So we come to the last edition of 2015 with a brief recap on what’s happened over the last couple of months and what to expect in some of the countries as we go into the new year.
When I prepared the first newsletter earlier this year I had no idea how many significant things I was going to write about in such a short period of time – from the German minimum wage to the changes on the engagement of VAR/independent contractors in the Netherlands and the revised Dispatch Law in Japan; the ECJ’s ruling that the US Safe Harbor framework is not really that safe; the UK Modern Slavery Act; the new WPS system in Qatar and Saudi Arabia… the list goes on. As I look back, I believe the Volkswagen scandal is one of the things I will definitely remember about this year though. For me it was clear that it doesn’t matter how big a company is and how long it has managed to get away with it, lack of compliance will eventually get found out and the resulting reputational damage can be simply disastrous. I know VW wasn’t the first and it won’t be the last, but the story was out there for everyone to see, so banging on about the importance of compliance is not scaremongering, but a true need. In a way, I feel compliance professionals have been vindicated once again! And I feel ready and excited about the challenges the new year will bring!
So, as Christmas is nearly here, please allow me to wish you a truly special one and a very successful 2016!
Happy reading,
Helga
BELGIUM
Electronic signature for the temporary employment sector
In order to simplify processes and reduce bureaucracy, temporary employment contracts will be signed electronically in Belgium from 2016. The platform that will enable this is being launched by Federgon (the Belgian Federation of Staffing Agencies) and is currently exclusive to temporary businesses.
With the new online platform it is expected that more contracts will be signed on time and that there will be a greater level of legal certainty for all parties involved. Another advantage is that contracts will also be stored electronically.
DENMARK
Deadline for amending employment contracts
Employers in Denmark have only a few days to make sure they amend their individual agreements that stipulate the automatic termination of an employment relationship due to an employee turning 70. After January 1 2016, any provisions in employment contracts on automatic termination will be invalid.
Failure to amend the employment contracts would put the employer at risk of breaching the Act on Employment Contracts and, in some cases, the company may be ordered to pay compensation. This does not apply to employers with employees who turn 70 before January 1 2016.
If the company is subject to a collective bargaining agreement entered into after January 1 2008, a provision regarding automatic termination on turning 70 can be maintained until the date when the collective bargaining agreement can be terminated. For CBAs entered into before January 1 2008, it will still be possible to maintain the applicable age limits for compulsory termination, provided that they are objectively and reasonably justified by legitimate purposes and the means to reach such purposes are appropriate and necessary.
HUNGARY
New requirements for invoicing programmes
Further to Decree Nr. 23/2014 (VI.30) NGM on the Tax Identification of Invoices and Receipts, invoicing programmes in Hungary must include a specific built-in reporting function (known locally as ‘adóhatósági ellenÅ‘rzési adatszolgáltatás’ – data disclosure for inspection by the tax authority) function. This specific function should enable the programme to produce an electronic file in a set format upon request of the Tax Authority, which would include invoices issued within a specific period designated by entering the opening and closing date (year, month, day) or within a specific range of serial numbers designated by entering the number of the first and last invoice in that range.
This requirement applies to invoices, credit notes and modifying invoices issued on and following 1 January 2016 so those using VMS tools and running MSP programmes in country should ensure they’re complying with the new requirements. Further information can be found on the Hungarian Tax Authority site on http://en.nav.gov.hu/taxation/inromation_leaflets and http://en.nav.gov.hu/taxation/inromation_leaflets/Availability_of_the_X20151014.html
LATIN AMERICA
LAM countries embrace e-invoicing
25 billion of the 42 billion e-invoices processed globally in 2015 will have been processed in Latin America as the region invests in the development and implementation of tools for digital invoicing and processing, leading the way to a new phase of electronic and payroll reporting.
Mexico and Brazil are amongst the most developed countries when it comes to the usage of electronic processes at an international level. In Mexico specifically, employers need to provide Electronic Payslips (CFDI), which is made possible by working with an Authorised Certification Vendor (PAC). In Brazil, from September 2016, all companies will have to comply with the e-Social regulations – a digital platform that contains specific reporting templates aimed at guaranteeing accuracy in reporting, consolidating the way the government receives information and allowing workers to gain access to their details. Regular audits and penalties for non-compliance are carried out by the local Ministry of Labour.
Similarly to Mexico, Argentina also requires Electronic Payslips and non-compliance can be penalised with hefty fines (up to 2000% the minimum salary paid), but only those companies notified by the local tax authorities and registered through the online portal have to comply.
Colombia has a system where all social security payments are made electronically through the PILA – Integrated Social Security Contribution Form and compliance is ensured by the UGPP , which is the local Parafiscal and Pension Management Unit in country.
In Uruguay, whilst the implementation of an e-payslip system is not mandatory, it is expected that both private and public companies start using it to expedite processes, increase controls and security as well as reduce costs and the need for physical storage.
NORWAY
Upcoming changes following tax reforms
For those operating in Norway, they should be aware that tax reform is high on the agenda for the Norwegian Government, with the two main changes due to take effect in 2016 being:
- Corporate tax rate: currently Norway is one of the countries with highest tax rates in Europe, so in order to address that, the government has announced the intention to reduce the corporate tax rate from 27% to 25% in 2016. This would be followed by a second stage plan that would see the rate further lowered to 22%. By doing this, Norway hopes to increase investment and employment and also level things with Denmark and Sweden. The result should also prevent companies moving income to territories with much lower tax rates and at the same time provide potential for them (companies) to increase profits, leading to higher productivity and higher levels of wages – all of which would have a very positive effect on the local economy.
- The VAT rate, on the other hand, is set to be increased from 8% to 10%, which applies to transport services and entertainment products, cinema and event tickets, TV licenses and entertainment services. In addition to that, the Ministry of Finance is considering the possibility of removing current areas of exclusion so that they fall under the VAT system as well as a proposal to introduce indirect taxes within the finance sector, which would include VAT on a number of fees and charges; financial services rendered against compensation and a special tax on marginal income of financial institutions.
UAE
Further changes to employment rules in the UAE
The Ministry of Labour has recently issued three Ministerial Decrees – which were described as a major milestone – in an effort to improve current employment conditions in the UAE labour market. Ministerial Decrees 764/2015, 765/2015 and 766/2015 will come into force from 1 January 2016 and will apply to the private sector except those companies and employees registered in the DIFC.
The main objective of the Decrees is the consolidation of contractual employment terms, setting conditions for termination of employment and improving labour mobility whilst tightening enforcement and monitoring of labour relations.
Employers operating in country should make sure they are fully aware of the new rules. The first Decree refers mainly to written offers of employment and the Standard Employment Contract, both of which should comply with specific MoL requirements. The second Decree concerns the duration of fixed-term contracts (tenure reduced from 4 to 2 years) and a confirmation of the specific circumstances under which an employment relationship may be terminated. The final Decree covers a new work permit regime which would allow employees to move employment if they wish to. The government hopes this will promote labour mobility based on the principle that an employment relationship should only continue with free consent of both parties.
USA
Fair Pay Act becomes law in California
Back in October the Fair Pay Act was signed into law in California and it has been suggested that it is one of the most stringent gender pay equity law in the country. Although similar in some respects to the federal Equal Pay Act, the bill departs from and expands on its federal counterpart in several ways that are potentially problematic for employers. As an example, the act expands pay equity claims in California to encompass allegations based on unequal pay for “substantially similar work” which is significantly broader than the standard under the federal Equal Pay Act, which requires a plaintiff to prove a disparity “for equal work”.
The California act ignores the existence of different labour markets within the state, requiring equal pay for substantially similar work even if the work location is not the same, meaning claimants may try to argue that the employer is required to raise a rural wage rate to the same level as its urban counterpart in order to prevent litigation. Even more problematic, the literal terms of the Fair Pay Act might permit a claim based on pay disparities between California workers of one sex and those of another who are working for the same employer outside the state. Whilst it could be argued that the statute should not be applied extraterritorially, nothing in the act’s language clearly prevents such an interpretation.
It is highly advisable that companies assess the status of their gender pay equity as a matter of urgency. Where inequities exist, it is important that companies also identify the root cause of those inequities and address these as much as possible so to avoid litigation, especially as gender equity claims play well in the press and have the potential for significant damages.
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