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: Default super funds in modern awards; Means testing bill advances
EU: White Paper on pensions; EIOPA advice on IORP Directive revision
India: Tripartite Labour Conference recommendations
Singapore: 2012 Budget
Spain: More on labor reform decree
Push for private pension regulatory framework
Rules for the private pensions sector have been a priority for the National Bank of Rwanda (BNR) since 2006 (IH 11/08/06). The necessary insurance and pension measures are now making slow progress through Parliament and BNR is urging legislators to expedite them. The measures address provider licensing, standards for operating pension schemes and sector oversight.
Work permit system consolidation
GIDA, Tanzania Daily News
The work permit system is a poorly coordinated collaboration among the Immigration Department, the Tanzania Investment Centre and the Ministry of Labour. This is both daunting for foreign workers and vulnerable to abuse. The government has now committed to streamlining the work permit operation into a single centralized system.
Default super funds in modern awards; Means testing bill advances; Second tranche of Stronger Super legislation; Exposure Drafts on super disclosure
The Australian, SMH, Investor Daily
Australia's Treasury has tasked the Productivity Commission with conducting the Public Inquiry Default Superannuation Funds in Modern Awards to develop transparent and objective criteria for selection and ongoing assessment of default funds. The considerations include:
- Proper balance of risk and expected return
- Provider fees, including any charges upon termination of employment
An issue paper is due later this month and comments are welcome through 5 Apr 2012. The commission's final report to the government is due 6 Oct 2012.
Also, Fairer Private Health Insurance Incentives Bill 2011 (IH 02/15/12) has squeaked through a critical second reading vote in the House of Commons and should face no major hurdles. Means testing of the private health insurance rebate is now on track to take effect on 1 Jul 2012. However, the head of the opposition Liberal Party has abandoned a short-lived noncommittal stance on the issue. He characterized his party as "ferocious in our opposition" to the law and eager to repeal it "as soon as we can."
Meanwhile, the Treasury has published Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012, which analysts have complained is too close to the December Exposure Draft (IH 01/05/12). There had been complaints about unclear and burdensome new trustee obligations. While there are some clarifications and refinements in the bill, responses to most concerns are evidently deferred to the regulations.
In addition, Australia's Treasury held brief consultations on two Exposure Drafts for proposed legislation on superannuation disclosure. Exposure Draft – Disclosure of Superannuation Information would allow the Australian Taxation office to disclose a super participant's information to fund providers and administrators. Exposure Draft – Payslip Reporting of Superannuation Contributions details the disclosure of employer superannuation contributions that would have to appear on pay slips.
Direct Taxes Code, 2012
The Bangladesh National Board of Revenue has posted its draft Direct Taxes Code, 2012, a major package of tax law amendments. It features the tax regimes for pensions and provident funds as well as guidance on valuation of perquisites such as motor vehicles, loans, stock options and accommodations. The legislation is expected to reach Parliament in June and come into effect on 1 Jul 2012.
Dispute resolution initiative
Xinhua's China Economic Information Service
The Ministry of Human Resources and Social Security (MOHRSS) has posted an agenda (Chinese only) for introducing county-level arbitration offices for workplace dispute resolution by 2015. This follows freshly enacted regulations (IH 12/21/11) requiring dispute mediation committees on all large enterprises. The institutionalized arbitration layer is depicted as essential because labor disputes have become so prevalent.
Indian Labour Conference pushes reforms
The Hindu, Business Standard, Zee News
The 44th session of the tripartite Indian Labour Conference produced a notable package of recommendations:
- Statutory maternity leave under the Maternity Benefits Act should double to 24 weeks.
- There should be a National Minimum Wage covering all employment.
- The Rs6,500 monthly wage ceiling for Employees Provident Fund (EPF) contributions should rise to Rs15,000 (US$304).
- The EPF minimum monthly benefit should be Rs1,000.
- The five-year continuous service requirement for gratuity payment should be reduced and service credits from employers should be portable.
The Confederation of Indian Industry dissented on the gratuity proposal and the maternity change has also been questioned. The government will deliver a response to these recommendations within six months. The prime minister’s address to the conference advocated a "critical" review of current labour laws for greater parity for part-time workers and better work/life balance to make the job market more accessible to women.
More rights for contract workers
Ha’aretz, Jerusalem Post, Business Week
Union federation Histadrut ended a general strike after reaching separate agreements with employer representatives and the Treasury. By Histadrut’s account, contract workers performing a company’s core functions will become permanent after nine months on the job. Other contract workers will benefit from an “equalization” of many of the conditions set out in a collective bargaining agreement, sharply reducing the incentive for employers to keep them temporary.
Workplace bullying report
Japan Times, Japan Today, ILO
The Ministry of Health, Labour and Welfare has issued a Roundtable Working Group report (Japanese only) on workplace bullying of subordinates, or "power harassment." Power harassment can include verbal abuse, violence and physical offenses, isolation, impossible tasks, "under-demanding" tasks and invasion of privacy. The report proposes that management and labor develop clear policies to address the practice and conduct surveys, training and consciousness-raising exercises to help prevent and resolve the harassment.
Nonregular worker cutbacks; Paternity leave proposal
KBS, Korea Times
Now that the nonregular worker protection legislation has been promulgated, both major parties are promising further improvements for these workers in advance of the 11 April parliamentary election. Estimates of Korea’s nonregular workforce range from one-third to half of total employment. The main opposition would halve that population within five years while the ruling party promises to transition at least 200,000 to full-time jobs within three years.
Meanwhile, the Ministry of Employment and Labor (MOEL) reportedly backs a set of parental leave proposals that would upgrade the three-day unpaid paternity leave to three days' paid plus two days' unpaid. Another measure would call for reasonable accommodation of shorter workweek requests from a parent of a child under age six.
Guidance on tax treatment of severance pay; Flexible retirement bill
IBFD, Asia One, Malaysia Insider
The Inland Revenue Board of Malaysia has issued new guidance on the tax treatment of compensation paid for loss of employment. Public Ruling No. 1/2012: Compensation for loss of Employment sets out an umbrella tax regime for a range of payments that could be due when an employment contract ends. Broadly, there are schedules of tax breaks for compensation attributable to loss of employment, but payment attributable to past service can be taxed as a gratuity. The ruling also offers guidance on apportionment of tax treatment when termination payments have characteristics of both types of tax status.
Also, the retirement age hike legislation (IH 01/11/12) due next month will have concessions for both early and deferred retirement. The Human Resources Minister said that while employers would not be able to retire workers before age 60, employees would retain the right to take Employees’ Provident Fund (EPF) withdrawals at age 55. At age 60, the employer and employee would have the option of agreeing to an additional four years of service.
2012 Budget; CPF interest rate update
AFP, CNA, Xinhua
Singapore's deputy prime minister and finance minister delivered the 2012 budget speech, Budget 2012: An Inclusive Society, A Stronger Singapore, offering the government's responses on some high-profile issues:
- Initiatives to provide a more secure future for the elderly feature a significant moderation of the schedule that reduces employer Central Provident Fund (CPF) contributions for workers age 50 and over (IH 02/15/12). The drop from 16% to 12% at 50, 9% at 55 and 6.5% at 60 would now be 14%, 10.5% and 7% respectively.
- A Special Employment Credit (SEC) of up to 8% for employers of older workers would help offset the higher CPF premiums.
- An SEC of 16% of an employee’s monthly income, up to $240 per month, would be provided to employers that hire Persons With Disabilities of all ages who have graduated from Special Education schools.
- An effort to curb dependency on foreign workers would gradually lower the Dependency Ratio Ceilings, which specify the maximum proportion of foreign workers that companies can hire in key sectors. The reductions would apply for new foreign workers from 1 Jul 2012 and come into force for the entire staff from 30 Jun 2014.
- The increased cost of extending Medishield coverage from age 85 to 90 would be lessened by one-off Medisave top-ups.
- An Enabling Masterplan would use training programs, job placement and incentives to help improve the job market for the disabled.
Also, the Central Provident Fund Board announced that the Ordinary Account risk-free interest rate for the April- June 2012 quarter will remain 2.5%. This is in addition to the 1% interest on the first $60,000 (US$47,623) of a member’s combined balances.
Social security contribution dip
The 5% employer and employee superannuation contribution on up to Bhat15,000 (US$486.855) per month is getting some temporary relief in 2012. It is cut to 3% for the first six months and 4% for the balance of the year. On 1 Jan 2013, it reverts to 5%.
Cabinet backs austerity package
Austrian Independent, APA, Tax Analysts
Austria's Cabinet has approved the Finance Ministry's economic reform package and it has good prospects for clearing Parliament with few changes. Among the highlights:
- Eligibility for early retirement and disability pensions would be tightened.
- Workers would have to continue paying unemployment contributions until they reach the minimum age for retirement.
- Pension benefits would increase at a rate below the CPI in 2013 and 2014.
- An employer terminating a worker’s employment contract could be faced with a "manipulation charge."
- Abuses of the "block time agreement" for subsidizing reduced hours for older workers nearing retirement would be curbed.
- EUR1.4 billion would be cut from social insurance spending between now and 2016.
The measures could take effect as early as April.
Ruling on topping up Slovak pensions
Prague Daily Monitor, Radio Prague
The European Court of Justice (ECJ) has ruled in the past that it was discriminatory for the Czech Republic to award pension supplements to Czech citizens who had earned significantly lower Slovak pensions when Czechoslovakia was still a single country. The Czech Constitutional Court heard a challenge to this ruling and decided that the ECJ decision was flawed, so the supplements will be reinstated.
White Paper on pensions; EIOPA advice on IORP Directive revision; ICT rules advance in Parliament; Board diversity debate
Expatica, Professional Pensions, IPE
The European Commission’s White Paper: An Agenda for Adequate, Safe and Sustainable Pensions (IH 02/15/12) proposes a range of initiatives for ensuring adequate retirement income in an ageing society:
- Private retirement schemes, particularly occupational pensions should be encouraged with tax and other incentives.
- There should be further restriction of early retirement programs.
- Recommended retirement deferral approaches include an automatic longevity peg for the retirement age and equal retirement age for men and women.
- Older workers need a more hospitable job market.
- The supplementary pension rights of mobile workers should be reinforced by both promoting member state legislation and developing pension tracking services.
There is mention that this year’s revision of the IORP (Institutions for Occupational Retirement Provision) Directive (see next paragraph) will seek a “level playing field” with the Solvency II rules but, as the Commissioner in charge of financial regulation noted, it would be far from a “copy and paste” exercise.
Also, the European Insurance and Occupational Pension Authority (EIOPA) has delivered its much anticipated response to the European Commission’s (EC) call for advice on revising the Institutions for Occupational Retirement Provision (IORP) Directive (IH 07/14/11). EIOPA offers some flexibility on the Solvency II funding requirements (IH 02/01/12). It calls for a “holistic balance sheet” approach to pension capital requirements to allow for the diversity of member state occupational pension system regulation, while also capturing these systems on a single balance sheet. There would first be a quantitative impact study (QIS) on this method. EIOPA also embraces some qualitative requirements of Solvency II, such as governance and risk management.
Another proposal in the package recommends a Key Information Document with a core set of standard information for all defined contribution plans operating in the EU. QIS terms of reference will be released next month and the study results are due in the second half of this year, so the EC may have to push back its timetable for delivering a final draft of the revision by the end of the year. Recently, Mercer and other stakeholders had noted significant issues with the EIOPA consultation, such as the lack of consideration on the issue of deficit funding.
Parliament’s Civil Liberties Committee has approved the draft directive on intra-company transfers (IH 07/14/10) after the adoption of a number of amendments (item 25) that would:
- Facilitate family reunification for ICTs during their postings
- Allow transfers to other EU countries for up to half the duration of the work permit
- Refine the definitions of eligible managers, specialists and trainees
Committee members will now negotiate with the European Council to clear the path for a co-decision between Parliament and the Council.
Recent discussions at the EU Council of Employment, Social Policy, Health and Consumer Affairs Ministers (EPSCO) concluded that the gender balance of corporate boards requires improvement, although member states remain divided on the role for legislation. The European Commission is due to report in March on the progress of voluntary efforts to remedy the boardroom “glass ceiling”. Furthermore, the EU’s work programme for 2012 lists a legislative (albeit “soft law”) proposal addressing gender board diversity.
Finance bill advances
IBFD, Le Figaro, Bulletin Quotidien
France's National Assembly has adopted Amending Finance Law for 2012 (IH 02/15/12) and easy passage in the Senate is expected by 9 March. Along with the Financial Transaction Tax (FTT) and social Value-Added Tax (VAT) measures, the bill includes a provision that would raise the generalized social contribution (CSG) on income from capital from 8.2% to 10.2%, effective 1 Oct 2012.
Dual earner couple disincentive
The OECD Economic Survey of Germany 2012 has garnered some attention in the press with its illustration of the tax system’s inadvertent favoritism toward single-earner families. A family’s secondary earner faces a higher marginal tax rate plus public health insurance premium upon crossing the salary threshold of €400 per week, so the spouses of full-time workers are often motivated to take part-time work. The OECD recommends lowering that marginal tax rate and making the health insurance premium mandatory for non-working spouses.
Early pension withdrawals nixed
Irish Times, Irish Independent, IPE
Earlier this month, the parliamentary committee on jobs, social protection and education fielded a proposal from the Irish Brokers Association to let financially strapped people take early withdrawals from their pension savings. Some committee members enthused over this approach, but the Jobs, Enterprise and Innovation Minister ruled out the plan as having a disproportionate impact on a worker’s pension savings.
Ruling against benefit cut for working pensioners
BNS, Baltic Daily
The Constitutional Court has delivered a decision on the constitutionality of the 2010 Budget provisions that temporarily reduced pensioner benefits for 2010-11 (IH 12/16/09). The court determined that modest benefit cuts (averaging 5%) during an economic emergency were legitimate, but that the disproportionately high cuts (ranging up to 70%) for working pensioners were unconstitutional.
Pension rights do not expire; Various
DutchNews.nl, IPE, IPE
The Supreme Court ruled in a high-profile case that employee pension rights accrued over several years in a sectoral pension fund were undiminished even though the employer had failed to make contributions. The pension fund was ultimately responsible for honoring the rights of these workers and should have kept better track of the employer. The ruling suggested that a fund could amend its rules to specify that member pensions do not accrue when their employers do not contribute.
In other news:
- The European Court of Justice ruled in case C-594/10 that Dutch flat-rate VAT (value-added tax) treatment of private use of business assets – in this case a company car – fails to factor in the extent of actual use. The case is now referred back to the national court.
- New legislation with considerable support in Parliament would extend the right to reasonable accommodation of flexible hours requests to workers in small enterprises and end the six-month service requirement for this right. Employers would need “serious reasons” for turning down such a request. The bill includes provisions fortifying the employee right to telecommute.
- The Senate has passed a measure that would allow pensioners to join the boards of sectoral pension funds. The Social Affairs Minister will forward pension fund governance legislation to Parliament next month that would affirm pensioner representation but set a ceiling for the number of pensioners on a board. Both bills aim for 1 Jan 2013 entry into force and stakeholders have asked that they be harmonized.
Pension reform consultation, indexing court challenge
PNB, Warsaw Voice
Polish government proposals (IH 12/01/11) to reform the Act on Pensions and Disability Pensions are undergoing a 30-day stakeholder consultation (Polish only). Proposals include raising the retirement age for both men and women starting in 2013 to age 67 -- by 2020 for men and 2040 for women. The Economy Ministry has come up with a possible compromise that would enable women to be credited three years for each child but precludes retirement before age 60. Trade union Solidarity has collected 1.4 million signatures in a successful petition to force a nationwide referendum on this plan
Separately, the president has already signed an unpopular measure that would suspend the pension indexation formula for 2012, replacing it with a lump sum of 71 zlotys (US$23), but he has now submitted (Polish only) it to the Constitutional Court for review.
Bonuses in foreign offices taxable
The Finance Ministry’s Guidance Letter 03-04-06/6-13 states that when a Russian legal entity pays bonuses to employees working at a representative office abroad, that is Russian-source income subject to Russian income tax. This holds true whether or not an employee is otherwise defined as a Russian resident for tax purposes.
Health reform continuity
The new Health Minister plans to use his predecessor’s health reform “legacy” legislation (IH 02/01/12) as the starting point for his own reforms. A review in collaboration with the Finance Minister may lead to some major changes, but the former health minister is invited to have an active role in this reform package, which the administration aims to implement within six months.
More on labor reform decree; Phased retirement study
Euro Weekly, IHT, Expatica
Additional reports on Spain’s labor market reform decree (IH 02/15/12) have provided more detail:
- The benchmark for a hardship severance pay reduction (20 days' salary per year worked with a one-year ceiling) would be three consecutive quarters of decreased revenue.
- Two quarters of revenue losses could warrant suspension of a collective agreement.
- New contracts for small and medium enterprises (fewer than 50 employees) would be allowed to have one-year probation periods.
- Up to 5% of an employee’s work hours could be variable and overtime would be allowed for part-time workers.
The administration is confident that it has the votes to get the bill ratified in Parliament, but the head of the opposition – who has pledged cooperation with most other reforms – has warned that he is “deeply against” the decree and will be offering amendments.
Meanwhile, the employment minister has revealed that her office is considering new measures to expand the options for deferring retirement. Currently, workers may keep their jobs and collect their pensions only if they sharply reduce their working hours. One scenario under consideration would spare them that trade-off.
Higher thresholds proposed for sectoral bargaining
The Labour Ministry has submitted draft legislation to Parliament that would raise the threshold for trade union participation in collective bargaining. A union would need at least 40% representation to negotiate in a workplace. The 3% minimum representation for sectoral collective bargaining (up from 0.5%) would leave many unions that now bargain at the sectoral level coming up short.
Reduced pension relief for high earners pegged
Professional Pensions, Financial Times, Citywire
It had been reported in recent weeks that the deputy prime minister and other top members of the junior coalition partner Liberal Democratic Party were pressing the administration to include reduced pension tax relief for the well-off in the March budget. The prime minister and chancellor reportedly have now been won over to this approach. One commonly reported scenario would see all those earning over £100,000 annually lose their higher rate tax relief on pension contributions. Another would simply lower the annual £50,000 ceiling on tax relief for pension contributions.
Social security sustainability report challenged
Chronicle Herald, Canadian Press
The Parliamentary Budget Officer’s (BPO) report on the sustainability of the Old Age Security Program (IH 02/15/12) gained a more central role in the pension reform debate when the Finance Minister assailed it as “unbelievable, unreliable, incredible.” The BPO responded with a detailed letter to legislators explaining the study’s methodology.
Social security tax cut, unemployment benefit extended; Final regs on H-2B workers; Various
NYT, Bloomberg, Market Watch
Congress has passed H.R. 3630, Middle Class Tax Relief and Job Creation Act of 2012, legislation to extend a 2% Social Security payroll tax cut through 31 Dec 2012 (IH 01/05/12). The bill also includes an extension of emergency unemployment benefits. One of the late-stage compromises in this package will cut the duration of unemployment benefits from 99 weeks to a 63-73 week range, depending on a state’s unemployment level.
The US Department of Labor has issued Final Rule: Temporary Non-agricultural Employment of H-2B Aliens in the United States along with a series of fact sheets highlighting the extensive changes from earlier rules. US employers in the hospitality, health care, landscaping, manufacturing, lumbering and food-service industries often turn to H-2B visas to meet one-time, seasonal, peak-load and intermittent employment needs. The rule attempts to strike a balance between the rights of foreign workers who qualify for H-2B status and prioritizing jobs for US workers. Highlights include:
- A nationwide electronic registry will post all jobs for which H-2B workers are sought and the recruitment period for qualified US workers will be extended.
- A new certification model will establish greater certainty that the foreign workers brought in under this program will receive equal pay. Conversely, H-2B worker benefits such as travel allowances will be extended to US citizens performing the same work.
- Employers will be required to pay foreign workers for at least three-quarters of the period of their contract and their transportation home.
The rule will take effect on 23 Apr 2012.
In other news:
- It should be noted that the requirement for retirement plan service providers to disclose fees to employers/plan sponsors included in final regulations issued earlier this month (IH 02/15/12) applies to defined benefit plans as well as defined contribution plans.
- Two important provisions of the 2013 Budget (IH 02/15/12) took a while to surface. Individuals earning over $200,000 and joint filers earning over $250,000 would only be able to deduct 28% of the value of their employer-provided health coverage. There is also a clarification stating that ESOPs (employee stock ownership plans) awarded in a divorce are not subject to recapture tax.
- The National Labor Relations Board (NLRB) issued an Operations Management Memo reviewing 14 cases of social media restriction in the workplace. It concludes that workplace social media policy should be devised carefully and should avoid common violations of federal labor law.
Effective date deferred for health coverage continuation rule; Maternity leave expansion proposed
The National Supplementary Health Agency (ANS) has posted a notice (Portuguese only) that the Normative Resolution No. 279 rules on post-employment health coverage (IH 01/11/12) that had been slated to come into effect today will not take force until 1 Jun 2012. The ANS conceded that the initial deadline had not factored in the complexity of complying with the rule.