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.

South Africa

Taxation Laws Amendment Bill, 2010; Government role in labour broking; Debate on strike limits
The Star, Business Day, Cape Times
The Finance Minister has presented Taxation Laws Amendment Bill to the National Assembly. It would entitle lump-sum severance payments to the same tax break and lifetime limit as lump-sum payments from retirement schemes (IH 05/19/10). This package also includes the modified tax regime on employer-provided cars (IH 08/11/10).

Meanwhile, it turns out that the labour broking bill has one more controversial feature that eclipses the others (IH 08/18/10). The Department of Labour would manage a public employment service operating on a scale that would be a de facto nationalization of temporary employment agencies because the private sector would have trouble competing. In addition, a huge public sector strike is reviving talk on curbing the right to strike in essential services. Despite a Labour Court ruling against a public health service shutdown, hospitals have been reduced to essentially military medical staff conducting triage operations under military protection. Unions will announce today whether they have accepted the government's latest wage offer.

China

Wage reforms
BBC, The Statesman

The Financial and Economic Affairs Committee of the National People’s Congress (NPC) has proposed including income redistribution measures in the 12th five-year plan (2011-15). The goals are to foster a more robust middle class and to reverse a growing income gap. Details of the proposal, which reportedly includes social security measures, are not yet available. Another measure before the NPC would set criminal charges for nonpayment of wages. Jail terms would run as high as seven years.

Hong Kong

MPF portability update
SCMP

The Mandatory Provident Fund Schemes Authority still has not committed to a date for enactment of the new portability law (IH 07/22/09), but stakeholders are consistently preparing to have it in place in the first half of 2011.

India

Direct Taxes Code bill; NPS review
Money Control, Times of India, Economic Times
The Cabinet has approved legislation based on the draft Direct Taxes Code released in June (IH 06/23/10). Most importantly, it confirms that an exempt-exempt-exempt tax regime will apply to fundamentally all retirement schemes. While there is still some uncertainty on this point, it appears that ULIPs (unit-linked insurance products) that include pensions will have the distinction of being the only retirement schemes taxed at distribution (IH 06/30/10).  Another provision would end the tax deduction for equity-linked tax savings schemes (ELSS)  from April 1, 2012. The new code should come into effect in April 2011.

Also, the Pension Fund Regulatory and Development Authority (PFRDA) recently appointed a Committee to Review Implementation of Informal Sector Pension (CRIISP) to determine why the National Pension System (NPS) is off to such a slow start and how to make it more appealing. One concern is how to limit expenses while making NPS sustainable.

Korea

Tax revision package
Tax Analysts, DRE, Koilaf
The Finance Ministry has posted 2010 Tax Revision Plan, which features proposals to boost the job market and cushion the impact of population ageing:

• From 2011-2012, employers would receive a 10million won (US$8,000) tax break for each net gain in staff over the previous year.
  
  
• The tax exemption on pension contributions would rise from 3 million won (US$2,400) to 4 million.
  
  
• Part of the effort to steer retirees into annuities would be a reduction in the tax break for lump-sum distributions from 45% to 40%.

Lebanon

NSSF funding crunch; Measures to combat sex discrimination
Daily Star
The National Social Security Fund faces a financing shortfall at the same time that hospitals are in a compensation dispute with the system and cutting back on all but essential services to NSSF patients. The Labor Minister has proposed increasing subscription fees by 1% each for employers and employees. He also has recommended raising the LL1.5 million monthly subscription ceiling to LL2.5 million (US$1,666).

Also, the heads of two parliamentary committees have drafted a set of sex discrimination measures that would give women equal rights under inheritance, pension and tax laws. More anti-discrimination bills will follow.

New Zealand

Consultations on labour reform bills; Clarification on super compulsion; Closing date for fund withdrawal tax
NZH, NZPA, Scoop
When Parliament posted Holidays Amendment Bill and Employment Relations Amendment Bill (No2) last month (IH 08/26/10), both had links for brief consultations. The feedback periods end on September 17 and September 13, respectively. Stakeholders have requested a longer consultation, particularly now that ambiguities are emerging and background papers show that the government ignored Department of Labour advice on some key matters and failed to consult the department on at least on major provision.

Also, Mark Nelson noted that while the Labour Party has criticized the administration for punting the issue of compulsory KiwiSaver schemes to a working group (IH 08/26/10), Labour itself is still examining a “range of options to improve and strengthen KiwiSaver.”  Between auto-enrolment and “a truly compulsory scheme” a party spokesman sees a variety of measures, such as serial auto-reenrolment, to make the KiwiSaver more “universal.”

In addition, Supplementary Order Paper No 156 to Taxation(Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill would replace a plan to start phase out of the fund withdrawal tax in October 2010 with full repeal of the tax in April 2011. Compliance would have posed an excessive administrative burden.

Saudi Arabia

Fatwah over female cashiers
AFP, AP, Sify
The nation’s largest hypermarket chain recently launched a high-profile pilot project allowing women to work as cashiers transacting with male shoppers. A conservative cleric issued a fatwah calling for the chain’s boycott and the women were re-segregated. Saudi Arabia’s most senior religious leader proclaimed the fatwah illegitimate, but it was not clear whether any issue besides jurisdiction was being addressed. The company has yet to respond, but a rival chain has since hired female cashiers to work in the "family-only" sections of its markets.

Singapore

Consultation on dispute resolution
CNA
The Ministry of Manpower (MOM) has opened a brief online public consultation on an employment dispute resolution mechanism serving professionals, managers and executives (PMEs) earning up to S$4,500 (US$3,326) per month. The consultation is over on September 9.

Vietnam

Penalties under Health Insurance Law
Baomoi, VNB

Some provisions of the Health Insurance Law (IH12/23/09) are now mildly weaponized with health ministry regulations setting an array of fines for employers that fail to pay fees and hospitals that submit fraudulent charges. They would range as high as VND2.5 million (US$128.34) and VND20 million respectively. By one account, the regulations still need the Cabinet’s approval. No further word on the medical copayment provisions of this law (IH 08/11/10).

Austria

Green card due this year; Overtime reforms urged
Dow Jones, APA, Austrian Independent
The Minister of Interior Affairs has advised the press that a work permit system based on the US green card model will be introduced by the end of this year. The permit will be granted to individuals rather than families and the award will be based on education, work experience and proficiency in German.

Also, the 2011 Budget is due by mid-October and stakeholders are urging the administration to include job creation measures. One target is tax breaks on overtime hours that make it more appealing to extend hours than to hire new staff. Proposals include rescinding the tax break, raising the overtime premium and setting an employer levy on overtime hours to help fund unemployment benefits. Another factor holding back job growth is the proliferation of uncompensated overtime.

Czech Republic

Consultation on Labour Code revisions
CTK, Prague Monitor, Radio Prague
The administration will hold tripartite consultations on a set of draft amendments to the Labour Code (IH 08/11/10) this month. According to the most recent accounts, people who quit their jobs would still be entitled to unemployment benefits, but at a reduced rate, and the new severance pay formula will feature sharp reductions for those who have been on the job for a short period. The Labour Ministry aims to have the measures in effect soon after the start of next year.

Estonia

Consultation on pension taxation measures
Tax Analysts
The Finance Ministry is holding a stakeholder consultation (Estonian only) on Pensions Act and Associated Acts Amendment Act, which would:

• Cap both employer and employee annual contributions to third pillar pension schemes at the lesser of €4,000 and 15% of gross income
  
  
• Extend this preferential tax treatment to pension funds based outside the European Economic Area
  
  
• Allow second-pillar fund transfer three times a year, up from one
  

The tax amendments should come into force on January 1, 2011, while the portability measures are slated for April1, 2011.

EU

Internal migration challenge
Expatica, EU Observer, Euractiv
This is not strictly a worker mobility issue, but a warning sign of borders being less porous in a tight economy. The 10-12 million Roma (aka gypsies) in the EU are EU citizens and all member states are involved in a Roma inclusion project, but certain states are asserting their right to deport unemployed Roma. The EU Commissioner for Justice announced that she is checking into possible infractions of EU law in a recent series of crackdowns on Roma in France. Italy and France have invited officials from selected member states for an immigration summit to determine whether minimum income or self-sufficiency standards should be allowed for screening internal migrants. The Roma issue may stall the entry of Romania and Bulgaria into the Schengen area, which is now set for March 2011. The European Parliament reconvenes this week with a debate on the Roma issue.

France

Pension reform flexibility
AFP, WSJ, Les Echos
Parliamentary debate on pension reform will start on September 7 and unions will mark the occasion with a “day of massive strikes.”  The Labour Minister has indicated that the government has some flexibility on certain aspects of the legislation and has invited the unions to consult on possible amendments, but no takers yet.

Germany

Cabinet backs privacy bill; Various
The Local, Deutsche Welle, ADP
Though existing laws prohibit accessing a person’s personal information without consent, the administration has determined that new technologies require more explicit legislation. A package (German only) of measures approved by the Cabinet last week would fine-tune (German only) the protection:

• Companies would not be able to include restricted access social networking sites like Facebook in their background checks on job candidates.
  
  
• Any web content that is fully accessible via a keyword search is fair game for gathering information on workers.
  
  
• Workplace video surveillance would be allowed in fully public areas (not changing rooms) provided it is amply disclosed.
  
  
• Medical examinations for job applicants would be restricted to those occupations for which a clean bill of health is crucial.
  
  
• There would be limits (too vague for some tastes) on monitoring workplace internet use and employing position tracking systems.
  

In other news:

• The main opposition Social Democratic Party (SPD) is rebelling against a retirement age hike that it approved when it was a coalition partner. Incremental increases in the retirement age that are set to start in 2012 would be deferred to no earlier than 2015, contingent on the ratio of people age 60 to 64 still employed in the formal sector rising to above 50%.
  
  
• The Economics Minister is touting a paper produced by his department that recommends adopting a points-based immigration system based on the Canadian model.
  
  
• In response to a constitutional court ruling, the Ministry of Labour is complementing (German only) the Hartz IV benefits for the long-term unemployed with vouchers for education and extracurricular activities to give their children equal opportunity for development.
  
  
• Prominent employer groups are insisting that the economic recovery should be reinforced by cutbacks on holiday entitlements. One scenario would reduce the six-week entitlement to four weeks, possibly just for 2011. Another would let the employer schedule a portion of the annual holiday during periods when business is quiet.

Macedonia

Tripartite model adopted
Balkans.com, BBC

The government has united with the top employer federation and trade unions in a tripartite Economic and Social Council, which will monitor economic and social policy and have a role in the development of relevant legislation. Its first meeting is this week.

Netherlands

Pension funding dispute
DutchNews.nl., IPE, IPE

The Social Affairs Ministry has posted an FAQ (Dutch only) on the prospect of benefit reduction for certain pension funds (IH 08/26/10), but – citing confidentiality rules – it has refused to name the affected funds. Two additional developments have ramped up the pressure over funding levels. The Social Affairs Minister told an emergency meeting of the parliamentary social affairs select committee that alternative approaches to calculating pension liabilities amounted to “stick(ing) our heads in the sand.” Two days later, word came of the Actuarial Society’s new longevity figures (Dutch only), which will raise liabilities sharply higher than expected.

Poland

Pension reform deadline
PNB, Plan Sponsor, IPE

The Prime Minister met (Polish only) with the heads of the second -pillar pension funds (OFEs, IH 08/18/10) to chide them for excess fees and poor performance. He wants to introduce second -pillar reforms at the start of next year and the OFEs have until September 15 to submit their proposals. The OFEs have now proposed a multifund model that defaults to the lifecycle pattern, much like the one the government is considering (IH 08/11/10). They would raise the 5% limit on foreign investment to 30% (the government has recommended 15%) and they would offer "loyalty programs" with reduced fees for long-term customers. The Ministry of Labour and Social Policy has circulated draft regulations that would calculate the benefit under a second pillar scheme without a guaranteed minimum, using just the accumulated funds divided by estimated life expectancy.

Russia

Customs rule for expats to be revised; Employer deduction for social security contributions
RT, Moscow Times, Tax Analysts

A customs law introduced in July has had unintended consequences for expats. New residents were hit with a €4 per kilogram charge on most household items above a 50 kilogram limit. Those who did not travel light were hit with staggering fees for non-exempt items like books and dishes. The Federal Customs Service is preparing an amendment to the law that will greatly expand the list of exempt possessions. Also, measures granting employers tax deductions for social fund contributions that replaced the unified social tax will take effect tomorrow retroactive to January 1, 2010.

Spain

Senate passes labour reform bill
El Pais, Reuters, EPC
The Senate approved the labour reform bill (Spanish only, IH 08/04/10) with relatively few of the 280 amendments it fielded. The House is expected to rubber stamp the changes on September 9, but there may be resistance to a provision cutting from 100 days to 30 the period that an unemployed person may turn down a job offer or training without a benefit reduction.

UK

PPF funding strategy; Various
Professional Pensions, Financial Times, The Guardian
The Pension Protection Fund has published PPF Long-Term Funding Strategy, a 20-year roadmap to stable financing. A gradually shrinking pension protection levy, assets of firms brought into the PPF and investment returns are expected to bring the fund to 110% solvency with reduced risk exposure. This approach has been well-received and the government’s plan to switch to the consumer price index for pension indexing (IH 07/14/10) would give the PPF additional breathing room.

In other news:

• HM Revenue & Customs has issued new guidance Salary sacrifice arrangements involving cycles and bus passes that revises upward the valuation of employer bicycle loans and discount sales under the government’s Cycle to Work program. This is not mandatory, but one would have to argue the case for noncompliance. The guidance also examines inappropriate use of salary sacrifice for public bus passes.
  
  
• Following a European Commission reasoned opinion on inadequate transposition of the Data Protection Directive, the Ministry of Justice issued a Call for Evidence on the Current Data Protection Legislative Framework in advance of revising Data Protection Act 1998. The consultation runs through October 6, 2010.
  
  
• Mercer has published a pair of commentaries on the government’s proposals to limit tax relief on pension contributions (IH 07/28/10). Restriction of pensions tax relief – administration issues describes the “logistical challenge” and dearth of guidance on the administrative changes involved. Unintended financial consequences of pensions tax relief restriction explores scenarios in which middle-income people would be inadvertently affected by the restriction and proposes an alternative approach.
  

British Virgin Islands

New Labour Code
BVI News, Business BVI, Platinum News
Labour Code, 2010 was passed on May 27, but the government did not release implementation details until last week. Provided that the Labour Department completes a set of technical corrections on time, it will come into effect on November 4, 2010. Among its highlights:

• There are different severance pay formulas for full-time, part-time and periodic workers. Work periods from before the law takes effect will be subject to the old formula.
  
  
• Unless an employer can document a claim of financial hardship, it must offer a retirement scheme to its workers. An employee’s service period before establishment of the scheme would be credited in the benefit formula.
  
  
• Sexual harassment is banned as is employment discrimination based on sex or marital status.
  
  
• The details of an employment contract are spelled out.
  
  
• A new work permit system allows permits of up to three years with a renewal process, but no guarantee of renewal.
  
  
• Pre-employment medical screening will only be legal for workers age 18 and under.

Canada

Ontario pension reform package
Benefits Canada, Toronto Star, Hamilton Spectator
The Finance Ministry has unveiled Further Strengthening Pensions, an outline of proposals due this fall that will constitute a “second phase” follow-up to the pension reform legislation passed this spring (IH 06/03/10). Some notable provisions:

• The pension guaranty fund levy would jump from $1 per employee to $5 in well-funded schemes and from $100 to $300 per worker in underfunded plans.
  
  
• A plan would only take a contribution holiday if its transfer ratio were at least 105%.
  
  
• Surplus distribution arrangements would be determined by binding arbitration.
  
  
• The 15-year amortization period for funding benefit improvements would be cut to eight years.

Mexico

IMSS passes on benefit cut, proposes benefits for same-sex couples
SDP, Publimetro

The Mexican Social Security Institute (IMSS) has turned down the windfall offered in the Supreme Court ruling that would have allowed it to cut the maximum pension benefit by 60% (IH 08/04/10). As noted in a recent press release (Spanish only) on public health system improvements, the IMSS has found ways to cope with its debt without severe cutbacks. The IMSS also announced (Spanish only) that it has sent Congress draft amendments to the Social Security Act that would extend benefits to same-sex couples.

US

MLR disclosure forms; Various
Global Pensions, Chicago Tribune, PIA
The National Association of Insurance Commissioners (NAIC) has approved new forms for health insurer disclosure of Medical Loss Ratio (MLR,  the difference between premiums collected and claims paid) under the Patient Protection and Affordable Care Act (IH 03/24/10). MLR reporting will start next spring and from 2012 insurers will have to issue customer rebates for MLRs below 80% in small group plans (<50 enrollees) and 85% in larger plans. This release coincides with a Consumer Watchdog report on health insurer financial statements that finds premiums rising as MLRs drop.

In other news:

• The US Pension Benefit Guaranty Corporation’s Pensions Insurance Data Book 2009 highlights the PBGC’s exposure to rapidly increasing insolvency of multiemployer defined benefit plans and offers a dire forecast for the next 10 years.
  
  
• On August 18, the Financial Accounting Standards Board (FASB) issued an exposure draft Reporting Loans to Participants by Defined Contribution Plans. Rather than having the loans classified as investments at fair value, they would be counted as notes receivable from participants. Comments are welcome through September 7.
  
  
• Unions may be on the decline in the US, but anti-union rhetoric is on the rise and getting some traction with the conservative opposition, which is forecast to make significant gains in the November congressional elections.
  

Chile

AFP reforms
BNamericas

The Undersecretary for Social Security has disclosed that the government is reviewing private pension fund manager (AFP) regulations to streamline administration so that reduced operating costs translate into savings for participants. Also, AFP managers agreed last week that the contribution rate (now 10% of salary) and the retirement age, now 65 for men and 60 for women, should also be reassessed.

Colombia

Multifund debut – correction; President’s job creation agenda
BNamericas, FIAP, LBC

Contrary to earlier reports on a 2011 launch (IH 06/23/10) for the multifund system, Decree No.2373 (Spanish only) set the start date at September 15, 2010. The four funds will be: conservative, moderate, aggressive, and a programmed retirement fund for retirees. Meanwhile, the new President has called job creation “my obsession (Spanish only).” He will restore the Ministry of Labor, which was absorbed into another department under his predecessor. Forthcoming labor market reform legislation will include “first job” incentives for hiring youth.

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.