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:
EU: Extensive revisions proposed for EU data privacy laws
India: Medical treatment protocols in development
Indonesia: New guidance on outsourcing
Turkey: New visa policies; National health insurance requirement for expats
UK: Auto-enrolment delay
New tax breaks
The National Assembly has passed a major package of tax measures that has yet to be gazetted, but is reported to feature some new deductions on certain types of remuneration:
- Meal and transportation allowances averaging AKZ25,000 (US$262.37) daily when aggregated on a monthly basis will be exempt from personal income tax (PIT).
- PIT is also waived for vacations and Christmas allowances up to 100% of base salary.
- Reimbursement of properly documented employment expenses will not be taxed as income.
- There are also documentation requirements for PIT waiver on housing allowances.
Union federation registered
The Times, Swazi Observer
A national union federation, the Trade Unions Congress of Swaziland (TUCOSWA), was created on 1 May 2011, but the Ministry of Labour and Social Security allegedly stonewalled its registration. Following considerable pressure from the unions, the labour commissioner produced a registration certificate for TUCOSWA last week.
Minimum wage doubled
Following consultations with “respective organs,” the labour minister doubled the monthly minimum wage to SH140,000 (US$87.61). The Zanzibar Employers Association (Zanema) maintains that there was no consultation on this move and insists on shelving it until it’s been vetted. The measure reportedly takes effect today.
Template labour agreement for targeted sector
The minister for immigration has announced a consultation on Discussion Paper: Exploring a template Labour Agreement for the Tourism and Hospitality Industry, a collaboration with the Department of Tourism on a model for bringing skilled foreign labour in to a sector with a “critical shortage.” This would entail modifying the 457 skilled visa program to allow for a permanent visa pathway. Comments are welcome through 16 Mar 2012.
In other news:
- Wage Connect, a new hiring subsidy for the long-term unemployed, is being introduced in select regions. Offsets to labour and training costs during the first six months of employment would average $5,700.
- A recent Fair Work Australia decision was flagged as a precedent for approving a policy that let workers subject to collective bargaining opt out of the agreement and negotiate an individual contract.
- The Australian Tax Office (ATO) has posted an FAQ page to help super fund administrators comply with the new super reforms.
Draft life insurance regs
The China Insurance Regulatory Commission (CIRC) conducted a brief consultation on the draft Rules for Life Insurance Operations (Chinese only). It features tighter rules on policy content, disclosure and marketing.
Medical treatment protocols in development
Business Standard, Business Line, The Hindu
The head of the Insurance Regulatory and Development Authority (IRDA) has divulged that a sidebar of the authority’s work on health insurance regulations (IH 01/05/12) is negotiation with the Health Ministry on developing standard protocols for the treatment of common medical conditions. Sources vary on how far along the process is, but two state that the Health Ministry has nearly completed over 100 protocols. Treatment protocols are viewed as an important way to rein in costs. Another IRDA project is an approach paper supporting health insurance coverage for mental illness, which is not addressed in most health insurance policies.
New guidance on outsourcing
Jakarta Post; Jakarta Globe
The Ministry of Manpower (MOM) has issued a letter on local enforcement of the Constitutional Court Decision on the legal status of temporary workers (PKWT) and outsourcing (IH 01/25/12). It broadly outlines employer compliance responsibilities. Employer association Apindo believes that this does not necessarily void existing temporary work contracts and plans to follow up with the Constitutional Court on whether severance pay is specifically included among the new entitlements for these workers. Further instruction from MOM is forthcoming and a ministerial decree will follow tripartite consultation.
Social security reform status
Kyodo News, Nikkei Report Jiji Press
The administration’s social security reform proposal (IH 01/11/12) will be introduced in the Diet next month and is already positioned as the top priority of this legislative session. The opposition parties have so far been unwilling to debate any reforms that entail a consumption tax hike. Already dominant in the upper house, the opposition is now trying to force an early election in the lower house, in part to ensure against the reform’s passage.
Shorter workweek initiative
AFP, Korea Herald, Straits Times
The president has now committed to cutting back on the customary long workweek and has instructed his staff to develop measures toward that end. The Labour Ministry has already identified legislative and enforcement measures. One measure would end the anomaly of excluding weekend and holiday work from the calculation of overtime. The ministry will also conduct more rigorous inspections for compliance with existing overtime rules.
Universal health coverage
MEIR, Lebanon This week
The Health Ministry plans to launch a “comprehensive health care coverage plan” by the end of this year. Uninsured citizens who have resided in Lebanon for at least a year would pay about US$65 per year and the premium would be waived for those under a certain income level. An assortment of health-related "sin taxes" and surcharges on investment profits would finance the plan's costs.
Bank wage system for expats
GIDA, Emirates 24/7, Saudi Gazette
A new law due to take effect “within the next three months” will establish a bank wage system requiring all employers to open bank accounts for their workers and pay them by direct deposit. This scheme, a companion to the “Nitaqat” Saudization program (IH 10/26/11) is also known as “wage Nitaqat” because mandatory regular payment through banks would help curb the rampant exploitation of expatriate workers, reducing the appeal of hiring non-nationals.
Health reform in Dubai
Khaleej Times, Gulf News.com, Emirates 24/7
Dubai is preparing legislation on a universal health insurance scheme with mandatory coverage for all that is expected to debut next year (IH 10/12/11). In advance of that, the Dubai Health Authority (DHA) has started to roll out a “comprehensive” set of regulatory policies and guidelines for the health sector. The DHA is aiming for international accreditation. Regulations on diagnostic procedures, home health care and outpatient surgery are among those queued for release as well as guidelines for medical records and health care facilities.
Early retirement targeted
Law and Tax, Austrian Independent
Both the vice chancellor and the finance minister have singled out retirement deferral as a key component of budget repair. They aim to increase the actual pension age by four years within the next decade, using both early retirement disincentives (IH 06/22/11) and tax incentives for delaying retirement.
EC faults health insurance rules
The European Commission has advised Bulgaria that its voluntary health insurance sector is not fully compliant with the EU's First and Third Non-life Insurance Directives. The EC has determined that Bulgaria's rules contain inadequate provisions on governance and funding as well as barriers to foreign investment.
Health insurance contribution cut proposed
The administration has unveiled a set of revenue measures in advance of the 2012 Budget. One adjustment would trim the 15% general health insurance contribution down to 13%.
Second-pillar pension update
The second-pillar pension reform has been gazetted and has not been impeded by the president’s reluctance to sign it (IH 12/07/11), but the opposition CSSD Party is staging a two-pronged assault on it. The CSSD has introduced a measure in the Chamber of Deputies that would postpone the scheme’s 2013 launch to 2016 – an action it’s advocated for months – and it is lobbying to move the 2014 election forward to this fall. The party's aim is winning that election and rescinding the new law before it’s implemented. A CSSD petition to nullify the law and unseat the current administration will soon be debated in Parliament.
Extensive revisions proposed for EU data privacy laws; More limits considered for banker remuneration; Various
Reuters, Professional Pensions, Euractiv
Revisions to 1995 EU data privacy rules that focus on modernizing and ensuring proper enforcement and setting global protection standards have been proposed by the European Commission. The current law, which applies to personal data (including employee data), prohibits the processing of certain personal data without explicit consent and requires adequate protection of data processed outside the EU. Proposed revisions include: imposing financial penalties if organizations breach the law; applying one set of rules to global companies operating in the EU; simplifying notification duties; strengthening national data privacy authorities; and establishing an EU data privacy body. One analyst warned that the revisions present significant new obligations for pension plan administrators. The proposed regulation and directive must first be agreed at EU level prior to EU enactment into member states’ laws.
The European Union's internal markets commissioner told Reuters in an exclusive interview that continued pay excesses in the banking sector will require more stern measures. One of the options he’s weighing is a fixed ratio between the lowest salary and the highest. Another would set base pay at a minimum percentage of total remuneration. Incidentally, while he advocated the financial transaction tax (IH 01/19/12) during his trip to London, he gave assurance that the tax “won’t be imposed on the UK against its will.”
In other news:
- The European Court of Justice (ECJ) gave a fairly flexible interpretation of fixed-term contract restrictions under EU directive 1999/70/EC in Case C-586/10. The ECJ noted that the directive’s goal is to “prevent abuse arising from the use of successive fixed-term employment contracts,” but determined that there is such a thing as “non-abusive use” of these contracts. At issue was a floating court clerk’s claim of protection from redundancy after a string of 13 fixed-term contract assignments (mostly covering leaves) over a period of 11 years. The issue now goes back to the member state court to consider the specific facts and circumstances, including the number and cumulative duration of the contracts.
- The European Court of Justice (ECJ) Case C-282/10 confirms that the EU Working Time Directive pre-empts a French law that makes annual leave entitlement conditional on performing at least 10 days of work in that year. The ECJ noted that the directive does not distinguish between workers who are absent from work on sick leave during the reference period and those who have worked.
- The pension industry and other stakeholders haven’t let up on the torrents of dire warnings over Solvency II and the prospective review of the IORP Directive (IH 01/11/12). Here is a contribution from Mercer.
Tax Analysts, IHT, Der Spiegel
The first-round vote of the presidential election is set for 22 April and the current president is barely holding onto second place, well behind the Socialist Party candidate. The administration’s economic recovery plans now formally feature the social VAT (value-added tax), which would offset social security premium cuts (IH 01/11/12), and include a youth employment scheme that would subsidize social security premiums for six months when a small enterprise hires someone under age 26 at a low wage. The left opposes the VAT increase as shifting tax burden to workers and retirees. One popular Socialist Party goal is decreasing the retirement age from 62 to 60.
State pension benefit formula under review
The minister for social protection is reviewing a plan to accelerate a closer alignment of contributions and benefits in the benefit formula for the state pension. Rather than factoring in both income level and contribution period, a minimum contribution period (doubled to 10 years) would earn a minimum pension and each additional year of contributions would move the benefit incrementally closer to the maximum benefit level awarded after 30 years of service. Initially penciled in for 2020, the change could come as early as this September.
Cabinet approves deregulation package
The Cabinet has passed (Italian only) a decree designed to stimulate the economy by cutting bureaucratic red tape in a number of areas. One measure introduces greater flexibility to the statutory leave for pregnant women. Another simplifies the process for hiring non-EU foreign workers. The decree took effect immediately but must be ratified by Parliament within 60 days.
Commuter tax break under review
The government is concerned that a 19 cents per kilometer tax break for people who drive to work has contributed to traffic congestion. The Finance Ministry and the Transport Ministry are reportedly looking into the implications of reducing the tax break as low as 12 cents per kilometer. A recent Finance Ministry paper on easing the traffic flow recommends a “personal mobility budget” that would grant equivalent rewards to workers who choose an alternative to the company car for commuting.
Stiff opposition to Agency Work Directive
SIA, Planet Labor
As a European Economic Area (EEA) member, Norway almost always transposes EU laws. The Temporary and Agency Workers Directive, however, is encountering stiff opposition from the unions. While it represents a net increase in worker protection for most affected jurisdictions, the directive would actually make Norway a more hospitable environment for fixed-term contracts.
Referendum on retirement age hike
PNB, Polskie Radio
Since the prime minister first unveiled plans to raise the retirement age for men and women from 65 and 60 respectively to 67 (IH 12/01/11), Poland’s largest trade union, Solidarity, has been collecting signatures to force a referendum on the proposal. With four days to go, they already have more than double the 500,000 signatures needed to trigger the process.
Second pillar scheme a campaign issue
The center-left Smer-SD party, which is expected to gain a majority of seats in next month’s election, has denied stories that it plans to scrap the second pillar pension (IH 10/05/11), but it has asserted that the scheme should be fully voluntary rather than auto-enrolment with an opt-out. The party’s opponents are now claiming that it would siphon some premiums from the second pillar scheme to the state pension. MSD, a junior ally of Smer-SD, has mounted a campaign equating second-pillar participation with stepping into an open manhole.
‛Legacy’ health reform package
The administration’s health reform program (IH 07/27/11) stalled when a government crisis forced an early election last December. The outgoing health minister has now presented six draft healthcare reform bills as a “legacy” to the next government. The legislation covers the health insurance sector, the scope of basic health coverage, patients’ rights, the pharmaceutical sector and medical records. It includes measures that would resolve the issues flagged in a recent European Court of Justice (ECJ) ruling (French only). The court's decision had confirmed European Commission concerns about bureaucratic barriers to foreign health insurers violating provisions of the non-life insurance directives.
Minimum wage referendum update
Swiss Info, The Local, Newsflash
The Trade Union Federation has now formally presented its petition for a 22SF (US$24) hourly minimum wage (IH 11/16/11) to the Federal Chancery. If Parliament approves it, the petition will be subject to a national referendum. The initiative also calls for cantonal and sectoral variations on the minimum wage.
New visa policies; National health insurance requirement for expats
Bianet, Asbarez, Bikyamasr
A stealth amendment to Law 5683 Related to Residence and Travels of Foreign Subjects was tentatively set to be enacted today. Many foreigners come in to Turkey on tourist visas of up to 90 days, get jobs and then briefly leave the country when it comes time to renew the visa. Under the amendment, one will have to leave Turkey upon expiration of a tourist visa and stay away for at least 90 days between visas. The alternative is to apply for a work visa. This entails securing an employer who is willing to pay at least TL1,330 (US$744 )per month (the minimum wage is TL701) and social insurance premiums. According to one source, the new visa rules apply only to workers from a few dozen countries and that list is expected to shrink.
Even more confusion surrounds a companion measure requiring that all expatriates who have lived in Turkey for at least a year to start contributing to the national health insurance scheme (approx 2,500 lira per year) by today or pay an 886.50lira (US$495) fine. Social Security Institute officials and foreign consulates have wildly varying explanations of how this would work. The British Embassy’s notice is typical of stakeholder responses. There does appear to be consensus that the deadline is pushed back to 29 February, the nationals of some countries (including the UK) will be exempt and negotiations between the Turkish government and stakeholders are ongoing.
See also: EU, paragraph 1
Proposals for combating excess remuneration; Auto-enrolment delay; Various
Financial Times, IHT, Telegraph
The business secretary has outlined a set of measures for reining in unwarranted executive pay (IH 01/19/12) in speeches before the House of Commons and the Social Market Foundation. Among the highlights:
- There will soon be a consultation on proposals to give shareholders binding votes on future pay policy and any director golden parachutes above one year’s salary.
- New disclosure requirements would include the future policy, an illustration of how pay policy was implemented in the most recent year and a single figure for total pay for each director. The ratio between CEO pay and average employee salary would be included.
- Employees would be consulted on pay policy and would have a right to consultation on pay deals.
- Clawback provisions would be mandatory for all large public companies.
- Corporate boards would need greater diversity and the posting of executive directors on other company’s boards would be curbed. The first requirement on boardroom diversity is slated for October 2012. There would also be more transparency in the role of remuneration consultants.
- A high pay centre will be established to monitor executive compensation.
Meanwhile, the Department for Work and Pensions (DWP) has revised its proposed timetable for the introduction of auto-enrolment, introducing several extra stages and pushing back the deadlines for both smaller enterprises and full employer contributions. Firms with at least 250 workers will start auto-enrolment on 1 Oct 2012 and conclude it on 1 Feb 2014 while those with fewer than 30 qualified employees will enrol from 1 Jan 2016 to 1 Apr 2017. The 1% minimum employer contribution will rise to 2% on 1 Oct 2017, then 3% on 1 Oct 2018. A consultation and draft regulations will soon follow.
In other news:
- The Financial Services Authority (FSA) is holding a consultation on Discussion Paper: Implementation of the Alternative Investment Fund Managers Directive, an initial step in preparing to comply with the AIFM Directive, which EU member states are required to do by 22 Jul 2013. The directive includes provisions for management remuneration policies and disclosure in hedge fund and private equity funds. The consultation closes on 23 Mar 2012. EU formal guidelines on pay issues under the directive are due by the end of the year.
- The pensions minister noted at a recent parliamentary hearing that the government had already reserved the right to cap administrative charges under the National Employment Savings Trust (NEST) scheme. He is poised to exert this right if pension fund managers do not show good faith in both cost containment and transparency on expenses. He also mentioned that the emergence of serious competition to the NEST scheme could force a review of the contribution cap and limits on portability.
- The deadline for transposition of the EU Parental Leave Directive is 8 Mar 2012, but the industry press has learned that the UK will exercise its option of postponing compliance by a year to March 2013.
Antigua and Barbuda
Tax on benefits and allowances postponed
Last month, Inland Revenue issued a pair of notices advising taxpayers that the 1 Jan 2012 start date for including many benefits and allowances in gross salary (IH 01/11/12) is formally postponed because the consultation is not over yet. One bulletin reportedly announced that the start date is moved to 1 Mar 2012. The one posted on the government website simply announces that the stakeholder consultation is still underway, so the new regime and its start date are not yet decided. The bulletin thanks employers who were “proactive” in deducting the tax from the start of the year but asks them to stop until further notice.
Pension reform previewed
Globe and Mail, Canadian Business, National Post
The Prime Minister delivered a speech at Davos that outlined his reform agenda and placed pension reform at the heart of it. While there were no concrete proposals in the speech, it is widely believed that “the changes necessary to ensure sustainability” will feature a proposal to raise the public pension scheme retirement age from 65 to 67 obtained from a recently leaked internal document.
Insourcing initiative; FATCA guidance due
Boston Herald, Washington Post, Tax Analysts
Insourcing was a major theme in the President’s State of the Union Address. It was fleshed out in a fact sheet and a subsequent speech. The removal of tax deductions for expenses associated with outsourcing and the creation of tax breaks for moving jobs back to the US are expected to average out as revenue neutral. The administration will attempt to expedite the necessary legislation through Congress.
Meanwhile, the Internal Revenue Service (IRS) has missed its 31 January deadline for issuing further Foreign Account Tax Compliance Act (FATCA) guidance (IH 12/21/11), but publication is reportedly just days away. IRS officials have been advising stakeholders that the guidance will reflect sensitivity to concerns about administrative burden, privacy violations and unintended consequences. Some relief is expected for foreign retirement plans (IH 11/02/11), but there is little confidence that problems will be fully addressed.