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International Headlines - 28 March 2012

Written by: Patrick Sweeney



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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: Super guarantee rise clears Parliament
Germany: Pension reform package
Italy: PM to bypass social partners for labor reform
Japan: Retirement deferral, age hike bill
Netherlands: FTK2 previewed
Philippines: Mandatory profit-sharing proposal
UK: Budget 2012






Ghana launches three-tier pension scheme
Business Ghana, Ghana Business News, My Joy


The slow implementation of the 2008 National Pensions Act’s three-tier pension scheme (IH 9/15/10) has finally reached critical mass with a National Pensions Regulatory Authority (NPRA) press release and speech alerting stakeholders to the scheme’s arrival. Two mandatory schemes and a voluntary scheme comprise the new contributory pension plan. The first wave of pension fund managers, custodians and trustees have now been registered. The NPRA website has posted several new guidelines and application forms as well as an implementation timetable with stages spanning 16 March through 31 May.



South Africa


Labor reform bills reach South Africa’s Parliament
Fin24, New Age


Labor broking would be subject to stricter regulations under new bills just approved by South Africa’s Cabinet (Labour Relations Amendment Bill and Basic Conditions of Employment Amendment Bill). However, the proposed changes fall short of the outright ban demanded by the Congress of South African Trade Unions (COSATU). The measures would limit temporary employment to work of a truly temporary nature with a six-month cap, unless the employer can document the need for a special exception. Temporary workers would be paid the same amount as their permanent counterparts. Another notable measure being reported would make it easier to fire employees earning over R1M (US$130,191) per year by barring them from bringing unfair dismissal claims. Parliament will soon hold a public consultation on the bills. (From: Fin24, New Age)






Court OKs two-year noncompete clause


A recent high court ruling found that a two-year restraint of trade clause in an employment contract was reasonable despite its unusual duration. An executive agreed to sign the agreement partly because the compensation was generous and partly because he’d been advised that it was unenforceable. The court backed the clause because it did not violate any laws and was subject to specific negotiation between the parties. The court also noted that the executive had experience negotiating restraint clauses.


Super guarantee rise clears Parliament
Herald Sun, SMH


Employer contributions to Australians’ retirement security will rise following Senate passage of Superannuation Guarantee (Administration) Amendment Bill 2011 in its third and final reading. Between 1 Jul 2013 and 1 Jul 2019, the superannuation guarantee – the compulsory employer contribution – will increase from 9% to 12%. Also from 1 Jul 2013, the superannuation guarantee age limit --now 70 -- will be eliminated, ending a disincentive for employees considering delayed retirement.


'Dad and partner pay' proposed in Australia


Australia’s families minister announced the release of proposed “dad and partner pay” legislation that would expand on last year’s Paid Parental Leave Act. Paid Parental Leave and Other Legislation Amendment (Dad and Partner Pay and Other Measures) Bill, 2012 would introduce an entitlement to two weeks' pay for eligible fathers and partners, including adopting parents and partners in same-sex couples. The government-funded payment would be equal to the national minimum wage. The tentative implementation date is 1 Jan 2013.


Guidance on foreign source income issued
Tax Analysts, MMD


The Australian Tax Office has locked its sites on nondisclosure of foreign source income. Taxpayer Alert 2012/1, Non disclosure of foreign source income by Australian tax residents, reminds stakeholders that foreign pensions and some types of employment income are among the types of income subject to the disclosure requirements. Common arrangements that may mask foreign source income include use of offshore banks, loan arrangements and debit cards.





Draft labour law endgame
Gulf Daily News


Four years into their negotiations over a draft private-sector labour law (IH 3/24/10), Parliament is still rejecting the bulk of the Shura Council’s proposed amendments. The most prominent conflict is over unfair dismissal compensation, which Parliament insists should cover the balance of the contract period while the Shura Council would cap it at three months. If the Shura Council cannot compromise with Parliament at this point, the bill will be suspended.





Defined contribution model hampered by tax system
Asia Insurance Review


The China Insurance Regulatory Commission (CIRC) had identified the introduction of an individual tax-deferred defined contribution pension plan (IH 2/29/12) as a top priority for 2012. The issue was debated in the Chinese People’s Political Consultative Committee (CPPCC), which conceded that the Chinese tax collection system is not yet sophisticated enough to monitor personal income tax history as well as the scheme would require. Analysts noted that once the scheme is developed, local governments would play a significant role, such as determining the annual caps on the income that would be deferred in these plans.


New rules on MNC share schemes


The State Administration of Foreign Exchange (SAFE) has issued Circular No. 7 (Chinese only), which clarifies the rules on participation by a Chinese national in an overseas listed company’s incentive stock scheme. It details the registration process and disclosure requirements. The rule covers a broader range of schemes and entities than its predecessor. It went into effect immediately upon its 16 Mar 2012 release.



Hong Kong


FAQ on share-based payment revised


Hong Kong’s Inland Revenue Department has revised its FAQ: Share-based Payment Transaction to reflect a change in the tax regime for stock compensation. Until now, share-based payments were only deductible when the shares were purchased on the open market. The tax break is now extended to share-based payments obtained through an issue of new shares.





Retirement deferral, age hike bill
Daily Yomiuri, Asia One, JILAF


The Cabinet has reportedly approved and forwarded to the Diet legislation that would gradually raise the retirement age (IH 10/19/11) while creating a more viable employment environment for older workers. From fiscal 2013, employers would be obliged to rehire workers who reach the retirement age of 60 but want to stay on up to age 65. From fiscal 2013 through 2025, the official retirement age would rise from 60 to 65. It’s worth noting that last month a proposal to raise the retirement age to 65 for government employees failed; the administration’s back-up position was a scheme to rehire willing workers at age 60 at 70% of their former salary.


KNK pension liquidation rules reviewed
Jiji Press, Nikkei Report


Kosei nenkin kikin, supplemental corporate pensions that often incorporate funds from the mandatory kosei nenkin corporate pension program, have been hit hard by low interest rates, a weak stock market and the recent pension funding scandal (IH 3/14/12). The ruling Democratic Party of Japan (DPJ) is investigating options for making it easier to liquidate these funds or to cut back on their guaranteed yields. Liquidation requires restoration of full funding and approval of three-quarters of participants. DPJ is considering lowering the threshold to approval by two-thirds majority.





Draft Labour Code disputed
Eng.24,AKI, BBC


A revised Labour Code had been slated for Cabinet approval on 23 March, but unions are furious over anti-worker provisions that the Economy Ministry insists are based on false impressions. According to detractors, the draft would:


  • Allow fixed-term contracts of any duration


  • Strip worker protections against unfair dismissal, including during sick leave and maternity leave


  • End the guaranteed minimum wage


  • Eliminate workers' compensation


The economy minister has invited unions to join in re-drafting the code and the Cabinet has scheduled another cabinet meeting for 7 April.





Minimum wage update
Bernama, Asia One, Malaysia Insider


The minimum wage increase announcement that was due earlier this month (IH 3/14/12) is now being postponed until Labour Day, 1 May. The prime minister is being tight-lipped about the details, but he has given assurances that there will be no mandates on the salaries of those workers earning higher than minimum wage.


Gender bias ruling
Malaysian Insider, Free Malaysia Today


A high-profile gender bias case was dismissed by the Court of Appeal on the grounds that it was unrelated to sex discrimination. The employer had revised its handbook to state that women must retire at age 50 – five years earlier than men – because their health problems start earlier. In practice, 90% of those women were rehired as contract workers without benefits.



New Zealand


Planning for demographic changes
Dominion Post


The treasury secretary opined in a recent speech that maintaining a retirement age of 65 is “pretty hard to justify,” despite the prime minister’s insistence that he will not raise it. The secretary said that the Treasury’s long-term fiscal statement due early next year will present a set of options for coping with an aging population.





Clarification on tax regime for allowances
Manila Bulletin, Philstar, GMA


The policy setting the ceiling on tax-exempt allowances and bonuses at P30,000 (US$699.13) per year in the public and private sectors will have no exceptions, the head of the Bureau of Internal Revenue (BIR) has stated. Christmas bonuses, including 13th month pay, are factored into this total, but some smaller amounts such as uniform or clothing allowances and cashed-in vacation leave are not.


Mandatory profit-sharing proposal
Philippine Star


The head of the House Committee on Labor and Employment has placed a proposal for mandatory profit-sharing in large companies on the committee’s agenda. He said that the government has a stake in this because it would compel greater transparency for company finances, making tax evasion more difficult.


Wage hike debate 
Business Inquirer, Philippine Star, Butalat


The House of Representatives Labor Committee has agreed to debate legislation that would require a P125 (US$2.91) across-the-board daily wage hike in private companies. Backers of HB 375 contend the increase would help wages recover after several years of lagging behind inflation. Critics, including the president, say that legislation should not usurp the roles of the Department of Labor and Employment (DOLE) and the Regional Tripartite Wages and Productivity Boards, which have already set out to expedite minimum wage increases.





Dual minimum wage nixed
China Post, Taipei Times


The debate over setting a separate minimum wage for foreign workers (IH 3/21/12) is effectively over, according to the head of the Executive Yuan. The Executive Yuan and the Presidential Office share the labour affairs minister’s concerns about the legality and ethics of a two-track minimum wage. The prime minister will, however, continue to study a model for a virtual offshore area operating on the Special Economic Zone model with minimum wage rules waived and possibly other economic incentives offered.





Minimum wage challenge fails
Bangkok Post, The Nation


The Central Administrative Court has dismissed a complaint brought against the minimum wage hike by dozens of large multinationals (IH 3/21/12). It reviewed the methodology of the tripartite Central Wage Committee in arriving at the Bt300 (US$9.76) per day figure and deemed both the calculations and the consultations to be sound. The new rate will debut in seven key provinces, including Bangkok, on 1 April.





Mandatory health insurance by 2014
Vietnam News, VNBS


The 2009 health reforms (IH 9/03/09) extended health insurance coverage to 60% of the population. A new program (Vietnamese only) will now make it compulsory for all citizens by 2014. Small private companies will be among those brought into the system. This program is accompanied by the 15 April launch of co-payment increases ranging up to six-fold for some materials and services. The Health Minister noted that the medical fees have lagged far behind wage inflation and that the poor would be nearly exempt.






Retirement age deferral incentives
TVR, Prime-Tass, BelaPAN, Telegraf


A presidential edict introduces a new schedule of retirement deferral incentives. Workers who postpone taking their pension when they reach normal retirement age -- 55 for women, 60 for men -- will have their benefits increased by:


  • 6% for a one-year delay


  • 14% for a two-year delay


  • 24% for a three-year delay


  • 36% for a four-year delay


  • 14% for each additional year


The edict also sets out pension calculation of periods spent caring for a severely disabled person, someone over 80 or small children, as well as periods of military service and full-time study. The edict was released soon after the president rejected the social security minister’s proposal to raise the retirement age by 2.5 years for both men and women.





EU proposes laws on posted workers’ rights


The European Union (EU) has issued two legislative proposals that would supplement existing EU legislation on the employment rights of workers posted to work for up two years in another EU member state. The EU posting of workers directive (PWD) has been the subject of important European Court of Justice judgments, with labor unions claiming that workers’ rights have been relegated below business freedoms. The proposed directive, which is subject to co-decision with the European Parliament, aims to achieve “better and more uniform implementation, application and enforcement” of the PWD, including requiring joint and several liability with sub-contractors in the construction sector. The proposed regulation sets out worker rights to take cross-border strike action in the context of companies exercising the freedoms of establishment and provision of services within the EU. European business representatives have criticized the proposal for bringing strike law into the scope of EU law and for elevating strike negotiations to EU level. European trade unions claim, however, that the proposed regulation still fails to balance workers’ rights with business freedoms. The proposed regulation will be discussed by member states in the Council of Ministers.


AG opinion on consultation timing in redundancy
Eversheds, Shoosmiths


The European Court of Justice’s Advocate General’s (AG) opinion in Case C-583/10 sets out to establish the “trigger point” at which an employer’s decision to lay-off staff obliges prior consultation with worker representatives. A foreign government had announced its decision to close a military base in the UK months before consulting civilian employees about its decision. The AG concluded that an employer’s duty to consult arises “when a strategic or commercial decision which compels him to contemplate or to plan for collective redundancies is made by a body or entity which controls the employer,” and not after the decision has been made and when the employer is planning to proceed with consequential redundancies.





Pension reform package
The Local, Plan Sponsor


The Ministry of Labour and Social Affairs has posted an outline of the administration’s pension reform agenda:


  • Reforms to the Riester-Rente voluntary defined contribution scheme would include caps on administrative charges and a standardized product information sheet (IH 3/07/12).


  • The income-testing formula for those who stay employed while earning a pension would sharply increase the allowable earned income.


  • Employers would be able to negotiate with employees over additional voluntary employer contributions to statutory pension insurance.


  • A mandatory retirement scheme is planned for all self-employed persons.


The Labour Ministry and the Finance Ministry will collaborate on the details.


Momentum for gender quotas in management
Der Spiegel


With evidence that voluntary initiatives have had little success in increasing the number of women on the boards of Germany companies (IH 3/14/12), the German Cabinet and the ruling coalition have been divided over whether a gender quota should be mandated. The chancellor, who has hesitated about introducing a compulsory quota in the past, is reportedly interested in making it a campaign issue for the 2013 federal elections, if legislation is not passed sooner.


Changes to German family leave policy proposed
Focus, La Tribune


The German cabinet has approved and forwarded to the Bundestag the minister for family affairs’ eighth report, Time for Children (German only), which proposes some significant changes to family leave policy.


  • Currently, parents are entitled to up to three years' leave from a child's birth until her third birthday, with 12 months of that leave remaining available when the child is between 3 and 8 years of age. Under the proposal, parental leave available during that later period would double to 24 months, and the cap on the child's age would be removed.


  • From September 2013, all working grandparents would be able to take short unpaid leaves or work reduced hours to care for grandchildren.


  • From August 2013, the right to day care placement now afforded children above age 3 would extend to those in their first year of life.


The Family Affairs Minister also announced a “time policy" initiative that would better align the schedules of schools, day care centers and government agencies to further assist parents with work/life balance.





PM to bypass social partners for labor reform
NYT, The Economist, ANSA


Social partner negotiation on labor reform (IH 3/21/12) broke down last week, so the prime minister quickly secured the cabinet’s approval for his own package of labor law amendments. The draft is not immediately being sent to Parliament and the text has not been made public, but press accounts report that it would:


  • Allow companies to compensate unfairly dismissed workers (up to 27 months’ pay by one account) rather than rehire them


  • Streamline dispute resolution in dismissals


  • Provide more security for nonregular workers


  • Introduce a paid paternity leave (IH 3/14/12)


  • Create a regulatory framework for gender quotas in the workplace


The administration aims to implement this package around mid-year.





FTK2 previewed


An official with the Dutch department of social affairs has reportedly advised the press that FTK2, the next generation of the Financial Assessment Framework (FTK) (Dutch only), will not allow underfunded pension funds to have recovery plans. Elimination of the present system’s recovery plans would require immediate recognition, and the funding buffer would increase by 5%. A new discount rate for long durations is under consideration and a pension contract for a “real but conditional pension” may supersede existing pension rights. The social affairs minister will outline his plans for FTK2 before Parliament next month.


DNB sued for ordering allocation cut 
European Pensions, Plan Sponsor, Pension Funds Online


The Dutch pension regulator, DNB, would appear to have lost face last week when a Rotterdam court ruled that it was wrong (Dutch only) to order pension fund SPVG to cut its 13% allocation in gold stock to 3%. The decision reportedly lost the pension fund €11 million. The pension fund challenged DNB’s position, and the court ruled that the regulator had not made clear the reason for the sale, beyond saying that the holding was not prudent. It is not known whether DNB will appeal.


Guidance on disclosure of administrative costs
European Pensions, IPE


The Federation of the Dutch Pension Funds has revised its guidance document Recommendation Implementation Costs (Dutch only), which was already in the vanguard of best practices for disclosure of plan administration costs. The recommendations include tighter definitions and “concrete tools” that will improve reporting of pension management, asset management and transaction costs. The recommendations carry “comply or explain” status.





Health reform consultation


Romania’s Health Ministry is holding a stakeholder consultation (Romanian only) on health reform measures drawn up in consultation with the UK’s National Institute for Health and Clinical Excellence (NICE). Two proposals under consideration would (i) set the maximum duration of hospital stays for each illness at the average figure applicable to the previous year and (ii) restrict access to those drugs that appear to be over-prescribed.





Job security proposed for some fathers


The Health Ministry has drafted (Russian only) an amendment to the Labor Code that would protect fathers from dismissal when they are the sole breadwinners of families with children under age 3 and the mother is devoted to full-time child-rearing. The press release mentions that the measure targets large families but doesn’t provide a threshold. This amendment would roughly equalize the treatment of men under a law that already protects the jobs of women with children under age 3 and single mothers with children below age 14.





Referendum rejects gay marriage rights bill
Jurist, AFP, Washington Post


Last week, a national referendum defeated legislation that would have given registered gay partnerships the same legal rights as married couples. The Family Law Bill cleared Parliament last year only after some dilution (IH 2/16/11) and had not yet been enacted into law. There must now be a one-year moratorium before a new family law is drafted.





EC ultimatum on foreign pension taxation
Tax Analysts, IPE


The European Commission has issued a second reasoned opinion to Sweden asking it to change its pension tax laws to end the discriminatory treatment of nonresident pension funds. Under current law, there is a withholding tax on dividends from these funds --30%, dropping to 15% if subject to a tax treaty. If Sweden does not provide a satisfactory response within two months, the Commission may refer the matter to the European Court of Justice.





Pension reform update
Kyiv Post, Ria Novosti, Interfax


Although Ukraine’s new pension reform law has been shelved (IH 9/28/11), the government is still obliged under the terms of an IMF loan to raise the retirement age, which is currently 55 for women and 60 for men. Facing stiff opposition, the prime minister has announced his intention to gradually increase the retirement age to 65 for both men and women. He can take heart that a large majority in Parliament recently voted down a bill that would have precluded any increase in the retirement age or length of service before 1 Jan 2030. The average life expectancy in the Ukraine is 61 for men and 73 for women.



United Kingdom


Consultation on same-sex civil marriage
BBC, IFA, The Independent, The Telegraph


The UK's Home Office has launched Equal Civil Marriage: a consultation to solicit public feedback on granting same-sex couples the right to a civil marriage in England and Wales. This proposal follows the introduction of civil partnerships in 2005. Other government departments are looking into how social security and employment laws, including state pensions and survivor benefits in occupational pension schemes, may have to be revised. Comments are welcome through 14 Jun 2012.


Budget 2012
Professional Pensions, Pensions Age, IPE


The chancellor has delivered the Budget Statement 2012 that includes some significant proposals, many involving pension reform:


  • A white paper due this summer will propose setting an automatic longevity peg for the state pension.


  • The two-tier arrangement for the state pension would be replaced by a flat-rate “universal” pension. Estimated at £155 per week, the benefit would not be subject to means testing and is expected to launch in 2015.


  • Age-related personal allowance will be frozen next year and limited to existing recipients.


  • The debt management office will consult on whether there is a market for 50-year gilts (government bonds) and “perpetual gilts” with no fixed redemption dates (an earlier idea for 100-year gilts was not well-received).


  • Statutory Instrument 2012/884 tightens the eligibility criteria for Qualifying Recognised Overseas Pension Schemes (QROPS), most notably by disqualifying any schemes that allow taking out more than 30% in a lump sum. These final regulations come into effect on 6 Apr 2012.


  • The expected measures on lowering lifetime and annual allowances for pensions (IH 3/14/12) were not included but may be subject to future change.


  • A new pension infrastructure platform owned and run by UK pension funds will invest £2 billion in infrastructure by early 2013 (IH 12/01/11)


  • A tax loophole for employer contributions to be paid into the pension of an employee’s spouse or family member would close effective 6 Apr 2013.


  • Tax loopholes in life insurance policies are targeted and annual premiums for qualifying policies would be capped.


Mercer has issued a press release on some key budget provisions.


North America




Québec budget tabled March 20

The Québec budget tabled on 20 March focuses primarily on pension plans from an employee benefits perspective. The budget contains important yet incomplete details on the province's Voluntary Retirement Savings Plans (VRSP) program, and announces the government’s intent to table a bill this spring that will pave the way for the program's implementation on 1 January. VRSP is the Québec equivalent of the federally proposed Pooled Registered Retirement Plan vehicle. Québec is the first province to provide details of this new type of pension plan. Other provinces are expected to follow with their own schemes. The budget proposed other measures affecting employers, including a reduction in payroll contributions for employers participating in the acquisition of shares of a labour fund, a reduction in contributions to the Health Services Fund for employers employing workers age 65 or over, and the introduction of tax relief for public transportation organized by employers.


Ontario medical payment formula
Globe and Mail, Toronto Star, National Post


Ontario’s Minister of Health has introduced a new patient-based funding model that the province will phase in over the next three years starting 1 April. Other than a few dozen smaller, rural hospitals that are exempt, the new Health Based Allocation Model (HBAM) will determine 46% of hospitals’ budgets this year, rising to 70% in 2014, reducing the current lump sum payment practice in an effort to increase hospital budget transparency. In addition, certain select procedures will be compensated on a “fee-per-service” basis, ensuring that different hospitals receive the same reimbursement for performing the same procedure.





New conditions for business tax deductions


A major package of income tax deductions that came into force on 25 Feb 2012 set new terms for corporate tax deductions. Employee remuneration is only deductible when social security contributions are being paid. Bonuses for directors and top management are deductible when they are based on actual profits.



United States


Congress OKs say-on-pay exemption for new firms

Congress has cleared for the president's expected signature a bill to exempt certain newly public companies from the Dodd-Frank Act's say-on-pay shareholder vote requirement and its pay-for-performance and internal pay equity disclosures. Given final approval by the House on March 27 by a vote of 380-41, the Jumpstart Our Business Startups (JOBS) Act (HR 3606), will exempt a new category of issuers -- "emerging growth companies" -- from certain Dodd-Frank requirements for five years or until they exceed $1 billion in annual gross revenue or become large accelerated filers.


South America




Minimum wage hike
Dow Jones, Trading Charts, Peru This Week

The president has announced that the second tranche of a 25% minimum wage hike promised during his first year in office will arrive in the second quarter of this year. The monthly 600 soles hit 675 last August and will reach 750 soles (US$283) by the end of June.



Mercer International Headlines is published by the US international consulting practice library of Mercer. Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.


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