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: Disability Insurance Scheme
EU: Free movement exemption
Italy: Accelerated austerity measures
Korea: Health insurance reform measures
South Africa: NHI Green Paper
US: Individual mandate ruled unconstitutional
Essential services list amended
Mmegi Online, The Monitor, Gazette BW
The Labour Minister has outraged unions by bypassing social partner consultation before submitting an amendment to the Trade Disputes Act to Parliament. The measure would expand the list of essential services that cannot be put at the mercy of collective bargaining. The additions include veterinary services, teaching services, and diamond sorting, cutting and selling services. The union federations are preparing a lawsuit against the government.
2011 Budget gazetted
The 2011 Budget came into force on 29 July. Caps have now been introduced for the tax exemptions on company car use, business travel expenses, housing benefits and employer-provided meals. The budget also offers income tax exemptions to companies that hire disabled workers, youth and the long-term unemployed.
Retiree health scheme
Daily Trust, Vanguard, Daily Independent
The National Health Insurance Scheme and the National Pension Commission (PENCOM) will collaborate on the blueprint for a nationwide Retirees Social Health Insurance Programme, a distinct subset of the National Health Insurance System (NHIS). Incidentally, states will be free to develop their variations on the NHIS provided they meet certain minimum standards.
NHI Green Paper; Consultations on financial market reform bills
LTN, Business Day, Daily News
The Health Minister marked last Thursday’s Cabinet approval of the National Health Insurance Green Paper (IH 07/20/11) with a speech framed as an FAQ.
Among the key themes:
- The basket of covered services would be ample but not comprehensive, with medicines and diagnostic procedures limited to menus that have been vetted by experts.
- Private health insurance would retain a complementary role, but people could not opt out of NHI because they have private coverage.
- Contributions would be mandatory for people above a certain income level and co-payments will have a significant role in financing the system.
- Health providers would not be required to participate. Those that want to join the system would have to meet certain requirements and accept the capitation payment method.
- Cost containment and quality of care must be joint goals, not competing values
Pilot programs are slated to start in April 2012. A public consultation will run through 12 October.
The Treasury is holding brief consultations on the Credit Rating Services Bill, 2011 and Financial Markets Bill 2011. The former would establish a tight regulatory framework for the credit rating services sector, aiming for accountability, transparency and better risk monitoring. The latter does not directly address any compensation and benefit issues and is offered more as an FYI. Its modernization of financial markets regulation would fully supersede the Securities Services Act and institutional investors may want to vet it for implications before the short consultation period (through 5 September for both bills) is over.
The Monitor, New Vision
The National Social Security Fund (NSSF) was recently compelled to issue a press release refuting widely-published claims that ending its monopoly over the mandatory retirement scheme sector (IH 05/04/11) will entail dismantling the NSSF. The fund will have to evolve both to comply with and compete under the new law, but will remain intact.
Disability Insurance Scheme; No FBT on emergency assistance; Early super withdrawal warning; Remuneration report voting rules
The Prime Minister has enthusiastically endorsed the recommendations in the Productivity Commission’s Disability Care and Support: Inquiry Report. The commission calls for a National Disability Insurance Scheme, no-fault coverage ensuring long-term care for those who become disabled. Other proposals include a National Injury Insurance Scheme for those who suffer catastrophic injury and a right for parents of disabled children over age 18 to request flexible work arrangements. The administration will now coordinate with the states on details such as administration, oversight, pricing and service standards. It aims to roll out pilot projects in 2014 and go national with the program by 2019.
In Interpretive Decision 2011/60 the Australian Tax Office (ATO) ruled that an emergency cash payment made in the wake of a natural disaster is not a perquisite subject to fringe benefits tax. Another recent ATO release warns superannuation scheme members that services allowing people to tap their super before retirement age are illegal and charge exorbitant fees. One’s super fund can grant early access to the monies in exceptional circumstances, but no arrangements involving intermediaries are legitimate.
Also, the Australian Securities and Investments Commission (ASIC) has issued Information Sheet 144, advising public companies on compliance with the rules on proxy voting in remuneration report resolutions. The government is preparing amendments to these rules that will allow the chairperson or another director to cast undirected proxy votes. The information sheet provides interim guidance.
Minimum pension boost; Minimum wage proposed for foreign workers
Trade Arabia, Mena Report, BNA
The government’s BD200 target for a minimum pension (IH 03/02/11) will jump to BD275 (US$730) thanks to a cash infusion from general revenues. The increase will take effect on 28 August and only those who retire at the normal retirement age of 55 will be eligible.
Also, a special session of the National Dialogue convened community, religious and cultural groups to discuss the grievances of foreign workers posted in Bahrain. The group found common ground on proposals that a minimum wage be set for foreign workers, that they be paid by direct bank deposits and that employers not be allowed to hold onto their passports. The proposals will be submitted to the King.
Daily Star, Women.BD
The public sector immediately implemented the six-month paid maternity leave entitlement introduced earlier this year (IH 01/20/11), but much of the private sector ignored it and continues to flaunt its defiance of the 2006 four-month paid maternity leave law. The Prime Minister has now exhorted the private sector to comply but there was no mention of greater enforcement efforts. She has also asked that all enterprises set up breastfeeding facilities ("corners") but no mention yet that this would become compulsory.
Expat social security tax clarification
Mondaq, Global Times, ACB
Contradictions in the press accounts of foreign worker status under the Social Insurance Law (IH 08/10/11) are now quietly being resolved. The provinces have a high degree of autonomy in their social security programs so provincial governments have individually decided whether to comply with the requirement on foreign worker participation in the long gap between the 1 July 2011 official launch date and eventual arrival of the actual launch. The majority of provinces are not enforcing the requirement; Tianjin being one of the few that formally introduced the mandate on 1 July. Officials of the Municipal Human Resources and Social Security Bureau in Shanghai – where expats already have the option to join the system – have been candid about participation being a bad idea for many expats. When the federal government does issue implementing regulations, the provinces will have some level of flexibility in compliance.
Essential industries decree published
Fiji Village, AAP, NZPME
Now that the government’s Essential National Industries (Employment) Decree 2011 (IH 07/27/11) has been released to the public, Australia’s Minister for Foreign Affairs and Amnesty International are among those urging the government to rescind its anti-worker decrees. Existing collective agreements are dissolved and collective bargaining rights are severely limited in a handful of "essential" sectors where workers will also lose overtime premiums and the right to strike. The sectors will be named in the regulations, but they are understood to include sugar production, tourism, hotels and mining.
EPF minimum benefit proposal; Universal health coverage proposal
Financial Express, The Hindu, Economic Times
Another proposal before a subcommittee of the Employee’s Provident Fund Organisation (EPFO) Board of Trustees (IH 07/20/11) would raise the minimum monthly pension under the Provident Fund Act to R1,000 (US$ 22.05). This would entail a net 0.6% increase in contributions. The Labour Ministry is open to the government and employer contributions rising by 0.3% each, to 1.46% and 8.63% respectively. Senior groups will stage a public fast outside of Parliament later this month to demand a benefit floor of R5,000 per month.
Also, the Planning Commission’s High-Level Expert Group has completed a proposal for a universal health system. A basic health package would be determined at the national level and states would be free to add coverage, but there would still be a market for private health insurance. Every citizen would receive a national health entitlement card (NHEC) and public health expenditure would rise from 1.4% of GDP to 3% by 2020. Health facilities would either accept the NHEC card and limit themselves to the services provided under the new system or restrict themselves to health services not covered in the basic package.
Ruling on social security implementation delay
IMF, Jakarta Post
The Central Jakarta District Court has found the President, Vice President, eight ministers and the Head of Parliament guilty for failure to implement the 2004 Social Security Law (IH 08/10/11). The press has not paid much attention to the ruling and last month’s vote delay in the House of Representatives (IH 07/27/11) has been attributed to bitter disputes over funding and administration of the program. Parliament has a new 21 October deadline for passage of the bill.
Introducing unemployment insurance; Minimum wage hike
Jordan Times, MEIR, MENA FN
The Social Security Corporation (SSC) will introduce the unemployment insurance scheme outlined in the 2010 Social Security Law (IH 04/21/10) at the start of next month. The latest summaries include changes to some key elements:
- Initially to be funded by dedicated employer and employee contributions, the scheme is now depicted as a financial assistance program from the government.
- Men below age 59 and women under 54 (retirement ages are 60 and 55 respectively) with three years of contributions to the social security system will qualify.
- The maximum benefit of JD500 (US$704.20) per month will last no more than six months.
- A decrease in the law’s schedule of income replacement from 75% to 45% over the first four months has not been confirmed.
Also, a tripartite committee convened by the Ministry of Labour appears to be favorably disposed towards a trade union proposal to lift the JD150 monthly minimum wage into the JD250-300 range. This would be consistent with a commitment to provide at least a subsistence wage to all workers.
Health insurance reform measures; Correction
Yonhap, Joins.com, AIR
The Ministry of Health and Welfare has outlined health insurance reform proposals for an interministerial Health Insurance Policy Review Committee that is exploring options for reining in medical costs (IH 01/26/11). A redesign (Korean only) of the drug reimbursement program would pay for the active ingredient rather than the brand name and use some of the savings to subsidize research and development in the pharmaceutical sector.
Another key component of the reform would base the member contribution on all income rather than just employment income. The ministry will use the committee’s conclusions as the basis for drafting legislation. Incidentally, the Korea International Labour Foundation (KOILAF) article linked in (IH 8/10/11) did more than just supply greater detail on new limits to pre-retirement withdrawals from the severance pay scheme (SPS); it also corrected newswire accounts on the launch date, 26 July 2012.
Labor contracting bills consolidated
Philippine Star, Bulatlat
Several bills on security of tenure (IH 12/15/10) have now been consolidated into HB04853, which preserves the proposal to ban labor contracting. The Department of Trade and Industry (DTI) has come out against the bill, saying its "shotgun approach" has unintended consequences for sectors that are truly seasonal. The DTI also opposes HB0375 (IH 02/24/11), the bill proposing an across-the-board wage hike of P125 (US$2.89), saying that Philippine companies would lose their competitive edge against neighboring countries.
Six-month ban for foreign workers relaxed
Emirates 24/7, ANI
The Ministry of Labour has advised employers that the six-month hiring ban on foreign workers who break their initial two-year contracts will be waived for workers meeting certain criteria in educational background and salary offers. This ranges from Dh5,000 (US$1,361) per month for high school graduates to Dh7,000 for workers with bachelor’s degrees.
2012 Budget preview
EIU, Expatica, GIDA
The caretaker administration has outlined a 2012 Budget proposal to share with the eight parties that will attempt to form a coalition government this month. It is not clear which participant in the prospective hand-off would helm the budget process but passage of a 2012 Budget reflecting the EU Stability and Growth Pact is one of the urgent priorities that will cut short Parliament’s summer recess (October return pushed up to early September). At this stage, the proposals include an unemployment benefit schedule that starts to taper off after the first three months and a generally higher, emissions-based tax on use of a company car.
Stock compensation tax audit
The Danish Tax Authority (SKAT) action plan for 2011 features an investigation of the capital gains tax compliance of employees who participate in the share schemes of unlisted companies. There has been somewhat of an honor system for members of these schemes but a recent audit of a single company found only 18% of employees reported the gains as taxable income. With tens of thousands of such schemes, SKAT is preparing more audits for the short term and considering options for new reporting requirements in unlisted share schemes.
Free movement exemption
Presseurop, Rompres, Euractiv
The European Commission (EC) issued a pair of press releases to explain its decision to endorse Spain’s temporary restrictions on additional Romanian workers entering its job market (IH 08/03/11). EC officials reasoned Spain’s invocation of the "safeguard clause" was valid given its economic hardships and very high unemployment among the Romanians now in Spain (only new migrants will be affected). Some analysts view this green light as a serious retreat from the core principle of free movement of persons. Spain intends to keep the restrictions until 31 Dec 2012. Spain had opened its borders to Romanian and Bulgarian workers far in advance of the ultimate 31 Dec 2013 deadline, so – symbolism aside – the EC’s flexibility is not very dramatic.
More retirement credits for the unemployed
The Labor Ministry has published Decree no. 2011-934 (French only) which increases state pension credits for the uncompensated unemployed. Job-seekers not receiving benefits will now have a maximum of six quarters – up from four – credited to their state pension benefit formulas.
"Chips tax" bill adopted; Draft Labour Code discussions
IBFD, Trademagazin, Budapest Times
Now that the "chips tax" bill (IH 06/29/11) on junk food has cleared Parliament a surtax ranging from 10-25% will be applied to a wide range of heavily processed foods from 1 September. Manufacturers and suppliers will be assessed, but the cost is expected to be passed on to consumers. Criteria for taxation include specific thresholds for salt, sugar and caffeine. The proceeds will go into funding of health promotion initiatives.
Also, the Labour Minister met with union leaders last week and promised to review their proposed changes to the draft Labour Code (IH 08/10/11). While he assured them the final draft will be to their liking, they are holding out for formal tripartite consultation. Another provision causing a stir would limit straight unemployment benefits to three months and make subsequent payments contingent on working for state projects. The work is described as part-time shifts but some major construction projects would involve relocation to temporary camps.
Parental leave extension deferred
The Justice Department plans to seek a special derogation for a one-year reprieve on the March 2012 deadline for transposition of the revised parental leave directive (IH 03/10/10, EU) that adds a month to the three-month unpaid leave entitlement and allows greater flexibility in scheduling the time off. The derogation request is attributed to the administration’s heavy legislative backlog. A Justice Department representative mentioned that an agreement in principle has been reached on expressly including a paternity leave entitlement in the legislation.
Accelerated austerity measures
ANSA, Reuters, Dow Jones
The EU had pressed Italy for a new set of austerity measures that would show results faster than the package negotiated last month (IH 07/20/11). The Cabinet has now passed the Finance Minister’s latest set of austerity measures (Italian only) by decree. Details have not yet been posted, but it appears that most – if not all – of the measures previewed in the press turned up in this package:
- The five-year retirement age hike for women would start in 2015.
- The longevity peg for retirement age increases would be introduced next year, rather than 2013.
- Length of service exceptions to the normal retirement age would be curbed if not totally eliminated.
- Survivor benefits would be cut.
- Non-religious public holidays would be moved to Sundays.
- Introduction of a new unemployment insurance scheme would be a trade-off for removal of some barriers to terminating workers.
- Abuse of temporary contracts would be curbed.
- A temporary solidarity tax on higher incomes would peak at 10% on amounts above €150,000.
- The social security contribution for contract workers may rise from 26% to 33%.
- Company-level collective bargaining would "have the capacity to regulate every aspect pertaining to the organisation of labour". This would include the option of waiving the rules against firing a worker without "just cause."
The decree took effect immediately but only becomes permanent law if Parliament approves it within 60 days. The legislature will take up the package next week.
Pension indexation measure withdrawn
LETA, Baltic Course
The Saeima Social and Labor Affairs Committee has withdrawn the pension indexation measure (IH 07/27/11) at the Finance Ministry’s request. The ministry promised to revisit the proposal when drawing up next year’s budget.
Pension contribution cut further deferred
A 3% cut in the employer social security contribution initially set for last month – then penciled in for 2012 (IH 05/18/11) – appears nowhere in the budgetary strategy statement covering 2011-2014. The Finance Minister explained the cut is now put off until "the best time."
Russian language test for immigrants
Moscow News, RIA Novosty, ERR
The Federal Migration Service is introducing a Russian language proficiency requirement in certain industries, for now housing and utilities. The Federal Migration Board previewed a more long-range goal of adopting a points-based system for skilled migrant workers seeking residence permits. Command of the Russian language would be a significant factor in this system.
Super-gross wage bill
The measure on applying the social security levy to the "super-gross wage" (IH 07/14/11) will need Parliament’s approval to take effect on 1 January. Opponents of the bill warn that legislation making often substantial changes to 110 laws needs time to be adequately vetted. The bill includes a provision on automatically adjusting the retirement age under the state pension to gains in life expectancy, to be done on an annual basis starting in 2016.
Challenge to curb on mass transfers
The Pensions Agency’s forthcoming block on massive electronic transfers (IH 06/29/11) within the premium pension system (PPM) has drawn the ire of Sweden’s association of pension management companies, Svepen, which has appealed the move before the Supreme Administrative Court. Svepen maintains that mass transfers are part of the service clients had signed on for, so disabling them without even involving Parliament is illegal.
Addictions ruled diseases
SDDZ, Swissinfo, WRS
The Federal Court has ruled that as nicotine addiction can generally be considered an illness much like alcoholism, health insurers must provide coverage for smoking cessation medicines. The Federal Health Office has endorsed this ruling and will be responsible for the implementing rules.
Employment consequences of M&A; Auto-enrolment deferral for some small enterprises
Professional Pensions, Financial Director
The Takeover Panel’s Instrument 2011/2 is a package of major amendments to the Takeover Code set to take effect on 19 September. From that day, the offer document will have to include a statement on whether the offering company’s plans would affect continued employment or employment conditions of the workforce. This statement of intention would be binding for at least 12 months. The offeree company will have to ensure prompt publication of the employee representatives’ opinion of the plan.
The Pensions Regulator (TPR) has issued new guidance on preparing for next year’s pension reform. Getting ready: First steps to prepare for the new employer duties makes news by offering an unexpected reprieve to small employers that are part of a large PAYE (Pay As You Earn) scheme. An enterprise with fewer than 10 workers that belongs to a PAYE scheme with at least 250 members would have its 1 Feb 2014 staging date pushed back to 1 Jan 2016. This change should appear among the amendments to the Pensions Bill.
CRA faulted over disclosure of TFSA tax regime
Vancouver Sun, Globe and Mail
The federal Taxpayers’ Ombudsman released Knowing the Rules, an assessment of the introduction of the Tax-Free Savings Account (TFSA) that criticized tax authorities for unnecessary consumer confusion over the limits to the tax breaks. The Canada Revenue Agency’s (CRA) upbeat marketing for TFSA marred the debut of a valuable product by omitting key details of its tax regime. Some learned the hard way about the tax on excess contributions (posted on CRA’s TFSA website), even when replenishing an early withdrawal.
Individual mandate ruled unconstitutional; Revised release schedule for Dodd-Frank rules; Unemployment discrimination bill
NYT, NLJ, CBS
Last week the 11th US Circuit Court of Appeals ruled the Affordable Care Act’s individual mandate feature (IH 02/02/11) is unconstitutional, increasing the likelihood the case will show up before the Supreme Court next year during the presidential campaign. In one possible scenario, that case would arise while this linchpin of the President’s most defining legislation is under attack from an opposition candidate – the GOP's most consistent front-runner to date – credited with developing the law it is modeled on.
The Securities and Exchange Commission (SEC) page on implementation of the Dodd-Frank financial sector reforms lists revised target dates for release of key regulations (scroll to bottom) that preclude reaching a previously announced goal of having all requirements in place for the 2012 proxy season:
- By the end of 2011, the rules on institutional investor disclosure of remuneration-related votes and any potential conflicts of interest should arrive.
- In the first half of next year, regulations on clawback policies and disclosure of performance-based incentive pay are due.
- The second half of 2012 will see publication of an SEC study on the use of compensation consultants
S.1471, the Fair Employment Opportunity Act of 2011 and its House counterpart HR 2501 would bar companies from discriminating against the unemployed in hiring practices. The bills are gaining some traction now that the press has caught on to the widespread practice of screening out unemployed job applicants. A recent sampling of internet job postings noted frequent use of the term, "must currently be employed."
Devaluing credit rating agencies
The securities commission, CVM, announced it is collaborating with the central bank, pension fund regulator Previc and insurance regulator Susep on revising regulations that set the rating issued by credit rating agencies as criteria for sound investment. Some new rules would remove any reference to credit rating agencies while others would marginalize their role. In recent years, pension fund supervisors have taken steps to reduce the power of credit agency ratings.
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