ICE April 2017 Newsletter

This time we look into, amongst other things, the approval of outsourcing legislation in Brazil, amendments to the Finnish Employment Contracts Act and the many changes taking effect in the UK from April 2017. A lot to take in, so happy reading!


President approves legislation on outsourcing

As covered in previous newsletters, the issue of outsourcing in Brazil has been long discussed without any conclusion to the matter. However everything changed on the 31st March 2017 when the Brazilian President, Michel Temer, sanctioned the bill regulating outsourcing in country, extending it to all activities (including the core business of a company) and therefore lifting restrictions that limited outsourcing to non-essential (ancillary) activities. The new law has been approved surrounded by controversy and despite protests across the country – it is defended by employers but heavily criticised by the opposition and trade unions. The law is in force since its publication at the beginning of April 2017 and the responsibility for paying the workers sits with the service provider, however should it fail with its obligations, the end client would ultimately have to honour the payments.

Safeguards for outsourced workers are to be introduced as part of the general labour reform and include things such as equal treatment (mainly related to working time and pay) in relation to comparable permanent employees of the client (obligations in relation to health and safety are already in place) and also a liability on the service user (client) to monitor the service provider to ensure compliance with its labour and social security obligations.

The law also affects temporary work, limiting a temporary employment contract to nine months (original contract duration is now allowed for up to 180 days with the possibility of a further 90-day extension). There was a proposal to have the nine-month period extended if approved by collective bargaining, but this has been vetoed by the President.


New visa policy introduces online applications across China

Since 24th March 2017 the alien employment services counters in Shanghai no longer accept new Employment Permit applications.  All employers are required to apply for Employment Permits via the online management system – this applies both to foreign employees who currently hold a Foreign Expert License and those with an Employment License.

Under the old visa and immigration policies different work permits were needed: an Alien Expert License holder had to apply for an Alien Expert Certificate, whist an Alien Employment License holder had to obtain an Alien Employment Permit in order to legally work in country. To simplify the process, the China’s State Administration of Foreign Experts made the two work permits into a single ‘Alien Employment Permit’, effective from 1 April 2017.

The online application started in Shanghai followed by a nationwide rollout a week later.

The new process includes the registration of an online account on the Chinese Management System, followed by a verification of the employer’s registration information in person at one of the local alien employment service counters. Only after completing these two steps can the employer log in to its account and complete the application by submitting all the relevant documents to the authorities. For now it remains unclear how long the whole process will take, but once a final decision on the process is announced, the Chinese authorities have to issue an Employment Permit to the applicant within 10 working days.

With the new visa policy, there is also a new three-tiered system which classifies foreign workers as A, B, or C level candidates, taking into account the candidates’ education, salary level, age, time spent working in China, and Chinese language skills. Applicants who receive more than 85 points are given the letter “A”, 60 to 85 points “B”, and less than 60 points “C.”


Parental rights increased for Colombian workers

The Colombian Congress approved at the beginning of the year new laws affecting maternity rights, increasing maternity leave from 14 to 18 weeks (20 weeks in case of multiple births), with one week being taken prior to the expected childbirth date and the remaining 17 weeks after the birth. The number of weeks taken prior to birth may be altered for medical reasons. The same rights are extended to a father who becomes the primary carer of the baby in case of illness or death of the mother.

Paternity leave is confirmed as 8 business days to be taken after the birth of the child. The law also introduces the obligation on some employers (those with at least 50 workers or with capital equivalent to 1500 minimum salaries) to create ‘breastfeeding rooms’ in the workplace, allowing mothers the possibility to express and store breast milk during working hours.

Also in January 2017 the Constitutional Court ruled that fathers should receive protection from dismissal (similar to that awarded to female employees) for the duration of their spouse or life partner’s pregnancy and also during the breastfeeding period. In order to qualify for this protection, the worker’s spouse/partner should be registered as his beneficiary for health insurance, meaning she is not employed at the time, and therefore, not affiliated and contributing to the health insurance scheme. Any dismissals for fathers in this situation will have to be expressly authorised by the Labour Inspectorate.


Amendments to the Employment Contracts Act come into force

With the aim of increasing flexibility in the Finnish Labour Market, changes have been introduced to the Employment Contracts Act and these have been in force since January 2017. Amongst the changes, the maximum duration of a trial period has been increased from four to six months, with potential extension in case the employee is absent from work during the probation period due to sickness or family leave. Another aspect that has been welcomed by employers is the possibility of signing a fixed-term contract for up to 12 months with a new employee without a justified reason – however this can only be done if the candidate has been unemployed for the preceding 12 months or longer. Other amendments affect re-hiring and outplacement (training) services obligations of employers in relation to redundant staff.

Also in January 2017, the reforms affecting the employment pension system came into effect. As a consequence, the earliest eligibility age for old-age pension as well as highest retirement age will be increased gradually, from the current age of 63 to 65 (for employees born between 1962 and 1964) and from 68 to 70, respectively. The lowest retirement age of employees born in or after 1965 will be adjusted annually based on the change in life expectancy.


Maternity benefits increased with new law

The Ministry of Women and Child Development announced in March 2017 that the Lok Sabha (Lower House) passed the Maternity Benefit (Amendment) Bill, 2016, which had already been passed by the Rajya Sabha (Upper House) during the Winter Session. The Bill amends the Maternity Benefit Act, 1961 and guarantees an increase in maternity leave from 12 to 26 weeks (this applies to the first two children; leave for the third child onwards will remain at 12 weeks). Leave of 12 weeks is now also extended to adopting and commissioning mothers.

Employers with 50 or more employees will now have the obligation to provide crèche facilities and allow mothers to make four visits during working hours to look after and feed their child in the crèche. At the end of the maternity leave, employers should, as much as possible, allow female employees to work from home. All employers need to ensure these benefits are extended to all female employees from the moment their employment commences.


Assisted procedure for digital dismissal can now also be submitted by labour consultants

With a few exceptions, since March 2016 all employees need to complete a digital form (available in a specific section of the government website) to indicate their wish to resign or consensually terminate their employment relationship. This can be achieved by one of two available procedures: the direct procedure, which requires a PIN device issued by the Italian INPS and registration on the Cliclavoro website prior to completing and submitting the form; and the assisted procedure, where the worker requests an authorised intermediary to process the form. Authorised intermediaries used to be limited to social welfare assistance institutions (patronati), union organisations, bilateral entities and certification commissions, but now labour consultants are also recognised as part of that list. The authorities have clarified that only labour consultants registered in the specific Register are to be considered authorised intermediaries, which means other professionals allowed to manage employment relationships are excluded.


Country seeks to improve maternity protection standards

At the beginning of March 2017 the Senate approved the third and final reading of the Bill 1305 seeking to increase maternity leave from 60 days (for normal delivery, 72 days for caesarean) to 120 days with pay. This benefit is to be extended to all female workers in the public and private sectors, regardless of their marital status, with a possible 30-day extension without pay. Single mothers will be granted 150 days maternity leave with pay.

The bill also provides that 30 out of the 120 days may be transferred to alternate caregivers (i.e. the spouse, common-law partner, a close relative); this right is also to be extended to adoptive parents.

Fathers would also have their paid paternity leave increased from seven to 30 days.

Non-compliance can result in severe fines and even imprisonment, if the bill becomes law.

This is part of the country’s efforts to bring their maternity protection standards more in line with what is prescribed by the International Labour Organization. A counterpart measure is pending second reading approval and that would have to be approved by Congress first, before both bills can be presented to a special committee and then forwarded to President Rodrigo Duterte for approval prior to becoming law, so there is still a way to go here.


The beginning of April saw a number of changes coming into effect in the UK, many of which we have covered in previous editions, but here is a recap:

  • IR35 in the public sector: the new legislation transfers the liability to determine the IR35 status of an engagement from the contractor supplying services through a Personal Services Company (PSC) to the public sector client. If IR35 applies, the contractor business has to be taxed at source, through the RTI system (Real Time Information) run by the client or a third-party (such as an agency), as if it were an employee (even though the actual employment status won’t change and therefore no rights or benefits will be granted to the contractor). If the client doesn’t take ‘reasonable care’ when determining the contractor’s tax status, it (the client) will then become liable for covering taxes and National Insurance Contributions in case the HMRC disagrees with the decision. This point especially was something that had caused great concern to recruitment businesses as the burden of decision sat with them under the draft legislation, but was subsequently amended in the final text.
  • Apprenticeship Levy: according to the government policy paper the Apprenticeship Levy will be a levy on UK employers to fund new apprenticeships. The levy will be charged at a rate of 0.5% of an employer’s pay bill, payable through PAYE (pay as you earn) and alongside income tax and National Insurance . Each employer will receive an allowance of £15,000 to offset against their levy payment. It affects employers in all sectors with an annual wage bill of over £3 million. For recruitment and staffing businesses, which have a much higher proportion of their turnover consisting of (agency worker) payroll when compared to regular employers, these charges will be disproportionately higher, so the scheme has, in general, not been well received by the industry, with many of these companies not having clear plans to finance the extra cost, some intending to absorb it as an overhead and others possibly having to put their fees up in order to cover the cost of the levy.
  • Gender Pay Gap (GPG) reporting: Gender pay reporting legislation requires employers with 250 or more employees to publish (on their own and a government website) statutory calculations every year showing how large the pay gap is between their male and female employees.  The figures must be calculated using a specific reference date (the snapshot date), which is the 31 March for public sector organisations and the 5 April for businesses and charities, and then published within a year of the snapshot date (and on the same date each year after that). For the purpose of the legislation, the term employees includes all those with a contract of employment within the organisation, workers, agency workers, self-employed workers who personally perform the services, part-time employees and even those based overseas (if they have an employment contract subject to English, Scottish or Welsh law).
  • National living wage: from 1 April 2017, employees and workers aged 25 and over (not in their first year of an apprenticeship) are legally entitled to at least the National Living Wage, which is £7.50 per hour. Those under the age of 25 are legally entitled to at least the National Minimum Wage and the rates vary as follows: £7.05 per hour for employees and workers between 21 and 24 years old, £5.60 for those between 18 and 20 years old, £4.05 for those under 18 and £3.50 for apprentices. Employers found to have underpaid their workers/employees have to pay any arrears immediately, and in case of an investigation from HMRC, penalties may apply and the employer may also be publicly named.
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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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