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.

Ghana

Pension reform launch
Citifm, Ghana News

As the government has contradicted itself on this a few times in the past (IH 09/16/09), it is worth noting that implementation of the three-tier pension system did start last month with the first collection of employer (13%) and employee (5.5%) contributions. Draft regulations on the licensing of trustees still await passage in Parliament. Guidelines on the third-pillar provident funds are due this month and their registration should start in March.

Australia

Health reform tops administration’s 2010 agenda
Dow Jones

The Prime Minister’s recent speech on the nation’s pressing priorities made the case that an ageing population will spike medical inflation in the coming years so “2010 must and will be a year of major health reform.”  The one approach he mentioned was to keep people in the workforce longer by improving the job market for seniors and helping parents to balance work and family concerns. These would contribute to the more productive workforce necessary because there is only so much the government can do to contain medical costs without compromising quality of care.

China

Occupational health campaign
Xinhua

An interministerial project has named and shamed over 10,000 enterprises in recent months as part of an effort to improve occupational safety standards. The Health Ministry is organizing workplace monitoring and work-related health services at a grass roots level.

India

Labour reform proposals
Business Standard

The Indian National Trade Union Congress (Intuc) met with an interministerial subcommittee as part of the tripartite labour law review (IH 12/16/09).  Intuc backs profit-sharing schemes covering all workers and would lift restrictions on retrenchment in exchange for higher severance pay.  It has also called for worker management of a single fund that would combine the social security fund, provident fund, pensions and gratuities.

Kazakhstan

Pension investment rules
ACC, Mondaq

The administration has adopted a set of investment rules for pension funds and investment managers of pension assets (IMPAs). The measures that took effect on January 1, 2010, govern the investment process and the procedure for transferring assets to another IMPA. Provisions setting investment levels for securities denominated in foreign currencies will take effect on January 1, 2011. The January 1, 2012, set will revise the menu of approved financial instruments for investment and will follow the multifund model for dividing portfolios into three risk categories: conservative, moderate and aggressive.

Kuwait

Labor Law repaired
Arab Times, Kuwait Times, PNP
The Deputy Speaker of Parliament has pronounced the new Labor Law “cleansed” of errors (IH 01/21/10), so it should be gazetted soon.

Malaysia

Regulations on part-timers
Bernama, AIF

The Human Resources Minister served notice that new regulations covering entitlements for part-time workers are due in the first quarter of this year. The issues mentioned so far include medical leave and overtime work as well as contributions to the Employees Provident Fund (EPF) and the Social Security Organisation (Socso).  He noted in an aside that the ministry has proposed a special court to clear up a backlog of industrial relations cases.

New Zealand

Minimum wage hike contested
NZPA, Scoop

The Minister of  Labour responded to a clamor for a 20% wage increase (IH 01/27/10) with a 2% rise.  The opposition will rush a bill into Parliament that would raise the minimum wage in two stages (March 2010, March 2011), from $12.50 to $15.00.

Pakistan

Sexual harassment bills advance
Dawn, Pakistan Observer, Pak Banker

Both houses of Parliament have now passed Criminal Law Amendment Bill 2009 (IH 11/11/09) and the National Assembly has passed the companion bill Protection Against Harassment of Women in the Workplace.  It would require companies to adopt a code of conduct on sexual harassment and to appoint a three-member enquiry committee to field any allegations of sexual harassment.

Singapore

Reducing dependency on foreign workers
CNA, Straits Times, Temasek Review

The Prime Minister has adopted productivity as a key theme, noting that local and foreign workers must be “upgraded.”  A large boost in education and skills training for locals will gradually reduce the high dependency on foreign workers. One sign of higher standards for foreign staff is an English language proficiency test (IH 12/09/09) for foreign workers in key service sectors. Work permits in these sectors will be contingent on performance in this test from July 1, 2010. Also, the Finance Minister's Economic Strategies Committee has released a report recommending a gradual rise in the foreign worker levy.

Taiwan

Income-based premium for health insurance
China Post, China Daily

The Health Minister has previewed a new health insurance contribution schedule (IH 12/02/09) that he suggested could debut as early as this month. There would be four broad bands based on income level. The uniform 4.55% levy may actually drop a bit for those with incomes in the bottom 25%. The heaviest hit would be a rise to 5.5% for those with incomes in the top 25%. Yesterday, the Prime Minister ordered the Health Minister to refrain from raising contributions this month and to prepare a report for the Executive Yuan on additional ways to improve health insurance program funding.

Thailand

Social security funding options
Thai News, The Nation

The International Labour Organisation (ILO) has delivered a report on the Social Security Fund’s long-term viability to the Social Security Office. Without any reforms, the fund would deplete in 2047. Reform recommendations include raising the 3% member contribution to 5% and lifting the retirement age from 55 to 63.

Uzbekistan

Corporate tax breaks
Tax Analysts
The President has signed a set of tax code amendments that includes deductions for corporations on:

• Long-term life insurance premiums
  
  
• Severance pay and other termination benefits
  
  
• Special compensation for workers in difficult working conditions
  
  
• Subsidies for employee travel expenses, uniforms and protective gear
  
  
• Compensation and medical costs for occupational illness
  

All measures came into effect on January 1.

Vietnam

Consultation on draft labour code

The Labour Ministry recently gave a progress report on its stakeholder consultations over a Draft Labour Code. Its main objective is to improve dispute resolution, social partner coordination and other industrial relations components that are currently malfunctioning. The American Chamber of Commerce in Vietnam has posted an English translation of the version that went up on the Labour Ministry website in November. The ministry plans to submit the revision to the National Assembly in May.

Armenia

Second pillar pension details
ARKA, Day.Az, News.Am

The Ministry of Labor and Social Affairs has filled in a few details on the January 1, 2011, conversion of the social security plan to an individual account pension (IH 12/09/09).  Participants (participation is mandatory for those under age 40, voluntary for those above) will contribute 5% of salary and the government will match the contribution on salary up to 500,000 drams (US $1,333.33) per month. At age 63, a member will be entitled to a monthly annuity based on the accumulated savings adjusted upward for life expectancy.

Bulgaria

Retirement age hike options
Sofia News Agency, SEENDI, Standart
The Consultative Council has come up with two alternative scenarios for raising the retirement age. One is based on the Labor Minister’s plan (IH 01/07/10), but it would start the 10-year climb to age 65 for men and women in 2012 and would require a minimum 37-year contribution period. The other would also start in 2012.  It would raise the retirement age to 63 for men and 60 for women while lifting the contribution period to 40 years and 37 respectively.  The Labor Ministry is also considering a levy of 0.2% each on workers and employers to finance a special fund to supplement the benefits of pensioners over age 75.

Czech Republic

EC endorses anti-discrimination law
The European Commission has formally dropped infringement proceedings against the Czech Republic following review of its new antidiscrimination law (IH 07/01/09).

Denmark

Overtime pay for ‘unsocial hours’ debated
Copenhagen Post
With retail hours gradually expanding (IH 08/19/09), the new round of collective bargaining will take on the divisive issue of overtime premiums for evening and weekend hours. Employee group HK also wants some safeguards against employees being forced to work unwanted shifts.

EU

Paternity leave proposal advances; Various
EIS, IPE, IPE
The European Parliament’s Committee on Women’s Rights has adopted a report on gender equality that includes an EU-wide entitlement to paid paternity leave. The committee could not reach agreement on another report that would have set a two-week minimum for paid paternity leave while raising the EU-wide base for paid maternity leave from 14 weeks to 20. 

In other news:

• The rapporteur for Parliament’s Committee on Economic and Monetary Affairs has logged over 1,000 proposed amendments to the draft Directive on Alternative Investment Fund Managers (IH 11/18/09), reinforcing the message that extensive repairs are called for.
  
  
• Social impact of the crisis –Demographic challenges and the pension system, a  report that the Economic and Scientific Policies Department produced for Parliament, makes the case that the disruption expected from population aging will dwarf the harm brought by the current global economic crisis.
  
  
• The Information Society and Media Commissioner announced plans to modernize EU privacy rules, with particular attention to notifying individuals whenever their records are being accessed.

Finland

Tax regime for public transport subsidy
IBFD

The tax authorities have issued new guidance, effective January 1, 2010, on employer subsidy for commuting  on public transportation. Annual ticket costs up to €300 and amounts between €600 and €3,400 are tax free. The amount between €300-€600 is taxed as is anything above €3,400. These costs may not be included in the deduction for commuting expenses, which applies to amounts between €600-€7,000 per year.

Germany

Severance pay splitting
LTN

Local tax authorities challenged an employer and a now-former employee for drawing up an agreement that – contrary to the company’s Social  Plan – allowed for distributing severance pay in two installments to reduce the tax hit. The Federal Fiscal Court has now ruled that a separate agreement benefiting the worker is legitimate as long as it is adequately documented.

Ireland

Trustee training requirement; Minimum wage exemption
Irish Independent
Statutory Instrument No. 506/2009 set a February 2, 2010, implementation date for Section 28 of  Social Welfare and Pensions Act 2008.  The provision introduces a requirement that all trustees receive “appropriate” training every two years and that new trustees sign up for training within six months. The Pensions Board has created a trustee e-learning website to facilitate compliance. 

Also, new government-sponsored legislation would establish a procedure for companies under Registered Employment Agreements (REAs) to receive a minimum wage exemption.  Other employers already have that option. When companies invoke the “inability to pay” clause, they would need the backing of the majority of the workforce and they would have to document the financial strain for a court. The exemption would be temporary, for a term of no more than a year.

Italy

More on liberalizing investment rules
Global Pensions

Over five months after first broaching the topic (IH 08/19/09), the head of pension regulator Covip delivered a speech to Parliament on his plans for modernizing pension investment rules. The 10-year old rules, based on the prudent person principle, are “obsolete” because they exclude the new generation of high-risk alternative investments such as hedge funds. While greater flexibility is desirable, certain core values like portfolio diversity would be affirmed.

Netherlands

Goudswaard report on pensions; Various
DutchNews.nl, IBFD, IPE
The Goudswaard Commission has delivered its report (Dutch only) on future-proofing supplementary pension schemes to the Social Affairs Minister. Like the Frijns Committee report (IH 01/27/10), it emphasizes managing risk.  It notes that workers will need to either raise contributions or receive a lower retirement income. The minister will respond by April 1.

In other news:

• The ministry is conducting a trio of consultations (Dutch only) on retirement-age hike legislation now before Parliament (IH 01/13/10). They cover staying in the workforce past retirement age, retiring at 65 on a reduced pension and constructing a bridge to retirement for those who lose their jobs just short of retirement age. The consultations run through February 8.
  
  
• Decree No. DGB2010/267M, gazetted on January 20, indicates that inter-company assignees from tax treaty countries who are in the Netherlands for 60 days or less in a 12-month period are not subject to Dutch tax.
  
  
• The Return to Work Regulations (WGA) allow companies to opt out of the public scheme for partial disability and sign up with a private insurer, often at significant savings. The Social Affairs Minister is expected to announce a switch to full privatization in the coming weeks. It should take effect around mid-year. The privatization option is likely to be suspended until that date.

Poland

OFE contributions will not change; Reasoned opinion on discrimination law
PNB, PAP, Reuters

The Prime Minister has definitively vetoed “for now” the interministerial plan to shift the bulk of the second pillar OFE contribution into the state pension  (IH 01/13/10). This emerged from a Cabinet meeting on pension reform last Friday as did indications that a retirement age hike and harmonization of all special pensions will be included. Other proposals called for removal of pension fund investment limits and creation of low-risk subfunds for people within ten years of retirement. Also, the European Commission has sent a reasoned opinion to Poland on several gaps in its national legislation mirroring EU workplace discrimination directives.

Portugal

2010 Budget
BBC, Seeking Alpha, IBFD

The 2010 Budget is most notable for measures on a one-off tax and a modified permanent tax on executive bonuses. It would impose a 50% corporate tax  this year on financial sector bonus amounts that are above both 25% of base pay and €27,500. Management bonuses exceeding those levels in other sectors would be taxed at 35% this year only.  The financial sector would maintain a permanent 35% tax on excess bonuses. These taxes would be waived in cases where at least 50% of the bonus is deferred for at least three years and delivery of the deferred portion is contingent on the employer’s financial performance. The Cabinet has approved this budget and has forwarded it to Parliament.

Romania

Pension reform consultation; Furlough extension mulled
Mediafax, Rompres, RT
The Labor Minister is holding a consultation (Romanian only) through February 5 on draft pension reform legislation (IH 12/23/09). It would discontinue special pensions, raise the retirement age, peg benefit increases to the CPI rather than wage inflation and determine contribution levels by an occupation’s risk and hardship factors. Contributions would be waived for people with incomes below a set level. 

Also, the prime minister has endorsed an urgent request from social partners to extend the furlough program through 2010.  Now capped at three months, the furlough scheme pays a suspended worker 75% of regular salary tax-free. The Cabinet is expected to pass a furlough continuation decree this week. Another social partner proposal would reward companies with tax breaks for hiring new staff.

Slovakia

Stock option tax regime changes; Pension investment rules flagged as infringement of EU law
SITA, IBFD, IPE
A package of Income Tax Act amendments that took effect on January 1 includes a measure that alters the tax treatment of stock options. The taxable amount is now the difference between the amount paid and the profit realized on the day of exercise. It had been the amount over purchase price on the first day that options could be exercised.  There is also an employee tax exemption on mandatory social insurance premiums paid while posted abroad.

Meanwhile, the European Commission has filed a reasoned opinion against Romania for discriminatory pension fund investment rules. The removal of investment restrictions against other member states under EU free movement of capital rules extends only to those states that have adopted the Euro as common currency. Slovakia has two months to deliver a satisfactory reply or face referral to the European Court of Justice.

Spain

Cabinet approve pension reform package
El Pais, AFP,  Europa Press
Last Friday, the Council of Ministers agreed on a fairly dramatic pension reform proposal that it will now forward to the Parliamentary Committee of the Toledo Pact.  Some notable provisions:

• The normal retirement age would gradually rise from 65 to 67 between 2013 and 2025.
  
  
• The minimum age for early retirement would increase from 52 to 58.
  
  
• There will be some concession in the contribution period formula for people who lose their jobs as they near retirement age. The companies that dismiss the older workers would subsidize this.

UK

Parental leave proposals; Various
Personnel Today, The Guardian, IPE
The Department for Business Innovation & Skills (BIS) has published the government response to the public consultation on draft regulations for greater parental leave flexibility (IH 10/21/09).  It outlines the final regulations, which will soon be submitted to Parliament for approval. Mothers would be allowed to transfer months 7-9 of their nine-month paid parental leave entitlement to the father as well as the supplemental three months of unpaid leave. If approved by Parliament, the regulations would apply to  parents of children born on or after April 3, 2011.

In other news:

• House of Lords debate on proposed amendments to the Equality Bill saw the defeat of two prominent amendments. The proposal to abolish the mandatory retirement age was rejected, with Labour Party leaders taking the position that an ongoing review will inform the government’s position and that any changes are likely to come in 2011. A proposal on employment rights for gay and transgendered people was also rejected on the grounds that the exemption for religious institutions was too narrow.
  
  
• The Department for Work and Pensions (DWP) response to a consultation on workplace adjustments to the demographic shift proposes an earlier start for  the 2011 default retirement age review referenced in the above bullet.  The argument against delaying removal of the mandatory retirement age is reinforced in a new set of Equality and Human Rights Commission (EHRC) proposals on accommodating an ageing workforce.
  
  
• A government review of The Pension Regulator (TPR) gave it high marks for risk-based regulation of defined benefit plans, but noted gaps in its approach to defined contribution plans.  The TPR responded that it is “already focusing on these issues.”
  
  
• From April 1, 2010, the Information Commissioner will have new powers for enforcement of the Data Protection Act. This will include fines of up to £500,000 for serious violations.
  

Canada

Review of pension reform options; Prospects for work-sharing program extension
Benefits Canada, Hamilton Spectator, Canadian Press
The Finance Minister of British Columbia has responded to the Mintz Report (IH 01/07/10) with the release of its less optimistic counterpart, Options for Increasing Pension Coverage Among Private Sector Workers in Canada.  It predicts a retirement income shortfall in the coming years and reviews a range of schemes to address the issue.  It concludes that an expansion of the CPP (Canadian Pension Plan) and a voluntary CPP supplement resembling British Columbia’s CPP plus proposal (IH 12/02/09) are the most viable approaches.

Also, the Work-Sharing program is set to expire on April 3, 2010, but some in the administration have flagged its extension as vital for job market stability. The Finance Minister has not yet committed to a continuation, but there is pressure to extend benefits under the strained Employment Insurance system, and this would be a less-costly alternative.

Jamaica

Debt swap may wallop pensions
Jamaica Gleaner, Jamaica Observer

The government has agreed with the International Monetary Fund to launch a Jamaica Debt Exchange (JDX) program as part of its economic recovery. The Finance Ministry has been marketing it to pension funds, but sponsors of defined benefit plans and members of defined contribution plans will lose money under this arrangement.  Most vulnerable are DC plan participants who plan to retire soon: their annuities could be 40% smaller.

US

2011 Budget, Middle Class Task Force report and State of the Union Address
AFP, Reuters, NYT
A variety of new initiatives were proposed in the 2011 Budget, the preliminary report from the Middle Class Task Force and the State of the Union Address:

• Automatic enrolment in 401(k) plans would be easier, and all but the smallest businesses would be required to provide automatic enrollment in individual retirement accounts (IRAs).
  
  
• Other 401(k) efforts would promote annuitization, replace the withdrawn investment advice regulations (IH 12/02/09) and raise standards for fee transparency.
  
  
• The Department of Labor (DOL) and the Treasury will collaborate on efforts to curb misclassification of workers as independent contractors.
  
  
• New disclosure requirements and fiduciary guidance are expected for target-date funds (IH 11/04/09).
  
  
• There will be a National Equal Pay Enforcement Task Force.
  
  
• The President emphatically renewed his commitment to health reform legislation, but did not endorse a specific strategy for passage.
  
  
• Companies would receive $5,000 tax credits for new hires and social security taxes would be waived on extra hours for existing staff.  This would be capped at $500,000 per company to ensure that more small companies benefit.
  

Bolivia

AFP system nationalization
SPANND, ABC
The administration has now revived and refined a plan to take over management of the AFP private pensions system (IH 01/08/09). AFPs are now managed by subsidiaries of foreign-based multinationals. This move will not have a major impact on them, and they do not seem inclined to challenge it. The necessary legislation is expected to pass in Parliament.

Chile

Pension fund hedging rules
BNamericas, Reuters, Business Week

The peso went into a sharp decline last week after the financial sector widely misinterpreted the Superintendent of Pensions (SP) announcement of new rules on pension fund hedging. The rule will allow hedging in underlying currency for foreign investment, not just the currency in which investments are denominated. It was initially read as requiring a precipitous reduction in currency hedging. SP has now issued a clarification (Spanish only).

Colombia

Sin taxes to subsidize health system
Dow Jones, LTN

A January 22 emergency decree (Spanish only) that went into effect on February 1 will boost public health system financing with increases – some very steep – in alcohol, gambling and cigarette taxes.

Peru

Foreign investment limit rises
Dow Jones
The Central Reserve Bank of Peru announced (Spanish only) that the ceiling on foreign investment for private pension fund administrators (AFPs) has increased from 22% to 24%, effective immediately.

IASB

Setback on DB disclosure standards
IPE

The chair of the International Accounting Standards Board pronounced a staff submission on post-employment benefit disclosure “just awful. I know we asked for it. It was a mistake.”  He has concluded that the 83 separate disclosure items for defined benefit plans are too much to expect. An exposure draft on defined benefit disclosure requirements is on the calendar for delivery next month.

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.