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: Royal Assent for corporate governance bill
France: Draft decree on equal pay due
Germany: “Work of the Future” initiative
India: Labour law reform studies; Health insurance portability rules deferred
Korea: Departure insurance for all enterprises
Malaysia: Minimum wage bill; Maternity leave bill
Social security coordination
East African Community (EAC) social security experts met earlier this month to discuss coordination of benefits within the common market (IH 04/06/11). Part of the path to coordination is setting the terms of reference for a regional actuarial study. The study should be completed in December and the labor ministers of member states will meet next March to chart a course based on its findings.
Royal Assent corporate governance bill; Various
The Australian, Herald Sun, SMH
Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011, the administration-sponsored corporate governance bill (IH 03/02/11), cleared its final vote in the Senate and went into effect on the date it received Royal Assent, 27 June. There were few significant changes to the original legislation. The Green Party amendment on capping executive pay at 30 times the average salary (currently under A$2 million) was defeated. Among the bill's key measures:
- Shareholders will be entitled to vote on a motion to “spill” (dismiss) the board if there is a 25% or higher “no” vote on the remuneration report two years in a row.
- There will be full transparency in the use of consultants.
- Bonus hedging to reduce risk exposure will be banned.
The Treasury recently published the submissions received in response to the consultation, The Clawback of Director and Executive Remuneration in the Event of a Material Misstatement, which was paired with the original exposure draft of this legislation (IH 01/06/11). The administration has yet to issue its own response to the consultation.
In other news:
- The Health Minister conceded that the government will not meet a 1 July deadline for means-testing the health insurance rebate (IH 05/18/11). She is still trying to marshal support for a proposal that the Senate has rejected twice in the past.
- A recent Fair Work Australia Decision, FWA 3777, reversed an administration policy that had set a three-hour minimum shift requirement for secondary school students working on school days. A new one-and-a-half hour threshold gives students and employers more flexibility.
- The administration is contesting the FWA decision on pay discrimination (IH 05/25/11) for nonprofit social and community services (SACS). It will take the case before an industrial tribunal where there are fair prospects for overturning it.
Mixed signals on union status
Bloomberg, Scoop, Trade Arabia
The US government and the International Labour Organization (ILO) are among the parties registering concern with the semi-governmental Joint Committee of Major Companies over its ultimatum that the nation’s trade union leaders resign or be jailed. This comes a few days in advance of the 1 July start for a trilateral National Dialogue wherein union leaders plan to press for the reinstatement of 2,000 workers dismissed from state-owned enterprises after pro-democracy demonstrations.
A little more guidance on social security for foreign workers
The National Population and Family Planning Commission (NPFPC) of China has issued a press release outlining the distinction between coverage for foreign staff of enterprises established in China and that of foreign workers under contract with overseas employers who are sent to work in China. Another NPFPC release notes that the Ministry of Human Resources and Social Security will not release details on foreign worker contributions until some time after the 1 July start of the coverage expansion. An academic who has seen the regulations said that expat contributions will be “similar” to those of Chinese workers.
Working hours initiative; Disability discrimination code of practice endorsed; Link for MPF contribution changes; MPF portability mooted
The Standard, ET News
The Legislative Council (LegCo) conducted a debate last week on a motion that would introduce a process for expedited development of legislation on standard working hours (IH 05/25/11). This effort would touch all the bases, including consultation with social partners and other stakeholders, but it would proceed with some urgency. Backers view the new minimum wage law as an incomplete project until it is paired with rules on standardized working hours.
Also, the LegCo Subcommittee on Revised Code of Practice on Employment under the Disability Discrimination Ordinance has issued a report on its namesake code of practice (IH 04/21/10) that recommends adoption of the document without any changes. Incidentally, the government has now posted the press release on the proposal to raise income thresholds for mandatory provident fund (MPF) contributions (IH 06/22/11).
In addition, the Secretary for Financial Services and the Treasury observed that while MPF fees have gradually decreased, there is still room for improvement. The administration aims to introduce legislation by the end of this year that would boost competition by allowing MPF members to transfer up to 50% of assets to another provider each year.
Labour law reform studies; Health insurance portability rules deferred; EPFO interest rate may stay high
Business Today, Economic Times, Top News
Two working groups, one tripartite panel helmed by the Labour Secretary and one led by the Planning Commission, are conducting comprehensive reviews of the 43 “central” labour laws, many of which have seen little change since 1948. The government sees an urgent need for modernization and consolidation. Outsourcing, special economic zones (SEZ) and mechanisms for better enforcement are among the top concerns.
Also, the Insurance Regulatory and Development Authority (IRDA) announced that the entry into force of health insurance portability rules (IH 06/22/11) will be delayed by three months to 1 October. It explained that the necessary technology is not yet in place. An IRDA official has noted that portability will not extend to those health insurance products offered by life insurance companies because they are too different from standard policies to be interchangeable.
Incidentally, when the Employees Provident Fund Organisation (EPFO) secured Finance Ministry approval on a 9.5% interest rate for fiscal 2010-11, it was on condition that there be an immediate inventory of the contested surplus in the interest suspense account (IH 03/23/11). The EPFO complied and has found the surplus higher than expected. An official has declared that this buffer should be sufficient to maintain 8.5% if the economy fares poorly and to keep the 9.5% rate if all goes well.
Foreign worker cap
AP, Himalayan Times
One measure under consideration in Parliament will require employers to have at least 50% Iraqi citizens in their workforce. There would be a six-month grace period, then heavy daily fines until the minimum balance is achieved. The great many foreign workers who would be displaced if this law takes effect would have six months to obtain new work permits.
Departure insurance for all enterprises; Union pluralism launch
The Minister of Employment and Labor announced that the obligation to fund an end-of-service/retirement benefit, “departure guarantee insurance,” for non-professional foreign workers (E-9 or H-2 visas) under the Enforcement Decree of the Act on Foreign Workers’ Employment will now extend to enterprises with fewer than five workers. The expansion will take effect on 1 August. Also, it appears that the union pluralism law (IH 06/08/11) will not have its 1 July debut postponed and stakeholders are warned that no one will be comfortable with the results. The unions will introduce legislation to rescind it when the National Assembly reconvenes in September.
Minimum wage push
The General Labor Confederation has a set of demands that will not wait until the new government has had a chance to introduce emergency economic reforms. Prominent among them is raising the minimum wage to LL1.2 million (US$793.40), which would re-align it with inflation. The last minimum wage hike (IH 09/17/08) only caught up to the 1996 cost of living.
Minimum wage bill; Maternity leave bill; Amnesty program
New Straits Times, FMT, Malaysia Star
The Ministry of Human Resources has sent Parliament the National Wages Consultative Council Bill 2011, legislation on establishing the authority that would set national minimum wage policy (IH 06/22/11). The tripartite council would follow a set protocol for compensation research and stakeholder consultation before making minimum wage adjustments. Fines for non-compliance would go as high as RM10,000 (US$3,290) per affected employee. While the government is on pace for enacting this bill by the start of next year, many stakeholders including the Malaysian Trades Union Congress (MTUC) charge that establishment of the council is a delaying tactic and insist on immediate adoption of a monthly minimum in the RM1,500 range.
Another bill before Parliament, Employment (Amendment) Bill 2011 would:
- Allow maternity leave to start as early as the 22nd week of pregnancy in special circumstances
- Ban termination of workers during maternity leave unless the employer is going out of business
- Define and set penalties for sexual harassment
Both bills are due on this site soon, in fact stakeholders have complained to Parliament about the lag in posting them.
Meanwhile, the Deputy Prime Minister has outlined the amnesty program for illegal foreign workers (IH 06/15/11). The 6P programme, a two-week census exercise for approximately 2 million illegal foreign workers, will commence on 11 July. Employers are advised that their active participation will be necessary to the success of the amnesty program. Those workers who participate will receive temporary work permits, but a subsequent study will determine how many of the non-Malaysian workforce are actually needed in the longer run.
Equal Pay Amendment Bill; ACC levy drop
Scoop, Mediacom, Voxy
A Member’s Bill from a minority party doesn’t necessarily start out with tremendous prospects, but Equal Pay Amendment Bill has drawn much attention and evidently “energized the base.” Among its champions is the broad-based Pay Equity Challenge Coalition, which will try to snag it plenty of press. The bill would improve on the 1972 Equal Pay Act by getting far more information on remuneration rates for men and women in the same occupations and sectors into the public domain, thus making it easier to document cases of wage discrimination. Also, the ACC (Accident Compensation Commission) has had large surpluses two years in a row and will soon pass the savings on to members. The ACC board met last week to determine how much of a levy reduction is feasible. If the Cabinet backs its conclusions, there will be a public consultation on contribution cuts next month.
Social health insurance scheme
MEIR, Peninsula, Gulf Times
The Supreme Council of Health (SCH) has released the first Qatar National Health Accounts Report, which includes an update on development of a social health insurance (SHI) scheme (IH 03/30/10). At this stage, the collaboration between the public and private health sectors is depicted more as a competition. In preparation, the SCH will draft regulations addressing consumer grievances with the private health insurance sector. These will cover marketing, policy disclosure, claims handling and consumer protection.
Elders pension scheme
With the pension reform bill stalled at best (IH 06/08/11), the administration has decided to go ahead with a default monthly pension for citizens over age 80 who are not already in another pension scheme. The Cabinet has already approved a blueprint of this plan and the details will be presented “in due course.”
Wage subsidy pilot project
The Council of Labor Affairs is preparing to introduce an NT$56,000 (US$1,938) subsidy for each worker who signs on for a “3k” (strenuous, dirty and dangerous) job from 1 July. Officials have asserted that 3K is an antiquated term, thanks to advances in workplace safety. If this initiative goes well, the subsidy will be extended to other industries.
Foreign worker decree
Vietnamnet, Saigon Daily, VNA
Interministerial Decree 46/2011/ND-CP revises the rules on foreign workers. Foreign enterprises tendering for a contract in Vietnam will have to disclose the job positions involved, indicating which will involve local hires and which will need foreign workers with special skills. They would be required to hire Vietnamese staff whenever possible.
Jersey maternity leave proposal; Minimum wage consultation
Mondaq, BBC, JEP
The independent consultative body, the Employment Forum, proposed establishing a statutory paid maternity leave in 2008 and the Social Security Minister endorsed it last year. In recent months, he’s been advising the press that it will be introduced by October. The benefit is modest by European standards. After 15 months on the job, one would be entitled to two weeks’ paid maternity leave and thirteen weeks’ unpaid. The ministry and social partners agree that it is overdue and stakeholders are campaigning for something closer to the UK model, 26 weeks’ paid and 26 weeks’ unpaid.
Meanwhile, the Employment Forum’s current public consultation on a minimum wage hike includes discussion on the merits of the special trainee minimum wage and whether companies should be allowed to deduct the cost of employer-provided meals from the floor salary. Feedback is welcome through 12 Aug 2011.
Council of Ministers approves accession
Last Friday, the Council of Ministers agreed to endorse Croatia for accession to the European Union (IH 06/22/11). There are a few strings attached, including judicial reform. The accession treaty should be signed by the end of this year.
“Small pension reform” passed; Health reform bills advance
GIDA, Ceske Noviny, CIA
The Chamber of Deputies, the lower house of Parliament, has again passed the small pension reform bill (IH 05/18/11), negating its rejection by the Senate (IH 06/15/11). This legislation, featuring a retirement age hike and a recalculation of benefits to better reflect contributions, now awaits the President’s signature. The retirement age is slated to rise to 66 for people age 40 now and projected at 73 for those born next year. The chamber also passed part of the health care reform package (IH 05/25/11). Measures include a preferred drug registry (higher co-payment for off-list medicines) and a somewhat vague description of the standard care offered under the public health system. Legislators are readying a constitutional challenge to the latter.
Maternity leave compromise attempt; Green paper on Professional Qualifications Directive; Various
Irish Examiner, AFP, EIS
The European Commission (EC) is resisting pressure to shelve the proposal for expansion of minimum maternity leave entitlements (IH 06/22/11) and will instead attempt another compromise. The EC had initially proposed extending the 14-week leave to 18 weeks with member states determining the pay levels. After Parliament boosted that to 20 weeks at full pay, the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) was unable to support it. The EC will deliver a revised plan to EPSCO by the end of the year.
Meanwhile, the European Commission has released the Green Paper, Modernising the Professional Qualifications Directive, in a follow-up to last January’s consultation (IH 01/12/11). This more specific public consultation seeks stakeholder input on such approaches as a professional card for cross-border recognition and minimum training requirements in selected professions. Responses are welcome through 20 Sep 2011 and the legislation is expected in December. The EC has also posted an FAQ on the release.
In other news:
- The white paper on occupation pension reform that was set for September delivery (IH 04/21/11) may now arrive as late as November. This suggests that the proposal for revision of the Institutions of Occupational Retirement Provision (IORP) Directive that was due in December is probably a couple of months off pace.
- One highlight of last Friday’s European Council meeting was agreement on introducing a mechanism to the Schengen open border system that would allow some flexibility “in exceptional circumstances.”
- Some analysts are interpreting European Council documents as requesting that the introduction of Solvency II (IH 05/11/11) be delayed a year to January 2014. The head of the European Insurance and Occupational Pensions Authority (EIOPA) denies this claim.
Draft decree on equal pay due; Minimum wage ruling; Gay marriage bill defeated
AFP, The Connexion, Jurist
A decree fleshing out one of the lower profile provisions of the recent pension reform law (IH 06/30/10) is expected soon. From 1 Jan 2012, all companies with at least 50 workers will have to have a published action plan or a collective agreement on workplace equality between men and women, including pay and promotions. Broader requirements will apply only to enterprises with at least 300 workers. Companies found in violation could be fined up to 1% of payroll.
Also, a district court has ruled against a retail chain in a class action suit over violation of minimum wage (SMIC) rules. The employer factored a compulsory paid break into its calculations of monthly minimum wage. It maintains that there is nothing in the rules that forbids this practice and it plans to appeal.
Meanwhile, the National Assembly has rejected legislation (French only) that would have legalized gay marriage. This follows a Constitutional Court ruling that a ban on same-sex marriage is not unconstitutional. Civil unions granting some of the same legal rights as marriage are already allowed.
“Work of the Future” initiative
GIDA, Dow Jones, Xinhua
The Chancellor has unveiled (German only) a tripartite “Work for the Future” program to combat a growing skills gap in the German workforce. Among the elements of the plan:
- Education and lifelong jobs training should be more robust and better integrated, with skills needs targeted.
- Improved life/work balance and equal opportunities would help keep more women in the workforce.
- Relaxation of the rules on skilled foreign workers would include ending the priority test (keeping a post vacant until satisfied that there will be no German candidate for it) for selected sectors, liberalizing recognition of foreign degrees and removing the minimum income level of €66,000.
Sale of second pillar assets; Junk food tax
MTI, Reuters, IPE
The government decided to go ahead with selling second pillar pension assets to reduce the public debt despite warnings of short-termism from the International Monetary Fund (IH 06/22/11) and other analysts. The Prime Minister’s Commissioner for Pension Protection will be overseeing an accurate transfer of second pillar funds to the accounts of people who transferred out, but the debt relief will leave much of it in IOUs. Also, the government has proposed a new tax on junk food, both to create added revenue for national health care and to get people to think twice before choosing heavily processed food. The ruling coalition holds a comfortable majority in the National Assembly, so the measure should pass in the summer legislative session.
Social partner negotiations resume; Pension reform modifications
El Pais, IPE
The social partners reconvened for labor reform negotiations on Monday. Employer association CEOE may again derail talks with its support for capping severance pay at 20 days’ salary per year worked. The CCOO union federation regards this proposal as a “provocation.” Also, the Congress Working Committee has adopted a couple of amendments that would dilute the recently passed pension reform package (IH 02/02/11). The original credits only the paid training periods in the four years before passage of the law toward social security contribution history. The amendment would count any two years of training periods in benefit calculations. Another compromise gesture would set early retirement at 56, down from 58, for people with at least 45% disability.
Mass transfer block; AP consolidation
Global Pensions, Esmerk, IPE
The Pensions Agency announced (Swedish only) that a “captcha” mechanism set to debut on 1 December will short circuit the automated mass fund transfers (IH 05/18/11) that have plagued the premium pension system (PPM) lately. Also, the Finance Ministry is conducting a thorough review of the AP state pension funds that is likely to resurrect plans for consolidating (IH 02/18/10) some of them. The arguments for whittling the quintet down to as few as three include reduction of administrative costs and absorption of weak performers. Other issues in the review include investment policy and scheme governance.
Paternity leave proposal
Swiss Info, WRS
Statutory paternity leave has not gotten much traction in Parliament, but a handful of legislators from all five major parties have united behind an umbrella group's proposal for a voluntary paternity leave scheme. People would have the option of making tax-deductible contributions to a “parental account” to subsidize paid time off. Another approach would allow workers to use the occupational pension scheme as a vehicle to fund paternity leave.
Consultations on tax residence and taxation of non-domiciled persons; EDM for expat pension parity; Various
Tax Analysts, Money Marketing, Investment International
HM Treasury’s release of consultation documents Statutory definition of tax residence and Reform of the taxation of non-domiciled individuals are down payments on promises made in the 2011 Budget. The tax residence consultation seeks to streamline and clarify existing guidance on tax residence status and provide for self-assessment in a simple test, possible via an (appended) interactive online application. The annual charge for a non-domiciled individual would rise from £30,000 to £50,000 and there would be incentives for domestic investment. Both consultations will close on 9 September.
Also, the International Consortium of British Pensioners (ICBP) has corralled dozens of parliamentary sponsors for Early Day Motion (EDM) 1895 Social Security Benefits Up-Rating Regulations 2011, a measure that would thaw the frozen state pension benefits for Britons who retired to over 120 countries, including many Commonwealth nations. EDMs are Parliament’s internal petitions and they do not necessarily evolve into legislation, but they can both help a cause maintain a high profile and test the waters for broad-based support, evidenced in this one by the several parties represented by the signatories.
In other news:
- With the Bribery Act coming into force on 1 July, stakeholders are being reminded of its possible impact (IH 04/06/11). The Ministry of Justice has collected its guidance on the new law on one site.
- It was widely reported that the government was planning to adopt the junior coalition partner’s campaign plank of ending pension tax relief for people with income above a certain level. The Treasury retorted that the story is “utter rubbish,” a tough phrase to parse for anyone trying to keep that rumor alive.
- The Business Secretary also delivered some strong language in a speech to the Association of British Insurers (ABI) on the “ridiculous levels” of executive remuneration in the private sector. A consultation paper due next month will solicit ideas on non-prescriptive ways to rein in the excesses. He also touched upon the “at this point … voluntary” efforts underway to increase the ratio of women on corporate boards.
- Employment Opportunities Bill 2010-11, which would have set out conditions under which an adult worker could receive a “training wage” below the statutory minimum wage, was defeated in second reading in the House of Commons.
Health benefit cash-out to lose tax exemption
The Canada Revenue Agency (CRA) has posted FAQs to flesh out an item that was mentioned in an annex to the 2011 Budget. The tax-deductible lump sum payments received in place of health and dental benefits will become taxable as income from the start of 2012. There will be some flexibility for companies that become insolvent before 2012 but make their payments after the cut-off date.
Proposed regs would revamp union votes
AP, NYT, WSJ
The National Labor Relations Board (NLRB) has released proposed rules on streamlining the union election process. Antiquated rules such as bans on electronic filing would be jettisoned and other steps in the process would have tighter time frames. Also, employers would have to disclose more about the consultants they engage to oppose the attempt to secure union recognition. The comment period closes on approximately 21 August.
AFPs prepare their own reform proposal
The new President’s perceived threat to the future of AFP private pension funds (IH 04/27/11) shrank to a plan for a monthly stipend to all citizens above age 65 who are not receiving pension benefits and the bill on tendering new affiliates to the AFP that offers the lowest fees (IH 06/08/11) has reportedly stalled in Congress. The AFPs realize, though, that there must be an alternative to a handful of providers charging high fees so they have teamed up to draft their own reform package. A new fee structure would base commissions on assets held rather than on a worker’s income, substantially reducing costs. Also, the self-employed would be required to enroll in an AFP. The sector will hold meetings in July and have a rough blueprint ready in early August.
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