ICE April 2016 Newsletter

In this edition we look at the EU-US Privacy Shield, the proposed reforms to the German staff leasing legislation, yet more changes to the UK rules and more compliance news that have an impact on the staffing and global mobility industry.


Apostille Convention ratified in Brazil

With the aim of reducing bureaucracy, the Brazilian government announced in February the ratification of the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (the Apostille Convention), which will come into full force in country on 14 August 2016. The convention aims to remove the requirement of diplomatic or consular legalisation of foreign documents so it will benefit companies with branches/subsidiaries in Brazil as it will expedite processes and reduce the cost of validating foreign documents between member states.

Documents that have an apostille from one signatory country are recognised for legal purpose in other signatory states, without the requirement of any additional certification. The ‘apostille’ itself is a certificate (with a seal or stamp) issued by a competent authority in the country and it certifies the authenticity of the signature as well as the capacity in which the person signing the document acted and, where appropriate, the identity of the seal or stamp which it bears.


Relaxed immigration rules for non-EU citizens

Further to increased demand for highly-skilled labour in specific sectors, the Bulgarian government is in the process of simplifying rules and procedures around the hiring of non-EU citizens. The first move happened towards the end of 2015 when the Bulgarian Minister of Labour and Social Policy introduced a list of professions for which a relaxed EU Blue Card *issuance procedure would apply. This step alone has reduced processing times by two months. The list was approved and published in January and covers several professions/positions from the IT sector.

The next step for the government will be passing a bill concerning labour force mobility and migration, which is expected to happen without major challenges or amendments. This should allow for more clarity on certain aspects of the current legislation that are deemed vague and make some of the required procedures faster, amongst other things. Changes to be brought in by the new bill include:

  • A new general rule combining all work permits with a residence certificate;
  • Eliminate the need for a work permit for foreign employees entering the country for up to three months (within a 12-month period) to complete a task (registration of the foreigner with the Employment Agency will suffice instead);
  • Simplified requirements for hosting entities and employees transferred to Bulgaria as part of an inter-company project (currently very limited in country).
  • For EU Blue Cards to be issued three key conditions have to be met: non-EU citizenship, being educated or skilled, and a work contract or binding job offer. All EU member states, except the United Kingdom, Denmark and Ireland, participate in the EU Blue Card scheme.


European Commission (EC) unveils EU-US Privacy Shield

At the beginning of February the EC confirmed it had negotiated the terms of a reworked data-sharing agreement to replace Safe Harbour. Like its predecessor, the Privacy Shield agreement is intended to ensure that the personal data of EU citizens benefits from the same privacy protections when processed in the US as it would within the EU. The abolishment of Safe Harbour caused a lot of concern especially to the technology sector so the arrangement of the new Privacy Shield was welcomed as a much-needed assurance to companies relying on data transfer in order to do business.

On 29 February the EC published the texts that will constitute the EU-US Privacy Shield, including principles companies have to abide by when dealing with transatlantic data flows. The EC also made public the US Government’s written commitments on the enforcement of the arrangement. The new regime is expected to come into force by the end of May.

The new data-sharing agreement will, unlike Safe Harbour, be subject to an annual review to ensure it remains fit for purpose.


Reform proposals of staff leasing in Germany reviewed after criticism

Back in November the Ministry of Labour and Social Affairs put forward a legislative proposal to amend existing labour leasing laws (The Temporary Employment Act/ Arbeitnehmerüberlassungsgesetz – AÜG), but just a few weeks later the Chancellor’s Office demanded amendments to the first draft bill and stopped the consultation process between themselves and the ministerial departments. After facing a lot criticism and lobbying from recruitment agencies and professional bodies, the German authorities released an updated draft proposal of amendments to the Act on 17 February. Some of the very contentious points, such as the one related to the legal framework for the provision of freelancer services, have been reviewed. And the most celebrated change is that the highly criticised criteria for differentiating leased and freelance staff from internal staff with a deemed employed status have been abandoned.

The following changes remain as part of the second bill:

  • Maximum total duration of assignment with the same hirer being limited to 18 months unless amended by collective agreements of the sector of the hiring company. Companies not bound by collective agreements also have the option to extend the maximum assignment period by making using of a works agreement that are identical in content to the collective agreement. Breaks between contracts only restart the clock if lasting longer than 6 months. Contracts/assignments dated prior to the 1 January 2017 will be excluded from the 18-month cap.
  • Equal working conditions (including pay) after 9 months meaning temporary workers would have to be given same basic working conditions as comparable employees of the hirer. Exceptions to this equal treatment principle would only be possible through a collective bargaining agreement (exemption for a period of maximum of 15 months).
  • Prohibition on using leased employees during strikes
  • Information rights of the works council

As there are still fundamental disagreements surrounding the draft bill, the consultation process has been put on hold once again. ICE will continue to follow the issue and advise on developments in the next Newsletter.

Once passed the amended law will come into force on 1 January 2017.


Government freezes recruitment of foreigners

In February the Malaysia government announced it was suspending the recruitment of foreign workers while assessing gaps in the labour force and reviewing a levy system for overseas workers that had come into force earlier the same month. With an estimated 2.1 million registered foreign workers and 1.7 million illegal foreign workers, the country faces challenges as it has a strong reliance on cheaper labour coming from overseas, mainly Indonesia, Myanmar, Nepal and Bangladesh. The decision came after the government had severe opposition for signing an agreement with the Bangladeshi government that would allow 1.5 million Bangladeshis registered to seek work abroad to apply for jobs in Malaysia.

No fixed timeline was announced for the recruitment freeze, despite fierce criticism by industry groups and the Malaysian Employers Federation. The government appealed to employers to ensure local workers were recruited while also advising that existing illegal workers would be detained and deported, so employers interested in keeping their workforce should consider the rehiring programme, which allows illegals to have a valid work permit obtained for them. The programme is available until the end of June.


The end of zero-hour contracts

The parliament passed a bill to ban zero-hour contracts in New Zealand – it took effect on 1 April. The vote was unanimous and it was celebrated as one of the first laws in the developed world to end the use of deals labelled as exploitative. The Labour Party that had been lobbying for the ban since the introduction of the Employment Standards Legislation bill in 2015.

The bill also extended paid parental leave to 18 weeks, introduced tougher penalties for breaches of employment standards and increased powers given to labour inspectors.


Panama Papers

In the wake of the Panama Papers and as authorities in France, Austria, Netherlands, Australia and a number of others launch their own investigations, the question surrounding the morality of tax avoidance is again hot topic. As current and former heads of state and a number of those related to them, politicians, celebrities and businesspeople deal with the consequences of being named somewhere in the more than 11 million leaked documents, questions about the fairness of tax havens, tax evasion and corporate tax rates are being asked again, but by many more and more loudly. It may be that now governments that have been talking about some of these issues will indeed come together and start taking action to accelerate some of the processes that will bring about change. In the next edition we will be able to look into this in more detail and analyse the true impact of the leaks.


There have been a number of changes and amendments in the UK over the last couple of months, so here is a brief summary of a couple of them.

Reform of the Conduct of Employment Agencies and Employment Businesses Regulations

Following a two-year consultation the Government announced the changes to the Conduct Regulations that took effect on 6 April 2016, which include amongst other things:

  • Removal of regulations 9, 11 and 17 (the latter refers to the need of an employment business to obtain agreement to terms with hirers);
  • Amendment of regulation 23 and 27A, with the latter being potentially the most relevant change as it prohibits employment agencies and employment businesses from recruiting solely from other European Economic Area (EEA) countries without advertising in Great Britain and in English.

New rules on travel and subsistence

Also from 6 April 2016 there are new rules that restrict access to relief for home to work travel and subsistence where a temporary worker personally provides services to another person, is employed through an intermediary (such as an umbrella company, agency, MSP or limited company/personal service company) and is under the supervision, direction and control (SDC) of a third person.

When a worker is subject to SDC but still claims and receives tax relief for travel and subsistence expenses for what is now considered normal/regular commuting (according to the new measures), this will result in underpaid tax and employer’s national insurance contributions (NICs) and the liability for the outstanding amounts can be transferred to the employment intermediary. Company directors may become jointly and severally liable for the payment of tax and NICs if the intermediary fails to meet the obligations.

A second transfer of liability may be applicable in case an employment intermediary can prove it was given fraudulent document/information by another party involved in the supply chain that led it (the intermediary) to make a claim when it shouldn’t have done. In that case, the party that issued the fraudulent document/information (or its directors) will then be accountable for any unpaid taxes and NICs.

IR35 intermediaries legislation and public sector engagements

Following a consultation over the summer 2015, the Government announced at Budget 2016 that reformed intermediaries legislation (IR35) for public sector engagements will be introduced from April 2017. The proposed new legislation will transfer the liability of deciding whether IR35 applies to the public sector body (engager/client). In situations where an agency (or other third party) is involved, the responsibility will be with the agency/third party to decide this (whichever party is closest to the worker’s limited company). If IR35 applies, client (or the agency, if there is one involved) will have to account for and pay taxes and NICs (national insurance contributions) through its own payroll (Real Time Information system – RTI).

As a consequence of this, the issue around worker classification which has had a very high profile in the US will become more relevant in the UK. Public sector bodies and agencies supplying into the public sector will be forced to determine the contractor’s true employment status, and if a worker’s engagement can be deemed as employment instead of self-employment (therefore inside IR35), appropriate tax and NICs will have to be deducted and paid. The government has advised that HMRC will provide guidance, introduce clear, objective tests for employers, including a digital tool to help engagers make a decision on each engagement up front.

To say the announcement has been met with criticism and scepticism is a great understatement and the government should expect strong opposition to the proposals over the coming months. More details are to be released in a consultation document before the summer. We will continue to monitor this situation and advise on any developments in the next Newsletter.


Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015

Back in February the US Department of Homeland Security (DHS) started the implementation of the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015. The Act makes a number of important changes to the Visa Waiver Program (VWP) and prohibits anyone who has travelled to Iraq, Syria, Iran, or Sudan within the past five years as well as citizens of VWP-eligible countries who are also citizens of these four countries from further participating in the program.

The DHS also included Libya, Somalia and Yemen in the list of countries of concern, so whoever has visited these countries since 1 March 2011 will not be able to participate in the VWP anymore.

Important to note here that the restrictions do not mean individuals are not allowed to travel to the US, but that they are required to obtain a US visa in order to do so

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I hope you find this newsletter useful. However please note that the content of this newsletter is to be used for informational purposes only and is not to be construed as legal or financial advice. While ICE tries to ensure the information is accurate at the time of writing, due to the nature of Global Compliance, all such information is subject to change AT ANY TIME based on country laws and regulations. ICE shall therefore not be held responsible in any way, and you are strongly advised to contact ICE directly should you wish to obtain further details on a specific country.

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