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.

East Africa

Common Market Protocol
New Times, The East African
East African Community member states have been rushing to complete approval of a Common Market Protocol and its Annex on the Free Movement of Workers (IH 01/07/10) before their effective date of July 1, 2010. According to one report, a forthcoming annex on social security that will serve as a multilateral social security treaty (IH 03/03/10) will also be retroactive to July 1, 2010.

Egypt

Social security reform bill passed; Pension and health insurance bills forthcoming; Prison term for wrongful dismissal
Zawya, Gulf News, IPE
Parliament has approved the Unified Social Insurance and Pensions Law (IH 05/19/10). In the final draft:

• A total social contribution of 41% will be cut to 10% for employers and 16.5% for employees.
  
  
• The retirement age will rise from 60 to 65 for all new workers beginning in 2012.
  
  
• The pay-as-you-go state pension will be converted to an individual account defined contribution plan and there will be a basic stipend for all citizens when they reach age 65.
  
  
• Unemployment benefits would be paid to qualified recipients for up to a year and there will be an individual account end-of-service indemnity.
  
  
• While most of these measures will take effect in 2012, a sharp rise in the minimum pension has been pushed ahead to this month.
  

A companion bill due before Parliament by the end of this year would set a regulatory framework for private pensions. The model would be defined contribution plans distributed as annuities. Another measure would fill regulatory gaps for the private health insurance sector, introducing regulations and stricter oversight for health maintenance organization and third-party administrators. Also, a misdemeanors court has set a precedent in sentencing three executives to two-year jail terms for unjustified dismissal and withholding of salaries. The executives will appeal.

Australia

Paid Parental Leave Act; Health reform setback
AAP, SMH, The Australian
Paid Parental Leave Bill 2010 (IH 06/16/10) breezed through Parliament with little resistance last week and the administration even managed to tack on some significant amendments:

• Companies will be allowed to replace their existing parental leave policies with the national parental leave scheme unless the policy is part of a workplace agreement. Any contractual obligation for paid parental leave will have to be topped up rather than superseded.
  
  
• Leave payments could be awarded to a woman who takes time off for a difficult pregnancy.
  
  
• Casual workers, the self-employed and women who have lost their jobs may also be eligible.
  

The benefit is for the mothers of children born on or after January 1, 2011. The Family Assistance Office recently posted a draft Employer Business Requirement Statement that outlines a company’s administrative responsibilities with this scheme. A final version is expected soon. Also, the Liberal Party took the occasion to repeat its pledge to introduce its own more generous paid parental leave scheme (IH 03/17/10) the next time it takes office.

Meanwhile, the Prime Minister’s health reform proposal lost a key element after the administration secured an agreement with most of the states and territories on the new funding model (IH 04/21/10). The National Funding Authority that would have overseen disbursement of federal health funds under this plan would not be created and its role would be assumed by the Treasury. Some argue that this invalidates the agreement. The Health Minister has admitted that further changes may be necessary for drawing up “an enormously complex implementation strategy.”

Cambodia

Migrant worker program
Phnom Penh Post

A Labor Ministry sub-decree due next month will introduce a framework for the protection of Cambodian migrant workers. Authorities would monitor recruitment agencies and impose sanctions on those that violate workers’ rights.

China

Unionization push
China Daily, Reuters, WSJ

Federal and local government and the state-affiliated China Federation of Trade Unions (ACFTU) are showing solidarity with the surge in worker dissatisfaction (IH 06/16/10). The federal government is encouraging the recent trend of double-digit salary increases (IH 05/27/10) and a World Bank report has allayed fears that this would trigger inflation. The ACFTU has come out strongly in support of unionization in private companies – particularly foreign-owned businesses – as a way to safeguard workers’ rights. It expects the unions to develop within its own framework, but it sees where a little revamping could be in order. A new ACFTU pilot project in three cities allows unions to hire their own officers rather than be managed by people on the employer’s payroll.

Gulf Cooperative Council

Sponsorship systems under fire

AFP, Arabian Business

The US State Department’s Trafficking in Persons Report adopts the position that the “kafala” sponsorship system (IH 04/28/10) is a form of human trafficking. Kafala is employed in many Middle Eastern nations, but it is most prevalent in the  Gulf  Cooperative Council (GCC) states. Bahrain has already abandoned kafala (IH 05/13/09) and the other GCC states are reported to be slowly coming around.

Hong Kong

Minimum wage update; Text of ordinance on wage liability
Cathnews, The Standard, Mondaq
The Provisional Minimum Wage Commission intends to propose a minimum wage rate in the coming weeks, so the Legislative Council can consider it along with the Minimum Wage Bill (IH 04/21/10) before its summer recess. Unions and management have staked out their positions on HK 33 (US $4.24) and HK 25 per hour, respectively.

Meanwhile, Employment (Amendment) Ordinance 2010 (IH 05/05/10) was gazetted last month. It establishes the terms under which top management would be held liable for any nonpayment of compensation. It goes into effect on October 29, 2010.

India

Direct Taxes Code revision; Gratuity threshold raised; ULIP reprieve
Financial Express, Mail Today, The Pioneer
The Finance Ministry has posted a revised draft of the Direct Taxes Code (IH 12/23/09) for consultation. Rather than conform all retirement schemes to the EET (exempt-exempt-tax) regime that was established for the New Pension System (NPS), this draft proposes an EEE status for all retirement schemes including NPS. Assuming timely passage in Parliament, the code is expected to take effect on April 1, 2011.

Meanwhile,, the Central Board of Direct Taxes has issued formal notification of the recently passed measure tripling the tax-exempt limit for gratuities (IH 05/27/10) from Rs. 350,000 to Rs. 1 Million. The law also amends the 1972 Payment of Gratuity Act , tripling the maximum benefit under the formula for statutory gratuity payment to Rs. 1 Million.. The measure is retroactive to May 24, 2010. In addition, the Insurance Regulatory and Development Authority (IRDA) will soon issue a notice that the July 1 deadline for bundling pensions sold under unit-linked insurance products (ULIP) with life or health insurance (IH 05/27/10) will be postponed.

Japan

Consumption tax hike
Jiji press, Tax Analysts, Xinhua

In advance of parliamentary elections that are tentatively set for July 11, the ruling party has released a campaign platform that calls for doubling the consumption tax to 10% (IH 03/03/10) to help shore up the social security system. The Prime Minister said that it would take two to three  years to phase in this increase. The main opposition party has a similar provision in its campaign platform.

Jordan

Labour Law amendments
Jordan Times
The Cabinet has recently approved a package of Labour Law amendments to bring the government into compliance with international labour standards. Those measures described in the press include:

• Excluding weekends and religious holidays from annual leave
  
  
• Granting equal employment rights to foreign workers
  
  
• Waiving the requirement for hospital admission before one is entitled to paid sick leave

Malaysia

EPF health withdrawal list expansion
NST, The Edge

The Employees Provident Fund announced that its list of critical illnesses that qualify for health withdrawals has nearly tripled to 36.

Northern Mariana Islands

New foreign labor law
RNZ, Saipan Tribune

Omnibus Immigration Conformity Act of 2010 went into effect at the start of this month, despite concerns that it could be preempted by US federal immigration laws. Foreign workers posted in NMI over 90 days must now register annually with fees ranging up to $300. There is also a migrant ID system, and there are extensive employer reporting requirements for foreign workers. The US Department of Labor is expected to challenge this law as it conflicts with the recent federalization of immigration law. The US Department of the Interior Office of Insular Affairs is holding public hearings in NMI in support of a report recommending that foreign workers be granted long-term status after five years on CNMI.

Philippines

Flextime bill
PNA, Manila Bulletin

SB 887, a package of Labor Code amendments tabled by the current head of the Senate Finance Committee in 2007, is now starting to get some press coverage. The bill’s proposals for flexible working arrangements, including a compressed workweek, have had a higher profile (IH 02/11/09) since it was first introduced. There are provisions to ensure that none of the alternative hours schemes entail reduced benefit entitlements.

Bulgaria

Anti-crisis bill passed
ADP

Parliament has reportedly approved the administration’s anti-crisis package (IH 06/09/10). The provisions on an alternative funding arrangement for sick leave will take effect on July 1 and will only last for the balance of this year.

Croatia

Pension reform task force
HINA, Balkans.com

The government has convened an interministerial task force to draw up proposals on easing the funding crunch for the state pension and other social welfare schemes. The announcement focused on making the financial case for a major redesign, but there was mention that current early retirement provisions are unlikely to survive intact.

Cyprus

Social security for repatriates
Cyprus Mail

The Labour Ministry will soon confer with the Finance Ministry on a default pension scheme for citizens who repatriate and fall between the cracks for pension entitlement in both Cyprus and their former host countries. At present, one must be a permanent resident of Cyprus for at least 20 years to qualify for a state pension. There would be an income test for this benefit.

EU

Green Paper on Pensions; Various
Global Pensions, European Voice, IPE
The Green Paper on Pensions (IH 06/16/10) is set for publication today. Stakeholders with advance access have described plans for an EU-wide pension benefit guaranty system to reimburse members of insolvent defined benefit schemes, possibly also those in hard-hit defined contribution plans. It will reportedly propose using the Solvency II funding rules for insurers as a “starting point” for developing a funding standard for pensions. Other items include the prospect of an EU-wide private pension regulatory regime and a suggestion that the Institutes for Occupational Retirement Provision Directive be reviewed in light of the rapid ascendancy of defined contribution plans.

In other news:

• The Commission has opened the public consultations Derivatives and Market Infrastructures and Short selling, which consider stricter rules for these controversial investments. The FAQ for the derivatives document was posted on another site. These are brief consultations, both closing on July 10, and the draft legislation is due in September. Incidentally, France and Germany have united in a campaign for an EU-wide ban on naked short-selling.
  
  
• The European Court of Justice drew attention to its ruling in Case C-211/08, which upheld the Spanish government’s position in a cross-border health care reimbursement dispute. When costs are subject to copayments in the state where the care is provided, the home state need not reimburse the patient for the copayment.
  
  
• Parliament’s Committee on Economic and Monetary Affairs has approved a proposal on remuneration policies at banks receiving state aid. Directors’ salaries would be no higher than €500,000, the bonus would be no more than half that amount and at least 40% of the bonus would be deferred for five years.

France

Pension reform outlined
AFP, Reuters, Financial Times
The Social Affairs has delivered a presentation (French only) summarizing the administration’s pension reform proposal (IH 06/16/10). Among its highlights:

• The normal retirement age would rise from 60 to 62 in four-month increments between 2010 and 2018. There would be some provision for early retirement and health monitoring in strenuous jobs.
  
  
• The pension contribution period, now on track to 41 years in 2012, would rise to 41.5 years by 2020.
  
  
• Tax hikes to subsidize social security would include tripling the employee social contribution on stock options to 8%, raising the employer stock option levy from 10% to 14% and increasing the tax on executive “chapeau” pensions.
  
  
• There would be new incentives for hiring workers over age 55.
  

The Council of Ministers will review the legislation on July 13 and forward it to Parliament in September.

Lithuania

Social security reform measures
ELTA, BNS, Reuters
The coalition government has endorsed a new set of austerity measures including the following social security changes:

• The expected retirement age hike for both sexes (IH 05/19/10) would incrementally raise the retirement age to 65 for both men and women between 2011 and 2026.
  
  
• Paid parental leave would be a choice of one year at full compensation or two years with the first year at 70% of salary and the second one at 40%.
  
  
• There would be a 2,500 litas (€723.74) monthly cap on parental leave benefits and it would no longer be illegal to earn an income while on leave.
  

The administration aims to get the package through the Seimas in the closing days of this month.

Macedonia

Accession obstacle budges
Euractiv

Macedonia’s EU accession talks have been stalled for the past five years because it shares a border with a Greek region of the same name and Greece fears that it would press for a reunification of the historic Macedonia (IH 11/07/07), which also includes a big chunk of Bulgaria. The simple, if inelegant, solution reached by negotiators would include the nation’s current geographical limits in its name, the Republic of Macedonia of Vardar. This would require a constitutional amendment and may not have popular support.

Netherlands

Some relief proposed for pension funding assumption
Global Pensions, EU Observer, IPE

The Cabinet is reviewing the Social Affairs Minister’s proposal to let underfunded pensions set higher assumptions for returns on equity investments. The OECD has suggested that using long-term bond rates to discount liabilities would make occupational pensions less susceptible to fluxes in funding ratio during times of economic instability.

Northern Ireland

Employment Bill
The Assembly has now passed the Employment Bill, a package of measures to curb worker exploitation in employment agencies and to strengthen the role of industrial courts.

Slovenia

Flexicurity legislation; Mandatory profit sharing rejected; Second pillar reform
STA, IPE
The Cabinet has approved a trio of labor bills that are meant to strike a flexicurity balance:

• The statutory severance pay formula would be modified with smaller cuts initially for those who have been on the job for over 15 years.
  
  
• Students and pensioners would have the option of mini jobs; no more than 720 hours a year at salaries as low as €4 per hour and no higher than €8.
  
  
• Unemployment benefits would rise from 70% of average wage to 80%. Workers above age 55 who have been in the workforce at least 25 years would be entitled to 25 months of benefits.
  

Meanwhile, amidst administration objections that the mandatory profit sharing bill runs counter to the productivity goals envisioned in its initial voluntary profit sharing bill, the National Assembly was not able to pass the profit sharing bill in its revote (IH 06/03/10). Backers of the voluntary profit sharing bill are expected to resubmit it.

Also, the government is still tinkering with its pension reform proposal (IH 01/21/10) and expects to submit it to a vote in Parliament this fall. A plan to increase transparency by converting insurance-based pension plans to a mutual fund structure has been rejected as too large an administrative burden. Instead, the pension schemes would adopt a pension calculation method similar to the one used by mutual funds.

Spain

See also: EU, bullet 2

Labour market reform decree
AFP, Reuters, Dow Jones
The Council of Ministers has adopted the Royal Decree Law introducing urgent labour market reform measures. The law went into effect immediately, but Parliament had to ratify it within 30 days to make it permanent.  The law had to be ratified without amendments, but the administration offered to hold an amendment stage after its passage.  Parliament approved the law yesterday with the main opposition parties abstaining from the vote.  The amendment stage could take several months.

Key measures in addition to those summarized last week (IH 06/16/10):

• There are measures to set limits on some fixed-term contracts and to curb their renewals.
  
  
• Employers are encouraged to stop short of terminations with an expanded menu of working hour reductions and suspensions.
  
  
• The definition of dismissal for economic reasons is clarified.

Switzerland

Paid maternity leave expansion rejected
Swisster

A bill that would have added four weeks to the 14-week paid maternity leave entitlement was defeated by a wide margin in the National Council this month. The 14-week leave measure failed in its first few tries (IH 09/29/04) and is still resented by some legislators.

UK

2010 emergency Budget; Various
Telegraph, Personnel Today, LTN
The Treasury released the 2010 emergency Budget yesterday:

• The triple guarantee for state pension increases (IH 06/16/10) is featured here.
  
  
• The requirement to take out an annuity at age 75 will end in April 2011.  In the interim, the age is increased to 77, effective June 22, 2010.
  
  
• The annual limit on pension contributions is due to be reduced, possibly as low as £30,000.
  
  
• People over age 65 would be exempt from a capital gains tax increase and there would be a lower rate for gains from long-term investments.
  
  
• There will soon be consultations on both raising the state pension age to 66 and phasing out the default retirement age.
  
  
• The government will introduce a levy on bank balance sheets and “take action”  against excess banker bonuses.
  
  
• “Objective medical assessments” will be employed to screen all who apply for the Disability Living Allowance.
  

In other news:

• The Deputy Prime Minister has outlined a new government commission’s assignment to draw up recommendations for family support, particularly improving work/life balance. The Childhood and Families Task Force will look into revising the rules for flexible work arrangements and increasing the paternity leave entitlement.
  
  
• Stakeholders reported that the Government Equalities Office’s (GEO) homepage for Equality Act 2010 (IH 04/14/10) no longer mentioned the October 1, 2010, implementation date for most of the key provisions. The site has since added a statement that October 1 is a target, but not necessarily a destination, and that additional information will be provided “as it becomes available.”
  
  
• The National Association of Pension Funds (NAPF) is part of an institutional investor campaign to hold all FTSE 350 companies to higher standards for executive pension disclosure.
  
  
• The press is carrying unattributed reports that there will be an announcement later this week on extending the timetable for auto-enrolment in the National Employment Savings Trust (NEST)  and altering the scope of coverage.
  

Bahamas

NIC reform would set longer vesting period for foreigners
Bahamas Journal

The director of the National Insurance Board (NIB) has concluded from a study of the 8th Actuarial Review that the NIB must take some measures to ensure the sustainability of the social security fund. Foremost would be extending the state pension’s three-year vesting period for foreign workers to ten years. He also expects to raise both the contribution ceiling and the contribution rate.

Canada

Ontario generic drug reform final regulations
Montreal Gazette

The Ontario Health Minister announced that the generic drug reform regulations that were withdrawn for further review last month (IH 05/27/10) have been finalized with few changes (the ban on professional allowances is intact) and will take effect on July 1. Mercer has produced a Communiqué on the new rules.

Jamaica

NIS contribution increase deferred; Occupational pension contribution ceiling mooted
Go-Jamaica, Jamaica Observer
The Labour Ministry announced last week that the May 31, 2010, effective date for doubling the wage ceiling for National Insurance Scheme (NIS) contributions (IH 06/03/10) had not given employers enough time to adapt, so it will not be enforced. A new deadline is expected soon. Also, the Financial Services Commission (FSC) is considering a proposal to grant tax deductions on employee contributions to occupational pensions of up to 20% of salary. The current limit is 10%, half of that matched by the employer.

US

Draft regs on target date fund disclosure: Various
AP, Washington Post, Tax Analysts
The Securities and Exchange Commission has opened a consultation on the proposed rule Investment Company Advertising: Target Date Retirement Fund Names and Marketing. It would require target date fund marketing material to use a standard format for detailing how the assets are being allocated and to give adequate warning of the risks involved. There is also guidance on avoiding the misleading statements that have often appeared in target date fund marketing. The consultation will close 60 days after the document’s imminent posting in the Federal Register.

In other news:

• An Internal Revenue Service (IRS) official noted in a recent speech that the IRS will "soon" publish guidance on the rollover of foreign retirement accounts to US individual retirement accounts (IRA). This follows up on a recommendation (pp.41-2) in the IRS publication International Pension Issues in a Global Economy: A Survey and Assessment of IRS’ Role in Breaking Down the Barriers (IH 08/19/09). That recommendation – and presumably the guidance – also covers rollovers to US qualified retirement plans.
  
  
• The Senate rejected cloture on S AMDT 4301 (IH 06/16/10) and the legislation has stalled, so certain emergency measures are being extracted for faster passage. So far, the pension reform measures and the unemployment benefit extension are not among them.
  
  
• Congressional gridlock over member nominations left the five-seat National Labor Relations Board (NLRB) with only two sitting members for 27 months. The Supreme Court has now ruled that one of the nearly 600 cases decided in that period was illegal because the board didn’t have a quorum.
  
  
• The Department of Labor’s Final Rule Relating to Time and Order of Issuance of Domestic Relations Orders provides instructions to plan administrators on pension splitting in divorce. The regulations take effect on August 9, 2010.
  
  
• The Federal Reserve has published Guidance on Sound Incentive Compensation Policies, final guidance on banking sector incentive compensation.
  

Bolivia

More pension reform details
BNamericas

The Vice Minister for Pensions recently spoke with the press about the administration’s pension reform plan, featuring AFP nationalization (IH 05/19/10). Women who have raised children would be qualified for early retirement and pensions would be higher for workers who contribute for over 30 years. The changes would be funded by a 3% employer levy and a surcharge on personal incomes above a certain level.

Brazil

President approves pension increase; Privacy ruling
Xinhua, Dow Jones, GIDA
As expected, the President signed the bill allowing a controversial 7.7% pension increase only after line-item veto of a provision that would have rescinded an early retirement disincentive (IH 06/09/10). Also, the Superior Labor Court quadrupled a lower court’s penalty for an employer that used video surveillance in its restrooms, but it otherwise upheld the legitimacy of workplace video monitors. Cameras may be installed in public areas to protect an employer’s business interests, provided that employees are notified in advance and warning signs are posted.

Chile

RBS introduced for AFPs, Maternity leave review
IPS, BNamericas

Pension administrator SP has concluded a risk-based supervision pilot project with one AFP (IH 01/07/10) and has now extended its risk evaluation system (SER, Spanish only) to all AFPs. Also, the Women, Work and Maternity Commission is preparing a set of recommendations on more family-friendly workplace policies. It is expected to propose an expansion of the 18-week paid maternity and measures to protect the jobs of pregnant women and young mothers. The report is due on July 11. The administration’s response is likely to advance its own plan to modify the requirement that employers with more than 20 women on staff provide nursery facilities.

Colombia

Congress passes vice tax bill; Multifund update
GIDA, Reuters, Bloomberg
The vice tax legislation considered essential for funding the public health system (IH 04/28/10) was recently revised to cover more vices, and Congress approved it last week. While welcome news, it basically just buys a little time before tougher decisions are necessary to keep the system sustainable.

Meanwhile, a pension industry insider has advised the press that the final multifund regulations (IH 07/01/09) will be published before the President leaves office in August. The new system should debut in April 2011.

Worldwide

Joint principles on temporary workers
A group of global union federations have collaborated on Global Union Principles on Temporary Work Agencies, a set of common goals for combating the proliferation of temporary work under the banner of “labour market flexibility.”  The participating unions aim to include temporary agency workers in their collective bargaining agreements and to pursue “equal treatment for them in all respects” so that they don’t have an unfair advantage in the job market over permanent staff.

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.