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.

Kenya

Wage impasse; Labour law taskforce
Daily Nation, Bernama

The Central Organisation of Trade Unions (Cotu) had set a 1 May deadline for agreement on a 60% hike in the Sh7,364 (US$88.35 ) per month minimum wage and the Federation of Kenya Employers (FKE) was adamantly against risking inflation with any wage increase. The government increased the minimum by 15% on 1 May and Cotu is now planning a general strike.

Also, the government has appointed a task force to revise labour laws in line with the new constitution. Collective bargaining, union membership, industrial action, fair pay and decent working standards are among the rights that will be included. The taskforce will deliver draft revisions by 27 Aug 2011.

Mozambique

New minimum wage; Foreign worker quota system under review
AIM, AFP, The Citizen

After years of preparation (IH 05/14/08), the government unveiled a set of new sectoral minimum wages with increases ranging as high as 52%. The highest rate, 5,320 meticals (US$170) per month in the financial sector, is still below the subsistence wage peg of 7,200 meticals that the unions had sought. Also, the tripartite Consultative Labour Commission (CCT) has set out to review the quota system for foreign workers. The cap ranges from 8 to 10% per enterprise, though the Labour Ministry has a protocol for granting exceptions.

Nigeria

Benefit awareness campaign
Daily Independent

The National Pension Commission (Pencom) has circulated a notice to private-sector workers advising them of their statutory right to an employer-provided life insurance policy covering at least three times annual gross wages. It also reminds them that pension contributions deducted from wages should reach the Pension Fund Custodian within seven working days. Workers are advised to report any violation of these rules to Pencom.

South Africa

Hints that provident funds are out of favor
Business Day, Pretoria News, The Mercury

The Finance Minister said that the relative inadequacy of provident funds as retirement savings vehicles has prompted “certain suggestions” to the National Economic Development and Labour Council (Nedlac). This has fostered rumors that he plans to have provident funds terminated in favor of pension funds. He has responded with the qualified assurance that he would not do anything with provident funds before consulting with social partners.

Uganda

Retirement benefits law, bill
New Vision, The Monitor, Red Pepper

Parliament has announced final passage, by unanimous vote, of Retirement Benefits Regulatory Authority Bill, 2010. It will establish an independent authority with domain over both private- and public-sector retirement benefit schemes, including institutions that provide retirement products and services. The long-awaited Retirement Benefits Authority Bill, 2010 (IH 04/06/11), referenced in a parliamentary press release as Retirement Benefits Sector Liberalization Bill, would end the National Social Security Fund (NSSF) monopoly over mandatory retirement scheme provision. The NSSF and other retirement schemes would have to apply to the Retirement Benefit Authority (RBA) for a license within three months of the law’s entry into force. The licensed schemes would compete with each other for the business of enterprises that would fund the schemes with employer and employee contributions. Trustees, fund managers, plan administrators and custodians would also need to obtain licenses.

Australia

Equal pay for foreign workers confirmed; Equal treatment for unemployed seniors
ABC, The Australian, Asia Pulse

The Prime Minister has ruled out an immigration reform proposal that would have featured a lower pay scale for foreign workers. This coincided with the revelation that the Fair Work Ombudsman is investigating claims that foreign workers on some high-profile projects were being paid a fifth of the minimum wage.

Also, one social welfare reform that will not be fleshed out in time for the budget next week (IH 04/06/11) would end relaxed job search requirements for unemployed workers over age 55. A period of volunteer work would no longer be an acceptable substitute for 10 job applications per fortnight. The measure should surface at the October tax forum.

Bahrain

Foreign worker fees suspended
GDN, EIU, Trade Arabia

In mid-April, the Prime Minister announced that the monthly BD10 (US$26.50) levy on foreign workers will be waived for six months. He has also ordered the Ministry of Labour to simplify the process for obtaining visas. Both moves are to help replenish a workforce depleted when many migrants fled during recent turmoil.

Hong Kong

No delay for minimum wage enforcement; MPF contribution hike eyed; Licensing for CRAs and their analysts
SCMP, The Standard, LTN

The Labor Minister turned down the Liberal Party’s appeal for a six-month “buffer period” on enforcement of the new hourly minimum wage. He noted though that the government will be “pragmatic” in its enforcement of the Minimum Wage Ordinance.

Also, a proposal before the Legislative Council Bills Committee would raise the maximum monthly salary subject to the Mandatory Provident Fund contribution from HK$20,000 to HK$30,000 (US$ 3,862). The minimum threshold would be bumped from HK$5,000 to HK$5,500.

Meanwhile, the Securities and Futures Commission (SFC) is now accepting license applications from credit rating agencies and their rating analysts. Under recent amendments to the Securities and Futures Ordinance (SFO), they will need these licenses to conduct business after 1 Jun 2011. The ordinance also gives the SFC regulatory power over the sector. A press release appends the ordinance and an FAQ.

India

IRDA reviewing insurer pension rules
AIR, Business Standard, Livemint

Business has slumped for the insurers that offer pension products since the Insurance Regulatory and Development Authority (IRDA) introduced new guidelines for unit-linked investment products (ULIPs) (IH 07/14/10). The IRDA has set out to review these guidelines, particularly the 4.5% guaranteed rate of return. There have been rumblings about a turf war between the IRDA and the Pension Fund Regulatory and Development Authority (PFRDA) (IH 03/30/11) over insurance-based pensions, so the IRDA wants to improve the perception of its performance.

Israel

Deportation for pregnant workers halted
Ha’aretz, GLM

The High Court of Justice has rejected a policy that voided the work visas of female foreign workers for the first 90 days after they gave birth. Under the policy, the workers had to leave the country and were only allowed to return if they came without their children.

Kyrgyzstan

24 March holiday status debated
AKI Press, Times of Central Asia

Parliament has opened debate on a motion to rescind the 24 March public holiday. The authoritarian regime that had declared it a holiday is no longer in power and left pretty sour memories. Some legislators have recommended substituting 7 April, the day the current regime took power.

Malaysia

Residence Pass launched
The Star, Totally Expat, HRM

The new Residence Pass program allows highly qualified foreign workers and their nuclear families to work in Malaysia for up to 10 years and to change employers without renewing the form. An eligible candidate would need three years' work experience in Malaysia, a bachelors degree or higher and an annual salary of at least MYR144,000 (US$47,550). The program was launched last month with a dedicated website featuring application resources and FAQs.

Nepal

Minimum wage renegotiated
Katmandu Post, Republica

After the social partners agreed to raise the minimum wage from Rs.4,600 per month to Rs.6,100, the Labor Minister agreed with the major holdout unions to boost it to Rs.6,200. Employer groups are now objecting to being left out of the debate. The tripartite minimum wage fixation committee must sign off on this agreement before it may be implemented.

Philippines

SSS contribution hike rejected
Manila Bulletin, PDI

The Social Security System has proposed raising employer and employee social security contributions by 0.3% each in order to both secure long-term funding and improve benefits. The President is skeptical because an SSS funding probe turned up no red flags and he has asked officials for an explanation.

Sri Lanka

New income tax measures; Pension bill revision
Daily News, Tax Analysts, Daily Mirror

The Inland Revenue (Amendment) Act, 2011 (due here soon), based on a special commission’s tax reform proposals, went into effect on 1 April. Several provisions affect employee remuneration:

• The ceiling was removed for tax-exempt withdrawals from approved provident funds by workers who retired on or after 1 Apr 2011.

   

• The rental value of an employer-provided residence is now tax-exempt.

   

• The 10% tax on director’s fees is now 10% on the first LKR25,000 (US$227.48 ) per month and 16% on anything above that.

   

• An employer-paid vehicle allowance is tax-free up to LKR50,000 per month.

Also, following a lengthy meeting with the tripartite National Labour Advisory Council (NLAC ), Treasury officials agreed to expedite a revision of Employees Pension Benefits Fund Bill for NLAC review before its second reading. The Joint Trade Union Alliance (JTUA) has expressed skepticism that the bill is salvageable and is planning an alternative that would substitute government contributions for worker levies.

Taiwan

Broader occupational safety coverage
China Post, Focus Taiwan

The Council of Labor Affairs (CLA) is preparing a revision of the Labor Safety and Health Act that would cover all workers in the private and informal sectors, including trainees and volunteers. Safer working conditions, safety training for staff and the creation of occupational safety systems in larger enterprises are on the agenda. The new law will be renamed the Vocational Safety and Health Act.

Thailand

Draft rules on diversified provident fund investment
Thai News

In support of its agenda for expanding employee choice in provident fund investments, the Securities and Exchange Commission (SEC) held a brief consultation last month on draft regulations supporting safe diversification of member investments and provident funds with multiple investment policies. The investment menu would expand and investment ratios of provident funds with multiple investment policies would be calculated for each subfund. The asset management company would be responsible for assessing the risk profiles of any members with less that 50% of holdings in low-risk investments and advising them as needed.

Andorra

New tax regime
LTN, Tax Analysts

The first stages of a new tax system were introduced last month. As of 1 April, non-residents face a 10% tax (Catalan only) on local-source income. A value-added tax not yet in force would generally be set at 5%, with a concessionary 1% rate for many health care goods and services. The ruling party’s severe loss in last month’s general election may result in a reconsideration of the tax reform package.

Austria

See: Germany

Denmark

Pension fund governance rules; Immigration reform proposals
Esmerk, Copenhagen Post, GLM

The Financial Supervisory Authority (Finanstilsynet) has set new requirements for the governance of labour market pension funds. Pension fund boards must now submit detailed reports on their operations to the authority and board members will be vetted more carefully. Boards are also expected to have robust risk management policies.

In addition, an interministerial study (Danish only) of the nation’s immigration policy found it largely successful but added 28 immigration reform proposals. These include:

• Raising a foreign worker’s minimum contribution period for a full state pension from 40 years to 45

   

• Requiring private health insurance coverage for foreigners during their first four years in Denmark

   

• Setting fees for doctor visits during a foreigner's first two years in Denmark

Estonia

Parental pension proposal
BNS

The Prime Minister’s address to the Riigikogu last month confirmed his campaign promise to offer a parental pension. For children born on or after 1 Jan 2013, the state would contribute 4% of the average wage (minus social tax) into one parent’s second-pillar pension until the child reaches age three. From 1 Jan 2015, the government would introduce a pension supplement for parents of children born between 1 Jan 1991 and the cut-off date for the new scheme. The Finance Ministry and the Social Affairs ministry are collaborating on the necessary legislation, which is due for publication in the third quarter of this year.

EU

See also: Germany

IORP harmonisation project; Schengen tweaks; Working Time Directive talks
Professional Pensions, The Express, IPE

The European Insurance and Occupational Pension Authority (EIOPA) has posted the European Commission’s request for information on a review of the IORP (Institutions for Occupational Retirement Provision) Directive (IH 04/27/11). The EIOPA’s Occupational Pensions Stakeholder Group aims to have a “skeletal draft” of its recommendations ready as early as this month. The request mentions harmonisation of security mechanisms including the recovery plans for underfunded pension schemes. This has raised concerns in the UK where a 10-year recovery period is more than double the EU average. Those segments of the UK press that are ambivalent about EU membership have found another occasion to grouse about “European meddling.”

Also, the turmoil in North Africa has seen an influx of refugees generally arriving in Italy then crossing easily into other EU states. Several powerful member states support a Franco-Italian proposal to temporarily restore in “exceptional circumstances” the border checks removed by the Schengen Agreement. The President of the European Commission has stated (French only) that allowance for “temporary restoration of borders” may help to “strengthen the governance of the Schengen Agreement.” This coincides with growing support for a delay on expanding the Schengen area to Romania and Bulgaria. In addition, advance forecasts of the social partner dialogue on revising the Working Time Directive (IH 04/06/11) suggest that the negotiators are too far apart for any meaningful progress.

Germany

Borders open to 2004 accession states
Deutsche Welle, BNS, Irish Times

Last Sunday, Germany and Austria, having claimed the maximum transition period allowed, ended (German only) the seven-year delay on opening borders to workers from the eight states that joined the European Union in 2004. The class of 2004 includes the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia. Workers from the 2007 entrants, Romania and Bulgaria, will evidently have to wait another three years. The European Commission has released an FAQ on the status of these transitional arrangements for free movement of workers.

Greece

Facebook dismissal ruling
Kathimerini, GLM

The District Court of Athens ruled that an employer was justified in firing a worker characterized in the press as “Facebook-addicted.” The contract worker was dismissed without severance pay. As courts in various jurisdictions worldwide deliver disparate rulings and companies develop policies on social media in the workplace, it’s worth noting that a few government agencies have actually taken to publishing their official statements on Facebook or Twitter.

Ireland

Form, guidance for new pension lump sum tax regime
Tax Analysts

The 2011 Budget’s Financial Resolution No. 8, a National Recovery Plan (IH 12/02/10) measure that was passed as part of Finance Act 2011 (IH 02/02/11), set a €200,000 cap on lifetime tax-free lump sum retirement benefits retroactive to 7 Dec 2005. The Irish Revenue has published eBrief No. 27/11, which introduces a revised form 790AA along with guidance notes. There are two tax bands for the amounts in excess of €200,000 and payment must reach the Collector General within three months of the end of the month in which the lump sum giving rise to the excess was paid.

Malta

Tax breaks for financial services professionals
LTN

Malta has enjoyed a boom in the financial services sector and now finds itself with a shortage of qualified workers in various management and professional occupations. Legal Notice 106 Highly Qualified Persons Rules, 2011 grants a person with the right credentials – private health insurance, a qualifying employment contract and income over €75,000 per year – a flat 15% tax rate retroactive through 2010 and up through 2012. Annual income up to €5 million is subject to that rate and anything above that amount is free.

Poland

Strengthening job security for new mothers
PNB

The National Labour Inspection (PIP) has determined that existing job protection rules for women returning from maternity leave and interested in reduced hours have too many gaps. The PIP has proposed extending the 12-month safety period to enterprises with fewer than 20 workers and requiring evidence from any enterprise claiming economic hardship when it sets out to dismiss a new mother.

Romania

Private pension guarantee fund
Mediafax

The head of private pension regulator CSSPP has high hopes that legislation to establish a guarantee fund for private pensions will get through Parliament before the current session ends on 30 June and then be implemented by the end of this year. It has been approved in one committee and has one more to clear before a plenary vote. The fund would compensate plan participants and/or beneficiaries if a minimum return is not met. The companies that provide private pensions would contribute 0.3% of net assets managed in the first year, 0.35% thereafter.

Russia

Tax on pension contributions for SFWs
DRE

Last month, the Finance Ministry issued Letter No. 03-04-09/6-73, providing guidance on the pension tax regime for skilled foreign workers (SFW). Qualifying SFWs – annual income would have to be at least 2 million rubles (US$71,359) – are tax residents at the preferred income tax rate of 13%. Their employers’ pension contributions count as taxable income as do any benefits they receive from overseas pension funds.

Slovakia

Cabinet approves draft labor code, measure on health insurer profits
AFP, SITA, TASR

An additional round of tripartite negotiations (Slovak only) preceded the Cabinet’s endorsement of the draft labor code. A handful of amendments included a one-year limit to the period that an expired collective agreement may continue while its replacement is still under negotiation. The Cabinet also approved a bill that would set the terms under which health insurers could earn profits (IH 03/30/11).

Spain

Informal phase-in for votes on executive pay
El Pais

The Sustainable Economy Law (IH 04/21/11) includes a measure on mandatory shareholder votes on executive remuneration at public companies, effective 6 Mar 2011. The National Securities Commission (CNMV) has since been advising companies that they are being granted a one-year grace period for voluntary compliance in order to prevent any “anomalies.” Legal experts have suggested that the CNMV advice would not be adequate protection in a lawsuit over violation of a law that has already taken effect.

UK

See also: EU, paragraph 1

Pensions Bill advances; Statutory residence test
The Herald, Press Association, Professional Pensions

The Pensions Bill (IH 04/06/11) passed its third reading in the House of Lords and first in the House of Commons last week. An amendment sets a stricter regulatory framework for the alternative certification test. For an existing occupational retirement plan to be approved, at least 90% of employees – up from a simple majority – must be shown to receive at least the same contributions that they would get under an auto-enrolment scheme. There are also provisions for checking on their status every three years.

In addition, during the Budget speech the Chancellor made reference to a statutory residence test to better determine UK tax residence status of a UK resident posted abroad. There will be a consultation on the issue next month, but meanwhile draft guidance from HM Revenue and Customs has reached the press and raised a few alarms. Some analysts were startled that working as few as 11 days in the UK while fundamentally assigned elsewhere was identified as a possible red flag for dodging UK tax residency. Others caution against overreaction to a passage that can also be read as saying that considering an individual’s extenuating circumstances is generally not worth the bother if the UK working time is 10 days or fewer.

Canada

Draft guidance on pension splitting in Ontario

Bill 133, featuring amendments to the Pension Benefits Act (PBA), received Royal Assent in 2009, but proclamation has been delayed for want of implementing regulations. The Finance Ministry recently held a brief consultation on Draft Regulations Regarding Pension Asset Division on Marriage Breakdown, fleshing out the law’s high-profile provisions on the treatment of pensions in divorce. Mercer has produced a Communiqué on the additional details of the pension division regime introduced in the proposed rules. The valuation and transition rules are welcome, but the Communiqué notes that the draft is not a foretaste of the full implementing regulations and that no effective date has been set yet.

US

Fiduciary definition dispute; Senate vote on Medicare privatization
Tax Analyst, Reuters, National Underwriter

The battle lines are drawn over proposed rules on a broader definition for plan fiduciary (IH 04/06/11). The Employee Benefits Security Administration (EBSA) holds that much serious risk for retirement plan assets is posed by advisors who fall outside a narrow definition of fiduciary. The financial sector has bipartisan backers in Congress for its charge that too wide a net would turn too many investment professionals into “accidental fiduciaries.”

Also, the opposition’s “Path to Prosperity” budget resolution (IH 04/21/11), which was expected to be dead on arrival in the Senate, will be scheduled for a plenary vote after all. This is election season and the party in power expects to gain from everyone going on the record in a vote on a plan to turn the Medicare senior health insurance program into a system that partially subsidizes a senior’s purchase of individual health insurance coverage with a voucher.

Brazil

Social security contribution cut
DRE

Later this month, the Finance Ministry will present a major tax reform package to Congress. The fourth and final stage (no timetable has been published yet) includes a measure that would reduce the 20% employer social security contribution to 14%.

Peru

Bill to raise foreign investment cap passed in committee
BNamericas, GIDA, Reuters

Congress’ Economy Committee has evidently overcome its misgivings (IH 04/27/11) about raising the foreign investment limit for private-sector pension fund managers (AFPs). A measure lifting the maximum from 30% to 50% has cleared the committee and is expected to pass in a plenary vote this week.

Venezuela

Food benefit expansion
Dow Jones, Argentina Independent, IBFD

The Presidential decree raising the minimum wage by 26.5% is not terribly newsworthy in itself because inflation is 27.4%. An aside in some of the reports mentions that a statutory meal benefit will now be extended to companies with 20 or fewer workers. All workers earning below triple the minimum wage will now be entitled to the daily food voucher, but they will no longer receive it while on leave.