender equality for the period 2011-2020. It stops short of setting quotas but urges member states to set their own equal pay, women in management and work-life balance goals. The Commissioner in charge of Fundamental Rights depicted the document as giving “self-regulation a last chance” and warned that she would revisit the prospect of a regulatory solution this time next year. This conclusions document gained ammunition from the statistics published earlier that week in observance of the first European Equal Pay Day
- Earlier this year, the French National Assembly adopted a resolution (French only) committing to push for harmonization of European laws on equal rights for women. The resolution was presented to the European Parliament to commemorate the 100th anniversary of Women’s Day. Parliament also marked the occasion by adopting resolutions on workplace and health care inequality.
- Several analysts have pointed out that the bombshell ruling on gender bias in insurance premiums (IH 03/02/11) has a wide loophole for annuities taken out under occupational pension schemes. The decision made a distinction between individual insurance products and employer-provided benefits. Observers differ over whether the loophole is intentional.
- The European Court of Justice (ECJ) has delivered a ruling in a residency case that had been referred by the Brussels Labour Court. In Case C-34/09, the court determined that while member states fundamentally have autonomy on issues of citizenship, when a third-country national is the parent of a dependent minor who is a national of a member state, the parent is entitled to residency and a work permit.
- Parliament’s Economic and Monetary Affairs Committee has voted to curb naked short selling and ban credit default swaps (CDS) of sovereign debt for those who do not already own sovereign debt linked to the CDS. The draft regulation’s sponsors must reach agreement on the text with member states before it can be scheduled for a plenary vote. Several states have expressed concern that singling out sovereign CDS would make sovereign debt more expensive.
Debt reduction plan
Budapest Times, Bloomberg, Reuters
The administration’s economic reform package (IH 02/16/11) has arrived:
- With a disproportionate number of disability pensioners, the state aims to introduce a new screening process and to review all existing cases by January 2012.
- The early retirement option will be removed except for the recently established concession for women who have worked at least 40 years.
- The co-payment on subsidized drugs would rise by as much as 30%.
Coalition agreement; Minimum wage ruling; ECJ hearing on VHI
Tax Analysts, Irish Times, Irish Examiner
Fine Gael and Labour have now formed a coalition government (IH 03/02/11) and posted a Statement of Common Purpose, offering details or outlines of shared positions. Universal Health Insurance (UHI) is set to be phased in with free general practitioner care in place for all by 2016. Private health insurance and the Health Service Executive (HSE) are on the chopping block under this plan. A white paper on financing the scheme is promised early in this term. There is also some passing mention of gradual conversion to a universal pension system, modernization of the rules on an employee’s right to collective bargaining and adoption of a flexible retirement program.
Also, the Irish Council of Trade Unions (ICTU) has hailed last week’s Labour Court ruling against a hotel chain that cut the pay of minimum wage workers after the previous administration reduced the minimum wage (IH 02/09/11). Staff were asked to voluntarily revise the wage information in their contracts, but those who refused were fired. The employer must now reinstate those workers at their old hourly rate. By the way, the new coalition government has agreed to reverse the minimum wage cut. Incidentally, last week the European Court of Justice (ECJ) heard Ireland’s defense of dominant health insurer VHI’s exemption from key insurance regulations (IH 07/01/09), including EU insurer insolvency rules. The court should decide the case within six months.
Tripartite agreement on work/life balance
The Labour and Social Affairs Ministry announced (Italian only) that it had reached an agreement with all major social partners to set common goals for balancing work and family priorities. A technical panel will be given 90 days to draw up a statement of best practices in work/life balance and a year later the social partners will conduct an audit of voluntary compliance. Top issues include:
- A flexible hours formula that supports both productivity and family priorities
- Promotion of telecommuting
- Job security for workers on parental leave with job training or refresher courses to ease the transition back to work
State pension entitlement case, reform prospects
Baltic Daily, IBFD, LETA
The Constitutional Court is hearing the case against a new provision of the National Social Insurance Law that took effect on January 1. It states that a person is not covered by social insurance if the employer has failed to make social security contributions. The plaintiffs argue that the right to social security is enshrined in the constitution and that the denial of benefits punishes the wrong party. Meanwhile, government officials and experts have opened a public debate on the viability of the pension system and what must be done to salvage it. Some maintain that there must be immediate decision on increasing state pension contributions, cutting benefits and raising the retirement age. The Prime Minister countered that these measures are under consideration but will not be addressed until the 2012 budget at the end of the year.
Pension reform, medical records bill stalled
The tripartite discussions on pension reform issues (IH 02/02/11) appear to have hit a wall. Trade union federation FNV (Dutch only) opposes benefit reduction for retirement at age 65 and contests the modest benefit increases for those who wait until age 66 or 67. Inadequate guarantee for supplemental private pensions and – by one account – a less generous tax regime for them have also raised concerns. In addition, legislation that would cut medical costs and reduce treatment errors with a system of digital records passed in the House two years ago but evidently will not get through the Senate. A solid majority of senators is swayed by privacy concerns.
Cabinet approves pension reform plan; Various
PNB, Global Pensions, IPE
Last week, the Prime Minister cemented his plan for diverting contributions from the second pillar OFE plan to the state pension (IH 02/24/11) and the Cabinet quickly endorsed it. As early as May 1, the OFE contribution would drop from 7.3% to 2.3%. By 2017, it would partially rebound to 3.5%. The tax-free contribution level for IKE and IKZE voluntary pensions (IH 02/09/11), initially slated to start at 2% and gradually rise to 4%, would be 4% from 2012.
In other news:
- The Constitutional Tribunal has ruled that the regulatory amendments sharply restricting eligibility for bridge pensions (IH 12/24/08) are constitutional.
- The Health Ministry has drawn up draft regulations that would make voluntary health insurance premiums fully tax deductible. It is aiming for a January 1, 2012, entry into force.
- The Trilateral Commission’s working team for labour law had scheduled a discussion of the Labour Ministry’s revision of working time rules for earlier this month, but the ministry has missed its deadline for drafting the amendments.
Next wave of austerity measures
The Prime Minister has outlined a set of “precautionary measures” that are slated to come into effect at the start of next year. They include a special tax on pensions above €1,500 per month and an indefinite freeze on pension benefits. Redundancy pay, now up to 30 days' wages with no cap on the number of years credited, would drop to 10 days' pay per year of service and would pay no more than one year's salary. The default minimum severance pay of three months' wages would be eliminated.
Cabinet approves draft Labor Code
The Cabinet has backed a revision of the new draft Labor Code (IH 03/09/11) incorporating 8 of the 144 amendments submitted by legislators. The press has flagged some of the late-stage changes:
- Job performance would factor more heavily than social concerns in planning a redundancy.
- The nine-month waiting period after a redundancy – initially set for removal – would now be cut to 45 days, with priority hiring for those workers who had been made redundant.
- The two-year cap for fixed-term employment contracts would rise to three.
- A provision allowing the employer to unilaterally drop the non-compete clause and the non-compete benefit with 30 days' notice has been dropped.
- An employer’s damage claims against an employee may be no more than five times the minimum wage.
The opposition’s no-confidence vote is scheduled for today.
Ruling on CEO’s retirement allowance
The Supreme Arbitration Court ruled that it was wrong for a company to deduct a CEO’s retirement allowance as corporate expenses. To qualify for this deduction, payments to current and former employees must be linked to the performance of their duties and this was more like a going away present.
Consultation on Labour Code amendments
Following agreement with social partners on Labour Code amendments (IH 02/09/11), the Labour Ministry is holding a brief public consultation (Slovak only) through March 28. Some of the more prominent amendments:
- Many of the rights and obligations in the employment contract would be subject to collective bargaining. These include overtime limits, severance pay, notice periods, probation periods and substitutions for holidays that fall on the weekend.
- Termination notice periods would run as high as six months but statutory severance pay would only be in lieu of a notice period.
- Unless an employer could give a strong case for it, pregnant women, mothers in the first nine months after birth and breastfeeding mothers would be exempt from fire-at-will during their probation periods.
- A legislative framework for non-compete clauses would limit the period before going to a competitor to one year and would entail paying 70% of final wages for that period.
Court backs pension reform referendum
The Constitutional Court has agreed to let the referendum on pension reform (IH 02/09/11) proceed. The referendum is tentatively set for early May and the administration will be busy both making the case for the reforms and producing the implementing regulations necessary for holding to a July 1, 2011, start date.
State pension reform; Welfare Reform Bill advances
Professional Pensions, The Guardian, IPE
The Pensions Minister recently delivered a speech previewing the state pension simplification proposals that were first addressed in connection with the overdue pension reform green paper (IH 01/12/11). A “fairer, simpler” state pension would replace a range of retirement income guarantees with a uniform universal pension of £140 per week that would not be means tested. The green paper is expected to flesh out this “Citizen’s Pension” concept soon and additional details are expected in the 2011-12 Budget, due next Wednesday, March 23. Officials are reportedly considering yet more curbs on pension tax relief (IH 12/15/10) to help fund the Citizen’s Pension. A “progressive removal” of tax relief on pensions would be partially offset by a 20% cap on income tax for retirees.
Also, Welfare Reform Bill 2011 (IH 02/24/11) prevailed by a wide margin in its second reading, evidently without significant change. It will now undergo a close review in a Public Bill Committee.
Ontario occupational health bill
Ontario’s Labour Minister has introduced Bill 160, Occupational Health and Safety Statute Law Amendment Act, 2011 in response to an expert advisory panel’s recommendations. The Ministry of Labour would assume responsibility for occupational health and safety oversight and would appoint a tripartite Prevention Council to advise it on the needs of an evolving workplace. Standards for occupational health and safety training would be maintained with particular emphasis on small enterprises and the immigrant workforce.
New AFP investment option
Later this year, local authorities will empower banks to offer mortgage-backed bonds. One of their aims is a more robust investment menu for AFP private pension fund managers.
Cabinet approves NPGE; Caricom work permit exemption bill
Jamaica Gleaner, RJR News
The Cabinet celebrated International Women’s Day with approval of the National Policy for Gender Equality (NPGE), a wide-ranging program that encompasses job discrimination and workplace sexual harassment issues. One element of NPGE is the Way Out Project, focused on education and skill training to lift women out of the unskilled workforce.
Also, the Labour Minister recently submitted a bill to the House of Representatives that would fulfill Jamaica’s commitment to the Caricom (Caribbean Community ) rules on free movement of skilled workers. Work permits would be waived for qualifying workers from member states.
Labor reform proposal
The main opposition party has the administration’s backing for a package of labor reform measures. Labor disputes over inadequate termination notice are hard to resolve and can stay in the court system for years. When cases are settled in the workers' favor, employers must generally pay full salary for the litigation period. The bill would establish a firm notification protocol with a labor board copied on the notice. Back pay for the period that the issue was contested would be capped at one year’s salary. Other measures in the package would ban pre-employment pregnancy tests and improve the legal status of both temporary workers and those on probation.
Clarification on pension distributions tax
The Treasury Department’s Administrative Determination 11-02 (Spanish only) provides important details on the tax regime for pension distributions under the 2011 Puerto Rico Internal Revenue Code (IH 03/02/11). The 10% tax on distributions for annuities and other installment plans is subject to exemptions on the first $23,500, or $19,500 for those under age 60. There are no exemptions to the 10% tax for in-service withdrawals and partial distributions.
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