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: Parliament passes private health insurance changes
Estonia: Occupational pensions law
India: EPF interest rate lowered
Korea: Broader definition of income for health insurance premiums
Turkey: Guidance on health insurance mandate for foreign nationals
UK: Government consults on executive pay measures
Central African Republic
Tax break for employer pension contributions
The National Assembly has passed the 2012 Budget, which introduces a corporate income tax break on insurance premiums for employee retirement schemes. A qualifying plan would have to serve a group of employees, not just a select few.
Strike vote bill disputed
This Day, The Moment, Leadership
A proposed amendment to the Trades Union Act was temporarily shelved after furious debate over whether it was a less than subtle move to suppress strikes. Backers say that requiring unions to vote on a strike, with a simple majority sufficient for approval, would conform to global best practices and curb political uses of union muscle. There was support among legislators for holding a public consultation on the measure before bringing it back to the floor.
Parliament passes private health insurance changes
SMH, The Australian, AAP
Fairer Private Health Insurance Incentives Bill 2012 has finally passed in Parliament, four years after the proposal to means test the private health insurance rebate (IH 2/23/12) was first broached. Companion legislation, Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2012 and Fairer Private Health Incentives (Medicare Levy Surcharge) Bill 2012, cleared their final votes on the same day. The Department of Health posted guidance earlier this month. The government provides a rebate on private health insurance cover as a percentage of the actual cost of premiums paid. Under the new arrangement, which will come into effect on 1 Jul 2012, the rebate and the Medicare levy surcharge (MLS) will be means tested. The level of rebate an individual is entitled to claim and the rate of MLS an individual is required to pay will depend on the individual’s (or family’s) income.
Australia streamlines permanent visa program
SMH, The Advertiser, Workpermit.com
The Immigration Department has introduced major changes to the process for securing a permanent employer-sponsored visa, in an attempt to match the limited number of available visas with the best possible applicants. From 1 July, the process for moving from a temporary (subclass 457) visa to a permanent visa will be simplified and expedited. Changes include loosening English language requirements for workers who already have 457 visas and raising the upper age limit for permanent visa holders from 45 to 50.
Proposal to curb workplace fatalities
China Daily, Market Watch
The latest session of the National People’s Congress had a bumper crop of proposals to improve the lot of working people. Notable among them was a proposal from the first migrant worker elected to the legislature, who proposed stricter controls on overtime hours in the interest of both occupational safety and reducing the incidence of death from overwork. An NPC standing committee will now determine whether to make this motion the basis for legislation.
EPF interest rate lowered
Economic Times, Business Line, Indian Express
The Labour Ministry has informed the Employees’ Provident Fund Organisation (EPFO) that the employees’ provident fund’s gravity-defying 9.5% guaranteed interest rate (IH 12/14/11) will drop to 8.25% for 2011-12. This sharpest reduction in years was occasioned by Finance Ministry projections of ballooning deficits if the rate stayed any higher.
India releases 2012-13 Union Budget
The Finance Ministry has posted the 2012-13 Union Budget. Among its highlights:
- The parliamentary standing committees on finance have delivered reports on the overdue Pension Fund Regulatory Development Agency (PFRDA) bill (IH 1/05/12) to the Finance Ministry, which confirmed it as a priority for this session of Parliament.
- A tax deduction of up to Rs5,000 (US$75.66) would be introduced for preventive health check-ups and there would be an Rs15,000 tax deduction to subsidize the purchase of health insurance for one’s parents.
- The eligibility conditions for tax exemptions on life insurance would be tightened. The insurance laws would be amended to raise the foreign direct investment threshold for insurance companies from 26% to 49%.
- Employers would be required to deduct 10% of the remuneration paid to a director that is not in the nature of salary.
NPS touted as an alternative to EPF
MoneyWire, Economic Times, Hindustan Times
The chairman of acting pension regulator PFRDA (Pension Fund Regulatory and Development Authority) has now taken up the cause of establishing the New Pension Scheme (NPS) as a legitimate alternative to participation in the Employees’ Provident Fund (EPF). The NPS has not lived up to expectations and the PFRDA has started to reform the scheme. While setting out to correct admitted "flaws” in NPS design, the PFRDA believes that it has advantages over EPF and would benefit from direct competition.
Pension safety net proposal
Jerusalem Post, Ha’aretz
The Treasury’s economic stimulus package includes a proposal for a limited pension safety net. It would guarantee benefits only for participants age 60 and up who earn less than twice the minimum wage, approximately ILS7,700 (US$2,051) per month and it would not be retroactive. The package is advancing with some urgency – already approved by heads of the main political parties and the Knesset Finance Committee – but few are satisfied with the size of the safety net. The Prime Minister will soon host a discussion on how to affordably design an adequate safety net.
Ruling party moves to extend pension, health coverage to part-timers
The ruling Democratic Party of Japan (DPJ) has outlined its plan (Japanese only) to extend pension and health insurance coverage to a broader swath of part-time and other nonregular workers. In companies with over 500 workers, individuals with annual income over 940,000 yen (US$11,332) whose work schedules average at least 20 hours per week would be eligible for social insurance after one year of employment. The legislation will be submitted to the current Diet session and is expected to come into force in April 2016. Reports indicate there may be some concessions to disproportionately affected industries such as the retail and restaurant sectors.
Pension reform update
Daily Yomiuri, Kyodo News, Tax Analysts
The prime minister intends to place legislation on subsidizing social security with a higher consumption tax before the Diet by the end of this month, but it must first overcome resistance from some cabinet members and the junior partners of the ruling coalition. Once in the Diet, the bill has poor prospects in the House of Councillors and an uncertain future in the House of Representatives, which could override the upper house with a two-thirds vote. Measures on integrating the civil servant pension program with the “kosei nenkin” scheme for the private sector will be in this package. The integration would start in October 2015, but premiums would not be fully harmonized until September 2018.
Day care consolidation plan
The Democratic Party of Japan’s social welfare reform package includes a plan to combine existing pre-school models into a single “comprehensive garden” for children, designed to offer optimal relief for working parents. Part-timers and other irregular workers would be entitled to enroll their children in these facilities, which would take children as young as age 2. The program is expected to launch in fiscal 2015.
Broader definition of income for health insurance premiums
A Health & Welfare Ministry press release outlines the draft enforcement rules for implementing an amendment to the National Health Insurance Act that will extend the definition of income subject to the health insurance premium to “total income,” including investment gains and rental income for all those whose non-wage monthly income exceeds 6 million won (US$5,363). Comments are welcome through 28 Mar 2012. The change is slated to take effect on 1 Sep 2012.
New universal health scheme already under review
Miadhu, Haveeru, Minivan
The Aasandha (Dhivehi only) universal health scheme (IH 12/21/11) was finally launched at the start of this year and pent-up demand flooded the system with 40% of the population seeking medical care in the first several weeks. The National Social Protection Agency (NSPA) has concluded that Assandha will not be sustainable unless some kind of cost-sharing mechanism is introduced soon. Officials hope to have a blueprint ready this week.
Foreign investment bill
Al Jazeera, Reuters
Myanmar’s courtship of foreign investors is intensifying with the initial accounts of draft legislation produced by the Foreign Investment Commission. Foreign companies would no longer be required to have local partners and there would be an array of strong tax incentives, provided these requirements were met:
- All unskilled workers in the enterprise were Burmese.
- After five years, there would be a 25% quota for locals in the skilled workforce. That would rise to 50% after 10 years, 75% after 15.
- The companies would be responsible for local worker training and skills development.
The bill has to get through Parliament.
Tax policy agenda
Inland Revenue has outlined Tax Policy Work Programme 2012-13. Among its top priorities for the coming year are:
- Studying the tax treatment of foreign retirement savings
- Exploring the tax regimes of certain untaxed benefits that are substitutes for salary
- Reviewing the tax status of employee allowances
The revenue minister’s speech noted that a discussion document regarding New Zealand residents' foreign superannuation would be released in the first half of 2012. He added that an issues paper on employee benefits topics is being prepared and will likely be released before the middle of this year.
Industrial relations bill becomes law
PNP, Business Recorder, INN
The National Assembly unanimously assented to the Senate’s text of Industrial Relations Bill 2012 (IH 3/14/12) without amendment and the president promptly signed it into law. A National Industrial Relations Commission will now be established to oversee industrial relations and resolve disputes in the Islamabad Capital Territory as well as those concerning trans-provincial matters.
Senate approves workplace discrimination bill
Business World, Tempo
The Senate has passed in its third and final reading SB 429 (IH 3/14/12), legislation that would expand employment discrimination protection for women. A bicameral conference committee will now reconcile the bill with its House counterpart.
Philhealth rate cut for OFWs
Philippine Star, TNS
The Philippine Health Insurance Corporation (Philhealth) announced some modifications to its sharp premium increase (IH 1/05/12) for overseas foreign workers (OFW). The July 1 doubling to P2,400 (US$55.74) is put off to 1 Jan 2013. Moreover, those OFWs signing up for two-year contracts will have their contribution frozen at P1,200 for the duration.
Dual minimum wage debate
China post, Asia Pulse, CNA
The economics minister’s proposal to create a separate minimum wage for foreign workers is opposed by the labor minister and has occasioned some heated debate in the Legislative Yuan, according to news reports. The Council of Labor Affairs aims to raise the hourly minimum wage from NT103 (US$3.50) to NT115 and the argument has been advanced that it's unaffordable in large part because foreign workers share the entitlement. The counter-argument is that a dual minimum wage risks flooding the job market with cheap foreign labor and could be seen as facilitating foreign labor abuses that could subject Taiwan to international sanctions.
Parental leave safeguard proposed
Taipei Times, CNA
The Council of Labor Affairs has lent its support to a legislator’s proposal to protect the jobs of workers on parental leave. The draft amendment to the Gender Equality in Employment Act would bar businesses from turning away a worker returning from parental leave. Evolving business needs or downsizing would no longer exempt employers from this requirement and there would be stiff penalties for violations.
Minimum wage pushback
Bangkok Post, The Nation
Forty-two companies employing over 5.4 million workers have asked the Central Administrative Court to issue an injunction against the minimum wage hike that is set to phase in from 1 April. They charge that the tripartite Central Wage Committee cut corners to deliver on the ruling party’s campaign promise rather than adequately vetting the proposal. Some manufacturers have threatened to relocate to neighboring countries with cheaper labor if there is no relief from this wage hike. A few have already committed and Myanmar’s new drive for foreign investment (see above) is getting plenty of attention.
Coalition agrees on new austerity package
Reuters, Flanders News
The six parties of the ruling coalition have reached an accord (French only) on an outline for a new austerity program to meet its commitment to lower the public sector deficit to 2.8% of GDP in 2012, from 3.8% in 2011. The measures reportedly include a higher tax rate on benefits from non-EEA pension schemes and a strong shift to generic substitutions in the drug market. These austerity measures are on top of a planned rise in the retirement age and a tax increase on company cars.
Retreat on pension freeze
The prime minister and the economy ministers have backed away from a plan to freeze the state pension for three years (IH 3/07/12). They are instead reviewing several alternative pension indexation formulas. The prime minister favors a modified version of the existing formula that references both inflation and wage inflation. Incidentally, the opposition CSSD party’s proposal to postpone the 2013 launch of second-pillar pension reform from 2013 to 2016 (IH 2/01/12) was soundly defeated in the Chamber of Deputies.
Occupational pensions law
The legislature has quietly passed Investment Funds Law Amendment (Estonian only), which features provisions amending the regulations on supplementary funded pensions to establish a regulatory framework for occupational pensions. It covers registration, governance, funding and disclosure requirements for employer-sponsored pensions as well as requirements for cross-border schemes.
Collective bargaining law amended
GIDA, Baltic Course
Parliament has approved labour law amendments that allow employers to shut down a collective labour contract when bargaining over a new contract has stalled. A non-term contract will require six months’ notice to participants before closure while a fixed-term contract will need three. A wave of strikes earlier this month was attributed in part to the nature of these amendments and the lack of consultation on them. Subsequent concessions to workers included some modifications to the bill and convening social partners to negotiate collective bargaining rights reform.
Central clearing requirements under Dodd-Frank
Financial News, IPE
Stakeholders who have been fixated on how to contend with the recently postponed central counterparty (CCP) requirement for derivatives trading (IH 3/14/12) are being warned that CCP will now be required for derivatives trading with US banks and their subsidiaries under the US’s Dodd-Frank Act’s financial services reforms. Analysts expect an exemption for US bank subsidiaries – as distinct from branches – and recommend that pension funds suspend derivatives trade with US entities until then.
Compromise on Solvency II Directive
Captive.com, Reuters, Post Online
Two major parties have reached an agreement on a key sticking point of the Solvency II Directive and Parliament’s Economic Affairs Committee has scheduled a vote on the text for 21 March. A matching premium mechanism, newly renamed “matching symmetrical adjuster,” would allow providers of annuities and other long-term insurance products to adjust the discount rate for calculating capital requirements in certain circumstances. The insurance industry is cautiously optimistic and eager to see the details. If Parliament approves this text, the next step will be negotiations among Parliament, the European Commission and member states.
Health premium cuts disputed
Berliner Zeitung, Tax news
A surplus in the health insurance reserve has generated proposals for contribution cuts. The finance minister and the health minister are reportedly preparing a 2013 Budget measure to trim the 15.5% premium to 15.4% while coalition partner Free Democratic Party aims to retire the quarterly practice fee. The head of the Christian Social Union plans to block these moves, reasoning that this extra funding is a buffer that could vanish quickly in an economic crisis.
Irish government reminded of DB commitments
The Independent, Irish Examiner
The Irish Association of Pension Funds (IAPF) has cautioned the Department of Social Protection against backing away from its commitment announced in November 2011 to devise a “more equitable outcome” for defined benefit scheme members when an underfunded pension plan is in wind-up. The government has not followed through on proposed changes to pension wind-up priority and IAPF had been alerted that this was no longer on its agenda. A department spokesman insisted that the proposal has not been dropped but would take careful study.
Labor reform deadline
AGI, Dow Jones, Business Week
The welfare minister is optimistic that tripartite negotiations on labor reform will bear fruit by Friday, 23 Mar 2012. The main sticking point is the government’s effort to add some flexibility to Article 18 of the Workers’ Statute, which entitles permanent workers to return to their jobs when unfair dismissal has been established. The government would like to offset this with greater accessibility to unemployment benefits and training as well as more rights for temporary workers (IH 3/07/12). If social partners reach an accord, the three major parties have agreed in principle to support the reform, so there should be little resistance in Parliament.
Ruling on salary disclosure
Polish News Bulletin
The Supreme Court has affirmed that workers are entitled to lodge information requests with their employers about the earnings of co-workers performing the same functions. Employers may not disclose pay information for specific colleagues, but refusal to divulge the salary range for a particular position may legitimately be regarded as a warning sign of discriminatory pay practices.
Voluntary health insurance mooted
PNB, Warsaw Voice, Europe-Health-Care
Legislation on the establishment of a voluntary private health insurance market with tax-deductible premiums (IH 3/16/11) was vetoed by the finance minister last year, but the Health Ministry is preparing a new proposal for publication by the end of this year. The aim is to make the public health system more competitive, but it is not yet clear whether the private sector would compete directly with the public health system for premiums.
Post-election pension reform prospects
Moscow Times, Reuters, RIA Novosti
The president-elect’s campaign promises leading into the recent election had included no rise in the pension age or the years of service required for a full pension, but authorities have now agreed to “carefully study” an article by a former finance minister claiming that the state pension will no longer be sustainable unless:
- The retirement age rises from 55 for women and 60 for men to at least 60 and 63 respectively by 2030
- The periods of service – which can now range as low as five years – are significantly increased
- Pensions are postponed for those who stay in the workforce after they reach retirement age
Despite the campaign promises, initial pension reform proposals from a Social Development Ministry working group (IH 11/09/11) are scheduled to arrive soon after the recent election and they are expected to give further momentum to those backing a retirement age hike.
Social security coordination directives coming into force
Swiss regulations implementing the EU cross-border social security directives 833/2004 and 987/2009 will come into force on 1 Apr 2012. They introduce new rules for social security coverage of people employed in more than one member state. A transitional rule for workers already in these assignments gives them 10 years with the optional application of these rules.
Guidance on health insurance mandate for foreign nationals
Turkey’s Social Security Institute (SGK) has posted a presentation that goes a long way toward clarifying the new requirement that from 1 Jan 2012 foreign nationals join Turkey’s Universal Health Insurance (UHI) scheme (IH 2/29/12). It examines a wide array of exemptions from the mandate including:
- Citizens of the 24 nations that have bilateral social security agreements with Turkey
- Workers on temporary assignment to Turkey
- Foreign residents already covered by another voluntary or mandatory health insurance plan
- Expatriates who have been in Turkey for over a year but with significant residency breaks
UHI benefits and the application process are explained for both those who must sign up and those who choose to do so.
Government consults on executive pay measures
The Guardian, Financial Times, Daily Telegraph
The UK’s Department for Business Innovation & Skills has opened a consultation, Executive Pay: Consultation on Enhanced Shareholder Voting Rights, addressing some of the ideas previewed in earlier ministerial speeches (IH 2/01/12). Primary legislation could be proposed in the next parliamentary legislative session. Proposed measures that would significantly enhance shareholder voting rights on executive pay include the following:
- Shareholders would be granted an annual binding vote on future remuneration policy. Approval would likely require more than a simple majority.
- An annual advisory vote reviewing the previous year’s implementation of remuneration policy would be taken. Companies would report annually on how this policy has reflected shareholder concerns.
- Any top management severance payment of more than one year’s salary would be subject to a binding vote.
Feedback is welcome through 27 Apr 2012.
Parliamentary committee’s NEST critique
Financial Times, Reuters, IPE
The UK Parliament’s Work and Pensions Committee has created a stir with its report, Automatic enrolment in workplace pensions and the National Employment Savings Trust, pronouncing the National Employment Savings Trust (NEST) scheme rules to be “impossible.” It asserts that the cap on annual member contributions and the ban on transferring small pension pots into a NEST scheme are critical flaws that undermine its mission and that they should be removed “as a matter of urgency.” The roll-out of pension auto-enrolment will commence with larger companies in October 2012. Mercer’s press release addresses ramifications of the committee’s proposals.
UK consults on dismissal laws
The Independent, Personnel Today, BBC
The UK’s Department for Business Innovation & Skills (BIS) has issued Call for Evidence: ‘Compensated No Fault Dismissal,' inviting stakeholder feedback on both existing rules for dismissal procedures and the idea of allowing compensated no-fault dismissal in enterprises with fewer than 10 workers. The Business Secretary is admittedly “skeptical” about introducing no-fault dismissal, but he sees value in reviewing the delicate balance between business needs and employment security. Comments are invited until 8 June.
Government’s coalition partner debates pension reforms
The UK government’s junior coalition partner, the Liberal Democrats, has endorsed a motion at the party’s recent conference that outlines its perspective on future pension reforms including:
- Measures to stabilize the environment for defined benefit schemes, including reform of actuarial valuation rules and resistance to European-level legislation with unintended consequences
- Simplification and risk reduction for defined contribution schemes
- Investigation of transparency and disclosure charges as well as administrative and investment fees
- Paid training leave entitlement for pension scheme trustees
The speech introducing the motion endorsed the pension minister’s idea to create a new hybrid pension scheme model (IH 2/29/12) termed “defined aspiration.” The concept would appear to be gaining some traction.
See also: EU, par 1
Senate OKs pension funding stabilization
Pension discount-rate stabilization reforms have passed the US Senate – with some modifications – as part of highway legislation, S.1813. The Senate-passed reforms offer significant short-term funding relief for 2012 and 2013, phasing down over five years. The bill also extends Section 420 transfers to retiree health accounts through 2021 and allows use of transferred funds toward retiree life insurance and health care benefits. Action now moves to the House, where the outlook is uncertain. Subscribers and Mercer colleagues may access a GRIST on the measure here.
Final health plan exchange rules released
The Department of Health and Human Services announced publication of the final regulations on state-level health insurance exchanges. From 1 Jan 2014, individuals and small businesses will have access to a health insurance marketplace in which they have economy of scale for signing on with qualifying health plans. The regulations grant the states considerable flexibility in designing these exchanges. Future regulations will address the federal role in developing health insurance exchanges for the states that cannot or will not develop them. Select subscribers and Mercer colleagues may access a GRIST and additional resources here.
Ruling on taxation of foreign source income
The Tax Administration has posted Consultation N.5.507 (Spanish only), a ruling on the tax treatment of the portion of income that a worker routinely receives for work performed outside of the country. The ruling sets out the criteria under which a worker’s role is confirmed to be Uruguay-based, thus subjecting his entire salary to Uruguayan personal income tax.