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: Backgrounder for Fair Work Act review
EU: Unisex insurance premium guidance – impact on pensions revisited
France: Crisis summit conclusions
Indonesia: Outsourcing arrangements ruled unconstitutional
Portugal: Tripartite agreement on labor reform
UK: Employee ownership initiative touted; Consultation on GMP equalisation
Backgrounder for Fair Work Act review; Various
The Australian, SMH, Tax Analysts
The Department of Education, Employment and Workplace Relations (DEEWR) has issued the Fair Work Act Review (IH 01/05/12) background paper for public consultation. The terms of reference and the questions for participants to consider in their responses are generally the themes one would expect in a thorough review of the law except that, in a concession to the business sector and the economic climate, the theme of productivity has prominent play. Submissions are accepted until 17 Feb 2012, a follow-up consultation will end on 2 March 2012 and the panel will deliver its final report to the government by 31 May 2012.
In other news:
- The Treasury released Exposure Draft – Limiting the Trading Stock Exception for Superannuation Entities (IH 06/02/11) last week. It proposes ending the capital gains tax (CGT) exemption for some classes of assets (including shares, land and units in a unit trust) held by a complying superannuation entity. Submissions are welcome through 10 Feb 2012.
- Opposition to the administration’s bill on means-testing the private health insurance rebate (IH 12/01/11) has reportedly eroded to the point that the single independent legislator needed to put the measure over the top has invited the administration to meet to discuss his reservations.
- The push for state consensus on federal occupational safety legislation (IH 12/01/11) has suffered a setback as drafting flaws and unintended consequences have been brought to light. A few states have now shelved their complying legislation until this law can be revised.
Flexible retirement age under consideration
China Daily, Women of China
The Ministry of Human Resources and Social Security has been consulting stakeholders as part of its inquiry into adopting a flexible retirement age formula. The need for flexibility is particularly pressing for women, who have a normal retirement age of 50 or 55 (compared with 60 for men). The standing committee of the Shenzhen People’s Congress is in its second review of a bill that would give female workers the option of negotiating the terms of deferring retirement to age 60 with their employers. Incidentally, the Shenzhen bill also includes measures that would grant 10 days' parental leave per year to each parent of a child under age 3.
Financial sector cuts lunch break
The Standard, MSNBC, WSJ
The long-standing financial sector tradition of an extended lunch break is being sacrificed to keep the Hong Kong Stock Exchange competitive with the world’s other stock exchanges. The two-hour break was cut to 90 minutes last year and will be reduced to an hour from 1 March.
RBI guidelines for banking sector executive pay; Various
Business Line, Mint, Indian Express
The Reserve Bank of India has issued Guidelines on Compensation of Whole Time Directors / Chief Executive Officers /Risk Takers and Control Function Staff, etc, final guidelines for top management remuneration at “all private sector and foreign banks operating in India.” Among the highlights:
- A remuneration committee should develop a “comprehensive “compensation policy by March 2012 so it can be operational for the financial year 2012-13.
- The committee should determine a “reasonable” basic salary reflecting risk and performance for the company officers affected, cap variable pay at 70% of fixed pay and refrain from any guaranteed bonus other than sign-on bonuses.
- A “malus agreement” will set the terms under which variable pay is subject to clawback.
- Detailed and standardized disclosure requirements are included.
- Although headquartered elsewhere, foreign banks are very likely to have their head offices in jurisdictions that adhere to international principles for banker remuneration. They will have to submit annual reports to RBI on adherence to the Financial Standards Board’s (FSB) principles and standards for compensation practices.
In other news:
- The Insurance Regulatory and Development Authority (IRDA) has now rejected all 23 applications for renewal of existing pension products in light of its new guidelines (IH 01/19/12). Typical surrender value in the applications was half the fund value or the accumulated premiums. IRDA has asked for revised proposals with either the surrender value set at the full fund value or the premiums increased at a guaranteed rate.
- The Pension Fund Regulatory and Development Authority (PFRDA) has revised the fee schedule for registration and transaction to replace a flat fee system that had the rich paying proportionately less.
- The IRDA draft health insurance regulations (IH 01/05/12) will ban age discrimination in access to health insurance policies. Recent changes allowed participants to renew at any age. This would allow someone to take out a new policy at any age.
Outsourcing arrangements ruled unconstitutional
Jakarta Post, Jakarta Globe
The Constitutional Court has delivered a decision in the long-standing dispute (IH 07/09/09) over the legality of outsourcing. The court determined that outsourcing is unconstitutional unless the contract workers performing the same tasks as regular employees also have the same benefits and employment conditions. The rights at issue include severance pay, overtime premiums and social security contributions. The Labor Law will be revised accordingly and the Manpower Ministry is drafting a circular to assist employers with compliance.
Tax break on director pensions limited; Non-regular worker protection measures
The National Assembly passed the Tax Revision Bill on 31 Dec 2011. One measure that wasn’t in the original package amended the Personal Income Tax Law to limit tax avoidance under a regime that taxes director retirement income at a lower rate than salaries. Qualifying retirement income will now be limited to average salary of the three years preceding retirement x 10% x years of employment. From 1 Jan 2012, any retirement income over that amount is taxed as income. Retirement income accrued through 31 Dec 2011 is grandfathered.
Also, the National Assembly has adopted a set of measures to tighten existing protections for fixed-term, part-time and other non-regular workers. They cover the redress process for non-regular workers who have received discriminatory treatment, the range of illegal practices with regard to dispatched workers and employer accountability for their treatment. Additional measures set the implementing rules for government subsidy of social insurance premiums in small establishments. This package is set to take effect approximately 1 Jul 2012.
Minimum wage agreement
Minimum wage agreement
The Cabinet has now agreed on a minimum wage compromise (IH 11/02/11) that should come into effect shortly:
- The minimum monthly wage will rise from LL500,000 to LL675,000 (US$448.21).
- The next tranche, up to LL1 million, would see an LL200,000 increase.
- Those salaries above LL1million up to LL1.5 million will rise by LL250,000.
- Anything over LL1.5 million would rise by LL300,000.
- The Labor Ministry is preparing legislation on maintaining statutory minimums for the daily transportation and education allowances that complement basic salary.
The General Labor Confederation broadly supports this arrangement but insists that it be retroactive to last October.
Social security bill
A technical committee reporting to the Ministry of Labor has now completed its draft legislation on the creation, administration and governance of the Contributory Social Security Fund (IH 11/02/11). The ministry has been collecting a 1% levy for the system’s launch for over two years, but the still-undetermined premium would be much higher. The first schemes to roll out will be unemployment, disability, maternity, medical, dependent and old-age benefits. The bill allows for introduction of additional schemes at some later stage. As many employers are not paying the current levy, the bill would introduce a series of penalties culminating in revoking a company’s license and confiscating the employer’s passport.
Alternative KiwiSaver default fund proposed
Scoop, NZH, Otago Daily Times
A study by ANZ, New Zealand's largest financial institution, has sparked debate with its conclusion that placing savers in default conservative funds when they fail to choose their own investment funds puts them on track for a severe shortfall in retirement income. The industry is now assessing ANZ’s proposal to replace the conservative default with a “life stages” fund that would gradually reduce risk as a participant approached retirement age. The government has yet to issue a response.
Tax incentives mooted for pension schemes; Corporate governance requirements
The Securities and Exchange Commission of Pakistan (SECP) recently gave the National Assembly Standing Committee on Finance a progress report on its financial market development plan. It will feature tax incentives for long-term savings vehicles like private pension schemes. A draft Pension Law should be published by the end of this year.
Another SECP initiative will introduce a number of corporate governance requirements from 1 May 2012. A website for quick posting of relevant information for shareholders will become mandatory. There are a variety of deadlines for the proxy-voting process and a number of financial disclosure requirements for the website.
Philhealth premium rise, balance billing relief
Philippine Star, Manila Bulletin, Thai News
Under fire over a sharp increase in premiums (IH 12/07/11) during its conversion to a Universal Health Care (UHC) system, Philhealth has notified members that those who pay their entire annual contribution before the premium doubles on 1 July will be spared the new premium until January. Also, there has been some concern about balance billing under the case rate payment system (IH 08/31/11) being phased in under UHC. Philhealth has now announced that a “No Balance Billing” scheme will be in place to ensure that costs are not shifted to patients, but that only the poor as determined through means testing would qualify for this protection.
EPF amendment bill passed
Daily News, Daily Mirror, Lanka Business Report
After weeks of disputes and rumors, Parliament settled down and passed the Employees Provident Fund Amendment Bill by a large margin. The new measures will allow people with at least 10 years of service to withdraw limited amounts from their EPF accounts as interest-free loans for home construction or as payment for major medical expenses. The law also sets new monthly payment and reporting requirements for all enterprises with over 50 employees.
Maximum stay for foreign workers extended
China Post, AFP, Taiwan Economic News
Last week, the Legislative Yuan adopted measures amending the Employment Services Act to raise the maximum stay for a foreign worker from nine years to 12. The package offers no relief from the requirement that expatriates leave Taiwan after each three-year term to reapply for a work permit. The law is expected to be promulgated by late March.
Preparations for AEC cross-border mobility
The Nation, Bangkok Post
The government is developing several job market initiatives to make a good faith effort at being ready for the seismic shifts coming for the ASEAN Economic Community (AEC) in 2015 (IH 11/29/07, Asia). To comply with and adapt to the AEC free movement of workers requirement:
- The Labour Ministry will amend several laws to allow foreigners to work in scores of occupations that have been limited to Thai citizens.
- The Social Security Act will be revised to extend coverage to foreign citizens.
- Additional legislation will grant foreign workers full employment rights, including the right to form unions.
- More skills training – and foreign language classes – will be made available to Thai workers to improve their competitive edge in the expanded job market.
Salary disclosure required in job postings
Effective 1 Jan 2012, an amendment to the Austrian Act on Equal Treatment requires employers to include – when applicable – the mandatory minimum remuneration for a position in any job posting whether internal or external. The notice should mention basic pay plus any allowances as well as whether the employer intends to pay above the minimum. The law does not preclude the employer from negotiating a lower rate with a job applicant who does not meet all of the qualifications.
Pension supplements for the elderly
BelTA, BelaPAN, Telegraf
A presidential decree has effectively doubled the minimum state pension for people age 80 and up to US$34 per month with a new schedule of supplements for the elderly. The minimum for those age 75 and up rose by 75% to US$30.
Pension agenda; Accession vote
HINA, Croatian Times, Euractiv
The administration has provided a few more details – and squelched some rumors – on its pension reform plans (IH 12/14/11). The prime minister has given assurances that in the drafting of a “viable” budget, “pensions will not be touched.” The Labour Ministry has categorically denied press reports that contributions to the second pillar scheme would be diverted or suspended. It added that reforms were likely to hold a more prominent role for the second pillar. Another likely component of pension reform is the introduction of a tax on foreign pensions. Absent this tax, Croatia’s neighbors have started to introduce taxes on Croatians receiving benefits from pension funds based in their countries. Germany’s tax, in fact, is retroactive to 2007.
Also, after some signs of trepidation, Croatian voters approved the European Union accession treaty (IH 12/14/11) by a two-to-one margin. Full membership will tentatively be conferred on 1 Jul 2013.
UIF assets “consolidated”
Following the resignations of both employer and union representatives (IH 12/01/11), the Estonian Unemployment Insurance Fund has agreed to move its assets into general revenue where the Finance Ministry will take responsibility for the benefit’s sustainability. The transfer is due to take place on 30 Jun 2012.
Unisex insurance premium guidance – impact on pensions revisited; Various
Professional Pensions, Money Marketing, Euractiv
European Commission guidance on compliance with the end-of-the-year requirement for unisex insurance premiums was released quietly during the holiday season and had some coverage here (IH 01/05/12) before the industry press had reviewed it. Subsequent analysis warrants further mention of significant relief both for occupational pensions and insurance contracts.
- The guidance clearly indicates that occupational defined benefit schemes are exempt from the requirement for gender-neutral underwriting.
- Certain analysts have firmly concluded that occupational defined contribution plans share this exemption.
- Insurance contracts drawn up before 21 Dec 2012 are grandfathered and, to a limited extent, modifications to these contracts would not constitute a new contract subject to the gender-neutral requirement.
In other news:
- A European Court of Justice ruling has confirmed that the offshore oil drilling sector is subject to the social security rules of the nearest member state and that subsequently moving to another member state does not end a worker’s entitlement to social security benefits.
- Today is the deadline for delivery of a comprehensive review of the data protection rules including a draft revision of the directive. There is some uncertainty over whether lingering disputes will be resolved in time to meet this deadline.
- A public consultation has opened on the green paper Restructuring and anticipation of change: what lessons from recent experience?, which reviews best practices in limiting job loss in restructuring. Themes include employee consultation, flexible hours and job training. Stakeholders are invited to respond by 30 Mar 2012.
Crisis summit conclusions
Bloomberg, Le Monde, EFE
A tripartite summit on addressing the economic crisis has yielded a few notable conclusions (French only):
- A partial unemployment model would feature job training during part of the non-working periods.
- Enterprises that employ people under age 26 would be excused of all social charges for the first six months.
- The long-term unemployed would be targeted for job training.
- Proposals drawn from stakeholder consultations on financing social security should be published by the end of this month. This may include introduction of a "social" value-added tax (VAT).
- There has been no mention so far of the anticipated modifications to the 35-hour workweek.
IASB reviews ATZ early retirement incentive
The International Accounting Standards Board’s International Financial Reporting Standards Interpretations Committee (IFRIC) has decided to turn down a request from Germany’s accounting standards committee (DRSC) to provide interpretive guidance on the ATZ early retirement arrangement. ATZ offers senior employees an old-age part-time work arrangement, often with a cash incentive, as a type of phased retirement. At issue is whether the payment falls under the IAS 19 definition of termination benefit, triggering recognition as an immediate expense. A draft work agenda decision recognizing the expense as a service-related payment for accounting purposes is expected to be submitted for public consultation soon.
EU infringement proceedings
EU Observer, MTI, IPE
The European Commission has launched “accelerated” infringement proceedings against Hungary over three pressing complaints. One is treatment of the judiciary. The principle concern is precipitously reducing the retirement age for judges from 70 to 62, but Hungarian authorities have received a “wider information request on the independence of the judiciary” prompted in part by reduction of the Constitutional Court’s powers, which came in response to a challenge to the constitutionality of recent second-pillar scheme maneuvers (IH 01/19/12).
Pension funding guidance update; Sovereign Annuity Regulations take effect
Sunday Business Post, IPE
The Pensions Board has now issued an acknowledgment that it missed its own target date for release of guidance on underfunded defined benefit plans. The guidelines will arrive “as soon as possible” and the board assures trustees that they will give ample instruction on producing a recovery plan and adequate lead time for compliance with the new requirements.
The Pensions Board has also served notice that the Sovereign Annuity Regulations are now in effect. They amend existing regulations to set out the disclosure requirements for sovereign annuity products. Supporting documents, including a pair of FAQs, are linked.
Long-term temporary employment contracts
SIA, DutchNews.nl, fd.nl
Leaked communications between the social affairs minister and Parliament revealed that he is drafting a proposal for a regulatory framework on temporary employment contracts of seven to 10 years' duration. This would extend the current arrangement, which allows up to three short temporary contracts before a worker must be made permanent to stay on. This coincides with ministry efforts to improve the temporary agency worker sector’s reputation with a clampdown, including large fines and shutdowns, on “rogue” agencies that exploit an immigrant workforce.
Working hours smoking ban proposed
Norway Post, UPI
The health minister has advised Parliament that the next phase of tighter restrictions on smoking will ban designated indoor smoking areas in workplaces as well as smoking outside the entrances of public buildings. It would effectively amount to a ban on smoking during working hours.
Tripartite agreement on labor reform
GIDA, AFP, El Pais
Tripartite negotiators reached an agreement (Portuguese only) on emergency labor reforms only after a key union dropped out of the process, and the government shelved the proposal for a half-hour extension of the normal workday. According to news reports, a number of significant measures did survive:
- Statutory annual leave would drop from 25 days to 22.
- There would be a cutback on public holidays.
- A 150-hour cushion would allow some opportunity to aggregate normal work hours without triggering overtime premiums.
- Workers receiving unemployment benefits who take a lower-paying job would be able to receive up to half of their remaining benefit entitlement as a salary supplement.
- Statutory severance pay would be reduced and the restrictions on employee dismissals would be relaxed.
Health reform bill withdrawn
Rompres, GIDA, Mediafax
The draft health reform bill (IH 01/05/12) quickly filled the streets with angry citizens who viewed it as a symbol of both harsh austerity measures and government corruption. The ruling coalition has now withdrawn the legislation and given assurances that future drafts would no longer be based on a public/private partnership model. The administration now aims to have three to six months of consultations with social partners and other stakeholders prior to staging a public consultation when a new proposal takes shape.
Employment law reform package
Slovenia’s labour minister presented to the Cabinet (Slovenian only) a massive revision of the Employment Relations Act. A common theme woven through many new measures is an attempt to strike a flexicurity balance for workers. Highlights include:
- The duration of fixed-term contracts would be capped.
- Temporary workers would be eligible for severance pay and could be subject to noncompete clauses.
- The list of causes for justifiable dismissal would expand, the dismissal notification period would shrink and there would be a new ceiling for the severance pay entitlement.
- Seniority bonuses would be addressed in collective bargaining, rather than as a statutory right.
- The EU works council rules would be transposed.
Social partners miss labor market reform deadline
El Pais, GIDA, Negocios.com
When social partners could not meet the 15 January 2012 deadline for consensus (IH 01/11/12), the employment minister announced (Spanish only) that the administration will draft its own reforms. The expected centerpiece is a universal employment contract (IH 12/01/11) for use by both permanent and temporary workers. Other priorities include a less generous severance pay formula and moving collective bargaining down to the company level. The employment minister expects to have a draft ready by the end of this quarter while several press accounts state that there will be some kind of blueprint for the Cabinet to debate at its next meeting, 27 January,. The social partners had already agreed on a measure moving middle of the week holidays to Mondays – effectively ending the tradition of “bridging” long weekends. This was added to a small package of austerity measures that Parliament adopted last week.
National health insurance update
UKRANO, Forum, UMG
The administration is publicly debating the timetable for transforming the public health system to a national health insurance model. The legislation should be drafted by the end of this year and some officials back introduction in 2014. The Health Ministry favors collecting employer contributions and running pilot programs for a few years, ensuring a smooth launch in 2015-16.
Employee ownership initiative touted; Consultation on GMP equalisation; Various
Law and Tax, Public Finance; IPE
The administration’s campaign against excess executive compensation (IH 01/19/12) has freshly minted the phrase, "irresponsible capitalism.” Last week, the deputy prime minister delivered a speech promoting employee ownership as “responsible capitalism.” Looking forward to “the decade of employee ownership,” he announced that the government will confer with the business sector and professional bodies on developing a model that would appeal to all stakeholders. He anticipates tax incentives turning participation in an employee share scheme into a “routine decision” for British workers. Incidentally, the business secretary is now tipped to deliver his proposals for controlling excess executive remuneration this week.
Meanwhile, the Department for Work and Pensions (DPW) has opened a consultation on Draft Occupational Pension Schemes and Pension Protection Fund (Equality) (Amendment) Regulations 2012. It proposes rules for equalising Guaranteed Minimum Pension (GMP) benefits for men and women. Analysts are warning about the high cost and administrative burden. By one account, the proposal would allow men subject to the GMP to claim benefits at the age of 60. An appended document offers one possible methodology for equalising these pensions. The consultation welcomes feedback through 12 Apr 2012.
In other news:
- After the pension minister broadly hinted that he was amenable to ending compulsory indexing for occupational defined benefit plans, the press widely reported that indexation was about to end. A DWP official subsequently had to issue a statement asserting that “no decisions have been made.”
- The deputy prime minister’s initiative on voluntary employer adoption of anonymous CVs has quickly enrolled over 100 of the nation’s largest companies and appears on track to becoming a private sector standard.
- The six pension schemes that lost a High Court ruling in their test case for a pension unlocking scheme (IH 01/05/12) have committed to launching an appeal.
Class action waivers deemed illegal
The National Labor Relations Board (NLRB) has determined that it is illegal for employers to compel workers to sign arbitration agreements that forego the option of a class action suit. The right to collective action is enshrined in the National Labor Relations Act. In this case, a class action waiver required all employees to bring their claims individually to an arbitrator and barred the arbitrator from consolidating claims or awarding relief to more than one worker at a time.
Off-hours e-mail reviews qualify for overtime pay
CNN, Forbes, SFGate
Last month, the president signed a labor law amendment (Portuguese only) making workers eligible for overtime pay when they answer office emails or field phone calls from their employers after working hours. This attempt to control the influence of Blackberry culture on workers’ personal lives is widely appreciated – and envied – but workers and employers are confused about how this will work in practice. In February, the Supreme Labor Court will review the issue of how enhanced connectivity increasingly finds non-telecommuters working from home.
Clarification on auto-enrollment
The auto-enrollment requirement and eventually mandatory participation in the private pension system for independent contractors (IH 01/19/12) is limited to people who provide professional services, such as doctors, lawyers and accountants. In addition, when a 7% contribution to the public health system becomes mandatory for these workers in 2018, they will also be obliged to contribute a variable amount, based on occupation, to the work injury scheme.