Monthly Legislative Update Asia Pacific

Size: px

Start display at page:

Download "Monthly Legislative Update Asia Pacific"

Ezra Newton
6 years ago
Views:

Monthly Legislative Update Asia Pacific November 2010 The Monthly Update summarizes recent legislative developments related to cost of employment, labor environment, employment terms and conditions,

1 Monthly Legislative Update Asia Pacific November 2010 The Monthly Update summarizes recent legislative developments related to cost of employment, labor environment, employment terms and conditions, retirement and social security, health care, taxation of compensation and benefits, and issues for expatriate employees. Australia Employment Terms and Conditions Under a government initiative, fathers in Australia would be entitled to flexible work hours to care for their children. The Ministry for the Status of Women announced a campaign to reform workplace equality legislation in order to give fathers more flexibility with regard to working time. Currently, under the National Employment Standards, employees are entitled to parental leave encompassing maternity leave, paternity leave, and adoption leave. The total maximum leave for both parents is one year. One week of unpaid paternity leave at the time of birth is available to males with 12 months continuous service. The maximum extended paternity leave of 51 weeks is reduced by any maternity leave taken by the employee s spouse. Health Care System The Australian government has introduced legislation to reform the health care system. Under the government s plan, the Commonwealth (federal) government would assume primary responsibility for financing public hospitals. Currently, bloc grants from the Commonwealth government to state and territorial governments finance approximately 40% of the cost of public hospitals; the remainder is financed by the states and territories. The Commonwealth government would fund 100% of general practitioner and primary health care services and 60% of the efficient price of public hospital services. It also would fund 60% of capital expenditures in public hospitals as well as research and training. The states and territories would give the federal government up to one-third of their Goods and Services Tax (GST) revenue for health care. The Commonwealth would introduce new national standards for public hospitals. To date, the states and territories have signed on to the plan with the exception of Western Australia. Copyright 2010 Aon Hewitt Inc. 1

2 China Retirement and Social Security In China, the Standing Committee of the National People s Congress passed the Social Insurance Law. The Law consolidates existing regulations and introduces several new provisions. Participants will be entitled to five types of coverage old age pension, basic medical, unemployment, maternity, and work injury insurance. The Law establishes a single nationwide old age pension insurance system, and foreign nationals will be required to participate. While this requirement was included in earlier regulations, many cities did not implement systems which allowed the participation of foreign employees. The government has indicated that it will negotiate social security totalization agreements to avoid payment to two systems. Other social insurance benefits will be made portable within a province; the State Council is expected to issue timelines for portability. The social security authority has new powers to recover back contributions if employers do not pay or underpay contributions. Employers will not have to cover all of the costs associated with a work-related illness or injury; some costs will be covered by work injury insurance funds. The work injury fund will cover medical costs; hospitalization; nursing care; travel expenses if travel is required for receipt of care; disability appliances; specified lump-sum disability subsidies and allowances; lump-sum medical subsidies the employee is entitled to receive upon the termination or expiration of his or her employment contract; fees for work assessment; and survivors and funeral allowances. Employers are required to pay for wages during the medical treatment period; monthly disability allowances for a Class 5 or 6 disability; and lump-sum disability and reemployment subsidies the employee is entitled to receive upon termination or expiration of his or her employment contract. The Law is effective July 1, India Retirement and Social Security After suspending the sale of universal life insurance products, India s Insurance Regulatory and Development Authority (IRDA) issued guidelines on the sale of fund-based products purchased by employers for gratuities, payments in the event of a collective dismissal, and group pensions/deferred annuities. Under the guidelines issued by the IRDA to insurance companies: --If a fund has a surplus, as defined by Accounting Standard 15, the insurer may suspend the payment of contributions or premiums. Top-ups will not be permitted unless the plan is underfunded; --Plans may include life coverage if the sponsoring employer opts for it (it is not required); --No lock-in period is required for employer-provided products. However, the insurer may assess a surrender charge that does not exceed 5% of the fund, up to a maximum of INR 5,000,000, if the fund is withdrawn before three years; and Copyright 2010 Aon Hewitt Inc. 2

3 --Guaranteed returns are applicable to pension/deferred annuity plans only. The guaranteed return at the individual member level is applicable only if membership in the group plan is at least five years. For all contributions and/or premiums received from September 1, 2010 to March 31, 2011, the minimum guaranteed rate is 4.5%. Issues for Expatriate Employees In India, the visa limit for highly skilled or professional foreign nationals has been lifted. Under a 2009 memo issued by the Ministry of Labor and Employment, the number of employment visas was limited to 1% of the total number of employees employed for a project, subject to a minimum of 5 and a maximum of 20 employment visas. In May 2010, the IT industry was exempted from the limit. The Ministry of Home Affairs recently clarified the treatment of employment visas. The number of visas will no longer be subject to any limit as long as the foreign national is earning more than USD 25,000 per year. India has signed social security totalization agreements with Norway and South Korea. Under the agreements with Norway and South Korea, employees on short-term employment contracts of up to five years would not be required to pay social security contributions in their host country provided they continue to contribute to their home country system. Any contributions paid to the host country system would be recognized by the home country for benefit purposes. The agreements must be ratified by the respective legislatures before they are effective. Malaysia Employment Terms and Conditions The Malaysian government is expected to introduce a national minimum wage scale for private-sector employees. The Cabinet has asked the Ministry of Human Resources to draft minimum wage legislation for the private sector. A National Wage Council, consisting of representatives from employers associations, unions, government agencies, and academia, would be given the power to establish the minimum wage as well as conduct periodical reviews. If passed, minimum wage scales would be implemented as of June Retirement and Social Security Employees in Malaysia may have more options for retirement savings in The government has announced plans to establish a Private Pension Scheme (PPS) to give employees more choice in retirement savings funds and, presumably, to compete with the Employees Provident Fund (EPF). Reportedly, existing tax relief for contributions to the EFP (MYR 6,000) would be extended to funds in the PPS. It is not clear how funds approved for the PPS would relate to the Members Investment Savings Scheme (MISS). The MISS is an alternative EPF investment program which allows EPF members who are younger than age 55 and have at least MYR 55,000 in their retirement account (Account I) to invest part of this amount in a unit trust Copyright 2010 Aon Hewitt Inc. 3

4 through external fund managers appointed by the Ministry of Finance. Members must invest at least MYR 1,000 but no more than 20% of the amount exceeding MYR 50,000 in Account I. All investments in MISS must be made through fund managers appointed by the Ministry of Finance. South Korea Issues for Expatriate Employees South Korea has signed a social security totalization agreement with India. Under the agreement, employees on short-term employment contracts of up to five years would not be required to pay social security contributions in their host country provided they continue to contribute to their home country system. Any contributions paid to the host country system would be recognized by the home country for benefit purposes. The agreement must be ratified by the respective legislatures before it is effective. Employers in South Korea with expatriate employees may wish to review their housing policies in light of a recent tax ruling. Employer-provided housing is not considered taxable income if the rental agreement is signed by the employer and the owner and the employer pays rent to the owner. In a recent ruling, the tax authority indicated that residence hotels furnished apartments with services such as cleaning, utilities, and Internet are not covered by tax rules on employer-provided housing, and hence, this benefit is considered taxable income to the expatriate employee. Taiwan Employment Terms and Conditions Female employees in Taiwan are entitled to unpaid maternity leave for medical reasons. Female employees are entitled to eight weeks of maternity leave. In the event of medical complications, employees are entitled to a maximum of one year of unpaid leave if they are hospitalized and up to 30 days of leave if hospitalization is not necessary. Previously, employees who miscarried after three months of pregnancy were entitled to four weeks of maternity leave. For normal pregnancies, female employees remain entitled to eight weeks of maternity leave. Employers are required to pay full earnings to employees on maternity leave who have at least six months of service. Employees with fewer than six months of service are entitled to 50% of pay. The entitlement to unpaid leave has been effective since May 6, Thailand Health Care System Individuals covered by the Thai Social Security System may soon be able to receive treatment at a hospital of their choice. The Social Security Office is negotiating with government hospitals and hospitals sponsored by the Thai Red Cross to permit individuals covered by the system to choose their own hospital. Currently, they are assigned a Copyright 2010 Aon Hewitt Inc. 4

5 hospital based on geography. Patients in need of critical care would automatically be transferred to university hospitals, which are generally considered the most advanced. Taxation of Compensation and Benefits The Thai Cabinet has approved a new tax deduction for individuals that purchase pension insurance policies. Under the draft tax provision, individuals would be permitted to deduct a maximum of THB 200,000 or 15% of total income, whichever is less, for the purchase of a pension insurance policy. The total deduction for insurance premiums, including life insurance premiums, would be THB 300,000. Currently, individual taxpayers can deduct up to THB 100,000 for life insurance premiums (if the policy s term is ten years or more and the policy was issued by an insurer in Thailand). However, the total deduction for all types of long-term savings including provident funds, government pension funds, and retirement mutual funds would remain THB 500,000. * * * The Aon Hewitt Country Profiles eguide provides a summary of the statutory environment affecting employment in nearly 90 countries. You can learn more about the Country Profiles eguide here. Copyright 2010 Aon Hewitt Inc. 5

6 About Aon Hewitt Aon Hewitt is the global leader in human capital consulting and outsourcing solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit Copyright 2010 Aon Hewitt Inc. This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt's preliminary analysis of publicly available information. The content of this document is made available on an as is basis, without warranty of any kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document. Copyright 2010 Aon Hewitt Inc. 6

Global Defined Contribution Update

Global Defined Contribution Update Fourth Quarter 2010 This quarterly Update summarizes recent legislative developments and trends related to defined contribution retirement (DC) plans and highlights recently