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:
Canada: Pooled Registered Pension Plans Act
China: Consultation on new employer social security contributions
EU: Social partner negotiations on Working Time Directive; Pensions white paper previewed
Germany: CDU approves minimum wage resolution
India: Cabinet endorses amended PFRDA bill
Russia: Social contributions for foreign staff
South Africa: Tax legislation submitted to Parliament
UK: Autumn Statement 2011
US: Deficit Reduction Committee adjourns
Dispute resolution law
Business Daily, ALN, EastAfrica.net
Part of a raft of bills passed in response to the new Constitution (IH 08/11/10), Industrial Court Act 2011 was enacted at the end of August, but it slipped in quietly and has yet to be posted by the Ministry of Labor. It sets the regulatory framework for a new industrial court autonomous of the Labor Ministry that will have the status of the High Court in work-related disputes while streamlining the process for dispute resolution.
Tax legislation submitted to Parliament
Tax Analysts, Business Live
The Prime Minister delivered a speech to Parliament upon delivery of the Taxation Laws Amendment Bills. Among the legislation’s more interesting provisions:
- The deductions for medical scheme contributions – now ranging from 18% to 40% – would be converted to a credit system with a uniform 30% rate of relief.
- Employer contributions to a variety of insurance policies for employees or directors would be subject to fringe benefits tax. Policies affected would include death, permanent disability and income protection.
- The rules on taxation of employee trusts would be refined to ensure that anti-avoidance provisions don’t discourage legitimate schemes.
- There are similar measures aimed at a more fair and standardized tax regime for key person insurance plans without reintroducing any loopholes.
Occupational safety measures; Health insurance rebate update
The Australian, PS News, Mondaq
Two significant occupational health and safety laws recently passed and the administration is now drafting a third one:
- Safety, Rehabilitation and Compensation and Other Legislation Amendment Bill 2011, which rescinds several OHS changes introduced by the previous administration, has passed both houses of Parliament. It will restore the ability to submit compensation claims for injuries received during off-site recess or overseas assignments and it will allow Comcare to tap the Consolidated Revenue Fund (CRF) for expenses relating to “long-latency” workplace injuries such as asbestos exposure.
- An interministerial initiative is preparing legislation based on a model Victorian measure designed to curb workplace bullying. Now a civil offense under OHS laws in most jurisdictions, bullying would be eligible for criminal penalties.
Also, the Health Minister decided last month that she did not have quite enough support to stage a vote on means testing the private health insurance rebate (IH 11/09/11). Deferring the measure, which would have gone into effect on 1 January, would leave the 2012 budget A$2.9 billion short. On the plus side, the ruling party gained a few seats in the latest parliamentary election and has better prospects for passing the means testing bill early next year. The Finance Minister has decided to keep it in next year’s budget with a tentative start date of 1 Jul 2012.
Consultation on new employer social security contributions; Social security contribution guidelines; Draft regs on female workers; China Job Bank; Ruling on leave entitlement
Xinhua, AIR, Thai News
The Ministry of Human Resources and Social Security (MOHRSS) has opened a consultation (Chinese only) on draft Social Insurance Collection Guidelines that would introduce employer contributions for two more social security schemes. Employers already contribute to retirement pension, basic medical insurance and unemployment insurance. The new measures would add maternity insurance and work injury insurance. The maternity insurance premium would average a little below 1% and workers' compensation levies would vary by sector with most falling between 0.5% and 1.5%. The notice coincides with status updates on efforts to meet the pension and medical insurance needs of a growing and aging population. This brief consultation is on the collection process only, not on whether these levies should be introduced. It will run through 15 Dec 2011.
Also, the Ministry of Human Resources and Social Security has advised the municipal governments on the parameters of pensionable salary for the new social security levies on foreign workers (IH 11/02/11). The maximum salary base should be three times the city’s average salary while the minimum threshold should be 40% of the average wage. It is not clear whether the cities are obliged to comply with this standard.
Meanwhile, the State Council’s Legislative Affairs Office has posted (Chinese only) the Female labor protection provisions package of draft regulations. It proposes a set of new entitlements and occupational safety measures for women including:
- The 90-day minimum maternity leave would expand to 98 days. A complicated delivery would earn two extra weeks. Miscarriage leave would be either four or six weeks.
- The maternity insurance fund (see above) would finance medical costs related to childbirth. Employers that do not contribute to the fund would be responsible for these charges.
- Women who are nursing or at least seven months pregnant would be spared night shift and overtime.
- There would be daily one-hour breastfeeding breaks.
- Certain hazardous or strenuous occupations would be closed to women and some activities would be forbidden for pregnant or menstruating women.
A public consultation is taking feedback through 23 Dec 2011.
In addition, MOHRSS has launched the beta version of China Job Bank (Chinese only), a website affording job applicants and employers with vacancies greater access to each other. Vetted postings are searchable by occupation or prefectural level. The initial response to this beta site suggests that it could prove a hub for the Chinese job market.
The Shunyi District People’s Court of Beijing provided a key clarification of the right to annual leave in a ruling delivered earlier this fall. It was already clear that the 12 consecutive months of employment necessary to claim the leave entitlement did not have to be with the same employer. In this case, the court affirmed that a worker with a new employer for less than a year following a period of unemployment was still qualified for annual leave because the earlier employment had been for at least 12 consecutive months.
Cabinet endorses amended PFRDA Bill; Minimum salary for Employment Visa
AFP, PTI, Indian Express
The Cabinet has approved a freshly amended version of PFRDA (Pension Fund Regulatory and Development Authority) Bill, 2011 (IH 11/02/11). The ministers honored the Parliamentary Standing Committee on Finance’s request to specify an FDI (Foreign Direct Investment) cap – setting it at 26%, while reserving the option of raising it – but that will not appear as a provision in the bill itself. The ministers turned down the committee’s request for a fixed minimum guaranteed return of 4.5%, but some minimum guarantee would have to be specified in the pension contract. They also rejected legislators’ request for greater flexibility on pre-retirement withdrawals. The bill is one of the administration’s top priorities for the winter session of Parliament.
Also, the Ministry of Home Affairs (MHA) has issued a statement clarifying the minimum salary requirements for an employment visa. A foreign worker – circus performers are not exempt – must document an annual salary of US$25,000 within three months of entering India to qualify. Those perquisites such as rent-free accommodations that fall under the definition of taxable income count toward the $25,000 threshold. Tax-exempt perquisites do not.
Retirement age hike for women proposed
Arutz Sheva, Jerusalem Post
The Finance Ministry’s proposal to raise the retirement age for women from 62 to 64 – a compromise on the original proposal to raise it to 67 for both sexes – was aired in the Knesset Finance Committee last month. A few factions in the Knesset back a counterproposal to freeze the pension age for women indefinitely.
Social security reform discussions
Daily Yomiuri, Nikkei Report, Jiji Press
The Government Revitalization Unit’s review of tax and social security issues has made some debate topics public:
- Benefit cuts that should have occurred to reflect negative CPI growth in fiscal 2000-02 would be introduced in fiscal 2012. The reduction is estimated at 2.5%.
- A tentative timetable for the consumption tax hike (IH 11/16/11) would raise it to 8% in 2014 and 10% in 2015. The bridging bonds reflecting future consumption tax increases (IH 10/19/11) remain part of the package.
- A proposal to raise the pension age as high as 70 for private-sector workers has been shelved for now.
- Pension coverage is expected to extend to part-time workers.
The panel will issue a report by the end of this year.
Sexual harassment grounds for workers' compensation claim
Asia Pulse, UPI, Korea Herald
Workers’ Compensation and Welfare Services has set a precedent by recognizing sexual harassment as a workplace injury. A woman whose work environment had generated anxiety, depression and insomnia was awarded compensation and reimbursement for medical treatment.
Foreign superannuation tax regime due for a review; National Party back in power
The Revenue Minister’s speech to the New Zealand Institute of Chartered Accountants (NZICA) featured highlights of his agenda for the coming year. Along with confirming his commitment to KiwiSaver auto-enrolment (IH 10/26/11), he announced a review of tax policy for New Zealand residents who have income from foreign pension schemes. The regime is so complex that compliance is difficult and it doesn’t appear to accomplish the outcomes that were envisioned for it. There will be a discussion document in the first half of 2012 and legislation toward the end of the year. In the interim, Inland Revenue will take a “pragmatic approach” to cases involving this regime.
Incidentally, the ruling party prevailed in the general election last month (IH 11/16/11). Its victory was attributed in part to the opposition Labour Party’s proposal to raise the retirement age (IH 11/02/11).
Consultation on VPS amendments; IRO extension
Business Recorder, The Dawn, The Nation
The Securities and Exchange Commission of Pakistan (SECP) has opened a brief consultation on draft amendments to the Voluntary Pension System Rules. Some highlights:
- There would be new reporting and disclosure requirements
- The notice period for changing fund managers would be cut from 30 days to 21.
- While still limited to once a year, the transfer between funds would not have to wait until the anniversary date.
- There are further measures to refine the tax harmonization with other retirement plans (IH 07/14/11).
The 14-day consultation opened on 23 November, so stakeholders may want to give it a quick look soon.
Also, though labor law has fundamentally devolved to the provinces and territories, the problematic Industrial Relations Ordinance 2011 (IH 10/05/11) remains in effect for the Capital Territory and – to some uncertain degree – applies to transprovincial issues. When the deadline for approval in the National Assembly neared and the ordinance was about to lapse, a 120-day extension of the ordinance was pushed through the legislature. A permanent law should be passed before another extension is needed.
Guidance on excess contributions tax; Anti-discrimination bill passed
Daily Inquirer, BDB
The Bureau of Internal Revenue has posted Revenue Memorandum Circular (RMC) no. 53-2011 to clarify and expand on RMC 27-2011 (IH 07/27/11). Only “mandatory/compulsory” contributions to the Social Security System, Philhealth and other social programs are tax exempt. Retroactive to 1 Jul 2011, the tax loophole on excess contributions to these schemes is closed.
Also, the Senate has passed SB 2814, An Act Prohibiting Discrimination against Persons on Account of Ethnic Origin and/or Religious Belief. Its House counterpart has already passed and a reconciliation of the two should be enacted by the end of the year. Workplace discrimination is one of the new law’s targets and the Department of Labor and Employment (DOLE) will draft guidelines on compliance and enforcement.
Unpaid furlough update
Taiwan News, China Post, Asia Pulse
The Council of Labor Affairs (CLA) has retreated a bit on an aggressive approach to companies placing staff on unpaid furloughs (IH 11/09/11). Given disparities in statistics and the slippery definition of unpaid leave, the CLA will not bar profitable companies from using it, but it would block any employer with an unpaid leave program from hiring foreign staff. A group of high-tech employers proposed allowing companies to aggregate normal work hours over the course of a year, but the CLA said that would be too radical a step at this point.
Budget breakthrough; Reasoned opinion on annual leave restrictions
Agence Belga, Dow Jones, Euractiv
The federal government website has posted a terse announcement (French only) about six parties negotiating a draft 2012 budget (IH 08/17/11) and being ready to form a coalition government. Among the highlights of this budget:
- The retirement age would not rise above 65, but the standard early retirement age would climb from 60 to 62 in six-month increments starting in 2013. The minimum contribution period would rise from 35 years to 40 in the same period and there would be exceptions for retiring as early as age 60 when age and contribution years total 102.
- There would be new age-based caps on the duration of unemployment benefits. The salary peg for these benefits would phase out for the long-term unemployed.
- A new tax on stock options is in the package.
- A controversial wage indexation mechanism will be retained.
Also, the European Commission has delivered a reasoned opinion to Belgium over its inadequate compliance with the Working Time Directive. Under Belgian law, the minimum entitlement to four weeks' annual leave can require a vesting period of up to 12 months. Belgium now has two months to advise the EC of the measures it is taking to remedy this.
Retirement age hike proposal
BTA, In Focus Sofia News
The Cabinet approved a plan to push forward implementation of a retirement age hike (IH 12/15/10) that has been in limbo since Parliament passed it late last year (IH 10/2/11). The rise from 63 for men and 60 for women to 65 and 63 respectively had been scheduled to start in 2021 and conclude in 2026. The new plan calls for proceeding at the same pace but starting in 2015. The major trade unions dropped out of the National Council on Tripartite Cooperation in protest over this measure, but they will participate in a tripartite meeting on pension reform scheduled for tomorrow. The President is considering a veto if the proposal gets through Parliament.
Ruling on high pension fees
The Supreme Court has delivered the final verdict in a six-year-old case brought by the Insurance Board of Appeal against a pension provider that charged administrative fees of DKK48 (€6.40) per month. At issue was which fees may legitimately be passed on to consumers. The court found that while the pension product in question did have high administrative costs, the financial regulator, FSA, had not objected to the costs. The Consumer Council, the independent body that brought the case against the pension manager, will now change its tack to negotiating fee restraint and transparency with relevant authorities and the pensions sector.
Welfare fund consolidation; Unemployment insurance contribution cut
Baltic Daily, Business Week, Baltic Course
A bill that would consolidate the Health Insurance Fund (HIF) and Unemployment Insurance Fund (UIF) with general reserves has cleared its second reading in Parliament. The Estonian Employers Federation has sounded the alarm on the fund grab and has withdrawn from the supervisory boards of both funds in protest. The federation also objects to a draft regulation that would – unaffordably, by some accounts – cut the UIF premium to 3%, 2% for employees and 1% for employers (IH 10/26/11). If approved, the change would take effect in 2013.
Social partner negotiations on Working Time Directive; Pensions white paper previewed; Parliament passes ban on short-selling and CDS; Various
Europolitics, Euractiv, IPE
The social partners have notified the European Commission (EC) that they will take up the contentious negotiations (IH 04/08/09) over proposed changes to the Working Time Directive. Sticking points in earlier negotiations have included member state opt-outs, the treatment of on-call time and the range of exemptions to the 48-hour limit. Participants are already divided over whether to modify selected provisions or conduct “a more global revision.” Their first meeting will be 8 Dec 2011 and they expect to deliver a draft to the Commission in early September 2012.
Also, the EC white paper in response to last year’s pension reform green paper (IH 07/08/10) is on a tight schedule for delivery next month, but observers have noted both that it was removed from the agenda for a recent meeting and that insiders are reporting little agreement on substance. Analysts have warned that concrete proposals for new policies may be deferred to a later document. A draft of the white paper has leaked to the press:
- While member-state autonomy in pension system features is acknowledged, a proposal to ban mandatory retirement age is tipped to arrive in early 2013.
- A set of recommendations supporting retirement deferral include life-long learning programs and workplace accommodation for an older workforce.
- The document recognizes that complementary pensions will be playing a larger role in providing adequate retirement income.
The official White Paper is penciled in for 13 December release. A recent EIOPA (European Insurance and Occupational Pension Authority) conference yielded some indications of how second- and third-pillar roles will be bolstered in some related releases. The EC is planning a code of good practice for second-pillar occupational pension schemes that would cover risk-sharing, stability and distributions. Third-pillar schemes are in for a voluntary code of practice addressing disclosure standards and consumer protection. An EU certification process for third-pillar pensions is also under consideration.
Meanwhile, a plenary session of Parliament has adopted the resolution Short selling and certain aspects of credit default swaps, which will ban naked sovereign credit default swaps. It also introduces limits and reporting requirements on short selling and credit default swaps as well as the authority for member states to suspend these instruments. The European Council is expected to rubber stamp this legislation soon. It is set to take effect 1 Nov 2012.
In other news:
- Parliament has approved a non-binding resolution supporting revision of the Professional Qualifications Directive. It recommends measures for streamlining cross-border recognition of credentials without endangering consumers. One option is a voluntary “professional card” with EU-wide recognition. This document is offered as input to the EC, which is due to publish a draft revision of the directive based on last June’s Green Paper: Modernising the Professional Qualifications Directive (IH 06/29/11).
- Another recent non-binding resolution, A7-0370-2011, would improve the safety net for the most vulnerable populations, most notably with an EU-wide minimum wage. Other provisions address broader eligibility for minimum social benefits and recommend funding the expansion with a levy on high incomes.
- The Internal Market Commissioner’s speech at the EIOPA conference included the assurance that the commission's "aim is to ensure that Solvency II does not penalize … retirement savings schemes … and medical insurance” and an outline of the commission’s approach to accomplishing this. He also noted that a late-2012 revision of the IORP (Institutions for Occupational Retirement Provision) Directive will be preceded by a mid-February technical opinion from EIOPA.
- The EC Work Programme 2012, Delivering European Renewal, offers a few surprises. The sticking points on vesting that sidelined the portability directive (now known as protection of supplementary pension rights of people who change jobs) will be revisited, the rules on free movement of workers are due for a revision and a second phase of the flexicurity approach will feature “concrete proposals.”
- The EC has approved draft regulations to weaken the influence and increase the transparency of credit rating agencies. A proposal for a temporary suspension of ratings for financially troubled states in an unstable time did not make the final draft. An FAQ accompanied the press release. The proposal now goes to the member states and Parliament.
- The EC has flagged four states that missed the 5 Jun 2011 deadline for transposing the new European Works Council legislation. Greece, Italy, Luxembourg and Netherlands now have two months to comply with the reasoned opinion before the EC refers them to the European Court of Justice (ECJ).
- The European Commission has set out to advance “mutual benefit migration” with non-EU nations, in part via “mobility partnerships” with strategic neighbors, starting with Tunisia, Morocco and Egypt. This has some member states concerned about increasingly open borders. An FAQ accompanies the press release.
Tax guidance for employer-provided health benefits; Social security contribution increases
The tax administration has released guidance (Finnish only) explaining when employer-provided health insurance qualifies as a tax-free benefit:
- An employer’s direct payment of health care expenses is tax exempt.
- A definition of “customary and reasonable” for employer-provided health insurance caps the premium at €400 per year.
- With limited exceptions for long-term employees, the benefit would have to be applied at the same level for the entire workforce.
Also, Decree 1132/2011 introduces social security contribution increases, effective 1 Jan 2012:
- The employee pension insurance premium will rise from 4.7% to 5.15%.
- Workers age 53 and over will pay 6.5%, up from 6.0%.
- The employee health insurance premium will rise from 1.19% to 1.22%.
CDU approves minimum wage resolution; Pension contributions cut
SIA, Die Welt, Reuters
The Christian Democratic Union, the dominant party in the ruling coalition, held a congress last month that yielded some interesting agreements (German only). Most notably, it reversed long-standing policy with overwhelming support for a proposal to introduce a default minimum wage for enterprises that don’t arrive at a higher one in collective bargaining. The hourly minimum wage for temporary workers (IH 11/09/11) will be a reference point for the new threshold, but the subcommittee responsible for proposing the details will also consider the minimum wages in collective agreements. The CDU congress also backed initiatives to improve the job market for seniors, expand disability insurance coverage and promote retirement deferral, particularly via a phased retirement model.
Meanwhile, the Ministry for Economics and Labor announced (German only) a modest but uncommon cut in social security contributions. The 19.9% rate will drop to 19.6% from 1 Jan 2012. The contribution rate will not change for those with monthly salaries above €5,600. This was accompanied by modest benefit hikes, 3.2% in eastern Germany and 2.3% in the west.
Social security consolidation law passed; ILO critique of draft labour code
Parliament has approved an administration-backed measure to replace all social security levies with a single 27% social tax (IH 11/02/11). The Prime Minister and other officials have assured stakeholders that adequate financing will be maintained for all of the affected programs. Meanwhile, the International Labour Organisation (ILO) has produced a technical memorandum on the draft Labour Code. The memo urges the government to consult with trade unions on revision to the draft and finds fault with:
- Provisions curbing freedom of assembly
- The duration of job protection for workers returning from maternity leave (the ILO recommends three months)
- The absence of any language on equal work for equal pay
2012 Budget link
The Finance Ministry did not post an English-language summary of the 2012 Budget (IH 10/12/11) , but the Icelandic budget page (Icelandic only) confirmed the lower deduction on the premiums for voluntary pension insurance and a temporary 10.5% levy on all remuneration except pension payments at all financial institutions.
Sick pay cost-shifting proposal, other 2012 Budget measures previewed; NPRF tapped
Irish Times, Irish Examiner, IPE
The Minister for Social Protection was tasked with identifying substantial savings for the 2012 Budget due later this month. Employer associations have criticized her proposal to transfer responsibility for payments during the first four weeks of sick leave from the government to employers. There are also reports of plans to cut the 60% employer rebate on redundancy payments to 30% and to do away with it altogether for multinationals that are moving jobs out of Ireland. The minister has stressed that the budget is not finalized but added that reductions in employer support would be preferable to benefit cuts. Among the other budget measures that have leaked or been forecast by experts:
- The state subsidy for private medical care carried out in public hospitals would end.
- A less generous tax regime for pensions would focus on reducing relief for people with high incomes.
- The controversial pension levy (IH 07/14/11) was slated for a reappraisal, particularly now that the alternative scenario of raising a similar amount with pension fund investment in infrastructure is in preparation.
- Anticipated medical cost-sharing measures include a €0.50 levy on all prescriptions.
The 2012 Budget is due to arrive here next Monday, 5 December.
Also, the National Pension Reserve Fund (NPRF), established in 2001 as a buffer for an anticipated spike in social security payouts, had its role diversified by 2009 legislation that granted the Finance Minister authority to siphon funds “as is required, in the public interest.” The occasion of a €250 million NPRF investment in an infrastructure fund has prompted some commentary on how the now €14.9 billion fund has already diverted €9 billion to a banking sector bailout and other economic relief initiatives in the past two years.
Isle of Man
Pension age hike acceleration
Manx Radio, Plan Sponsor
The Minister for Social Care has proposed adjusting an already-scheduled rise in the state pension age for women to mirror the compressed timetable set in the UK’s Pensions Act 2011. The threshold would rise to 65 by November 2018 and 66 – for both sexes – by October 2020. The measure must still be approved in the Tynwald (Parliament).
New Prime Minister’s agenda
Reuters, Ansa, Euractiv
The new Prime Minister has survived his first confidence vote after setting out a reform agenda generally consistent with the reform advanced by the previous administration:
- Greater pension system harmonization would combat benefit disparities among different occupations and generations. Any lingering early retirement windows would be shut.
- Generous protections for permanent workers and limited rights for contract workers make for a “dual market” that he aims to remedy.
- A strong safety net of welfare benefits, particularly unemployment benefits, would protect those displaced by job market liberalization.
- Workforce training and an educational system that produces more skilled workers will be a top priority.
30% rule changes advanced, amended; Integration course loan program; ECJ referral over employee participation
IBFD, Expatica, DutchNews.nl
The House of Representatives has approved (Dutch only) the 2012 Budget’s change to the 30% ruling on skilled expatriate tax relief (IH 10/19/11) after it was significantly amended (Dutch only). Under the new version:
- The minimum gross salary to qualify for this regime would be €50,000 per year, €38,007 for people who have earned their graduate degrees within the past year.
- The duration is limited to eight years and the employee may not be residing within 150 kilometers of the Dutch border when hired.
- This would take effect on 1 Jan 2012, but the new criteria would at times be retroactive for people who have not already completed 60 months under this regime by that date. They would have to meet the new requirements in their 60-month check and upon switching jobs.
The bill must still get through the Senate.
The Home Affairs Ministry has come up with another hurdle (Dutch only) for foreign workers. The high cost of mandatory integration (inburgering) courses for new arrivals would now be shifted onto the immigrants themselves. The ministry plans to offer “soft” social loans of up to €10,000 for taking these courses. Immigrants who do not pass the course within the first three years would lose their work permits.
Also, the European Commission has referred the Netherlands to the European Court of Justice (ECJ) for straying from the EU rules on employee participations in cross-border mergers. The Dutch transposition of the rules afforded participation rights to the Dutch workers, but not to those of other member states.
Pension reform tops agenda for new term
Plan Sponsor, PNV, PAP
The Prime Minister addressed Parliament last month to outline the agenda for his administration’s next term. Pension reform was a major topic:
- The pension age, now 65 for men and 60 for women, would rise to 67 for both. The ruling party’s junior coalition partner is among those opposed to the steep climb for women. It has proposed an early retirement scheme, shaving three years for each child a woman has added to the rapidly aging population.
- The employer premium for the disability pension would rise by 2%.
- The privileged pensions for miners, police, clergy, military, and other occupations would be phased out.
- A new indexation mechanism for retirement and disability pensions would slow the rate of benefit increases.
The Premier aims to enact these measures by mid-2012
Private pension guarantee fund established; Investment disclosure rules
Mediafax, Private Pensions
Legislation establishing a private pension guarantee fund (IH 10/05/11) came into force last month and the pension sector regulator CSSPP has now appointed (Romanian only) the directors of the Guarantee Fund. The fund should become operational and start collecting a levy from pension providers early next year.
The CSSPP also approved an expansion of existing pension disclosure rules. Detailed investment portfolio structures specifying the holdings of each financial instrument will have to be published twice a year. They will reflect year-end and mid-year data and will have to be posted within three months of each period's close.
Social contributions for foreign staff; Eurasian Union debut; Guidance on financial assistance to foreign employees
Expatica, RT, Euractiv
Legislation to reduce the social tax from 34% to 30% for 2012-13 (IH 07/04/11) has passed in the Duma and had its first reading in the Senate. An amendment that was just recently made public would end the social insurance exemption for long-term foreign workers, defined as any foreign worker on a permanent contract or a fixed contract of at least six months. Unskilled laborers would remain exempt. Affected employers are concerned that if the measure passes unchanged, they will have unplanned hits on their 2012 budgets. The bill would also cut the social tax to 20% for small and medium enterprises.
The Eurasian Union (IH 10/12/11) has broken ground with Russia, Belarus and Kazakhstan, signing a declaration that calls for establishment of a full “Eurasian economic union” by 2015. The Eurasian Economic Commission, a federal executive body based on the European Commission, will oversee the evolution of a single economic space. The other CIS nations are being invited to join and there will also be overtures to nations deemed “loyal to Russia’s interests,” including some of the easternmost members of the European Union and some non-neighbors like Mongolia, Cuba, Vietnam and Venezuela. Incidentally, Eurozone instability has not dissuaded this fledgling union from aiming for a single currency.
Also, the Finance Ministry’s Letter No. 03-04-06/6/297 parses an array of laws on the taxation of foreign worker income to determine that financial assistance from Russian employers to foreign workers posted outside of Russia is taxable income, subject to the 30% rate applied to income of nonresidents posted in Russia for fewer than 183 days. However, the first 4,000 rubles (US$131) per year would be tax exempt.
The general election is this Sunday, 4 December. This year’s referendum defeating pension reform legislation that featured a retirement age hike has given this election a third rail, but some main parties still back raising the retirement age to 65 with 40 years of service. There is also much talk of alternative approaches to raising retirement age such as financial incentives for retirement deferral. Health reform approaches tend toward nebulous measures like increasing efficiency and fighting waste. One interesting aspect is that the majority of parties are keen to abolish supplementary health insurance schemes.
New government’s agenda; Retirement age cut for hazardous jobs
El Pais, Reuters, EU Observer
The conservative Partido Popular (PP) won an “absolute majority” in last month’s election (IH 11/16/11). It has not posted a formal agenda since taking office, but these are some of its professed aims:
- The severance pay formula using days’ pay times years worked would halve the day component, which is now 33-45 days. By one account, the new range would be 10 to 20 days with a benefit ceiling of six months’ pay.
- The bottom line in wage negotiations would be productivity incentives rather than automatic inflation pegs.
- Collective bargaining would be by company rather than by sector.
- The Dependency Law that governs benefits for caregivers is up for review.
- The party believes that gay marriage should be demoted back to civil unions.
- The paternity leave period would double to four weeks.
- A universal employment contract covering benefits and severance pay entitlement is under consideration. It would replace both permanent and fixed term contracts.
- There would be considerable budget cutting, but pensions would be spared.
- The party has not confirmed one politician’s assertion that there would be an earnings test for government subsidy of medications.
Also, the outgoing Council of Ministers approved (Spanish only) a Labour Ministry Royal Decree establishing coefficients for retirement age reductions in occupations deemed “exceptionally painful, toxic or dangerous.” It includes measures on incentives for employers to make these jobs less taxing. The decree reflected part of the tripartite social and economic accord reached earlier this year (IH 02/09/11).
Autumn Statement 2011; Sickness Absence Review; Amendments to definition of earnings subject to NIC; Various
Tax Analysts, Employee Benefits, IFA
The Chancellor’s 2011 Autumn Statement featured:
- Rules –effective immediately – to curb a loophole granting excess tax relief on asset-backed contributions to pension schemes
- An acceleration of the state pension age rise to 67 (now scheduled for 2034-2036, it would occur from 2026 to 2028)
- The triple-lock state pension increase guarantee that will use the highest of CPI, wage inflation or 2.5%
- An agreement with the National Association of Pension Funds (NPAF) and the Pension Protection Fund (PPF) on a major new infrastructure investment project
- A proposal for no-fault dismissal in companies with fewer that 10 workers
- Notice of a call for evidence on sharply reducing the collective redundancy 90-day consultation process in companies with over 100 workers
- A swipe at the EU’s proposed Financial Transaction Tax (FTT), which would disproportionately affect the UK and would likely have the strongest impact on pensions
Anticipated curbs on tax relief for private-sector high earners did not materialize. These measures are due to appear in the Finance Bill on 6 December.
The Department for Work and Pensions (DWP) has posted the Sickness Absence Review that it commissioned earlier this year (IH 02/24/11). The document recommends some major reforms to the sickness absence system:
- It proposes granting tax relief to employers that pay for physical or vocational rehabilitation to help an employee get back to work.
- Sick notes from physicians would no longer suffice for candidates for long-term sick leave. Instead, applicants would be referred to an independent assessment service.
- A job-brokering service would find employment for those people who are still able to work but cannot yet go back to their current employers.
- Workers would be able to claim benefits or get job referrals during the assessment period.
The administration will publish its response to the review next year.
HM Revenue & Customs has published SI 2011/2700 The Social Security (Contributions) (Amendment No. 5)Regulations 2011, amendments to Social Security (Contributions) Regulations 2001 stating that certain types of remuneration newly subject to income tax are added to the definition of earnings used for National Insurance Contributions (NIC). The additions are disguised remuneration and the reduced tax break on non-cash child care vouchers for high earners. The rules will go into effect on 6 Dec 2011.
There were a few more second-tier highlights in the news cycle:
- The DWP has yielded to pressure on the timing of automatic enrolment and offered a reprieve for small businesses. Enterprises with fewer than 50 employees will have their compliance deadline pushed back from April 2014 to May 2015.
- Some of the proposals in the Chancellor’s Autumn Speech (see first paragraph) first appeared earlier last month in a Department for Business Innovation and Skills (BIS) outline of employment law reform proposals. Those not in the Chancellor’s package include a streamlined approach to dispute resolution and a consolidation of minimum wage rules.
- The High Pay Commission’s final report, Cheques with Balances: Why tackling high pay is in the national interest, has drawn much press coverage with a scathing account of “spiraling” executive compensation and a set of proposals to contain it. These include a mandatory link between maximum pay and average salary as well as creation of a tripartite body to monitor management remuneration.
Pooled Registered Pension Plans Act; Various
Benefits Canada, Toronto Star, Globe & Mail
The Department of Finance has announced the introduction in Parliament of Bill C-25, Pooled Registered Pension Plans Act (IH 10/26/11). These measures cover licensing, administration, distributions, eligibility, nondiscrimination, plan wind-ups, disclosure requirements and much more, but there are big gaps. In part, this is because certain key features, such as whether they are compulsory, would be determined in each province’s legislation. The Finance Ministry will soon launch a consultation on the tax rules for these schemes.
This would have been a strong news cycle even without PRPP:
- The Supreme Court made a landmark ruling in a 28-year-old pay equity case. The court agreed with the plaintiff that the employer had a discriminatory pay policy and the judgment devoted considerable space to applying standards of proof.
- The Federal Court of Appeal upheld the Canada Revenue Agency’s rejection of a tax deduction claimed on payments to employees for surrendering stock options during reorganization. The ruling differentiated this instance from a similar case in which the expense had been ruled deductible.
- The Canadian Association of Pension Supervisory Authorities (CAPSA) has updated its Prudence Standard Project with Guideline No. 6: Pension Plan Prudent Investment Practices and Guideline No. 7: Pension Plan Funding Policy. The former is accompanied by a self-assessment questionnaire.
Deficit Reduction Committee adjourns; Pension buyouts due for review
WSJ, Roll Call, BenefitsPro
Congress’s Joint Committee on Deficit Reduction considered a variety of tax and social security reform proposals for several weeks then issued a note conceding that it had reached an impasse. This inspired some to take another look at the fundamentally ignored National Commission on Fiscal Responsibility and Reform (NCFRR ) report from this time last year (IH 12/08/10). There has been some talk of piecemeal reforms such as social security means testing and a less robust automatic index for pension benefits, but it’s far from certain that any have enough support to advance.
Also, the head of the Senate Health, Education, Labor and Pensions (HELP) Committee is drawing public attention to a burgeoning and under-regulated pension buyout business. There is concern about potential for fraud in a field where retirees are lured into selling off their pension rights to investors. The committee is preparing to “take a closer look.”
Organic Labor Law consultations
El Universal, AVN
The President announced (Spanish only) the formation of a commission to discuss a draft Organic Labor Law with unions and other stakeholders. The process is depicted as a dramatic transition from a capitalist to socialist model. The draft is at an early stage, but a few provisions are already getting press coverage:
- Like the labor reform package that evidently stalled last year (IH 10/06/10), this bill features a sharp reduction in working hours.
- A new severance pay model would be retroactive.
- An employee consultation model would be adopted for a wide range of enterprise operations.
The President aims to enact the law on 1 May 2012.