ICE February 2017 Newsletter

Potential increase of flexibility in the Chinese market, new work permit rules in Kazakhstan, the postponement of the Dutch DBA and more – check our latest newsletter and stay up to date with legislative and regulatory compliance changes across the globe.


Flexible workforce versus increased labour protections

Whilst 2016 saw an increase of the number of people providing services through online platforms such as Uber, the number of claims by service providers wanting recognition of their employment rights was also very high. The courts made decisions on a case-by-case basis, granting employment rights to those workers under the management and labour rules of the platforms, and confirming the situations where these rights did not apply, based on the fact the service provider could decide his/her own hours and wasn’t under the general management and regulations of the platform. Whilst Chinese legislation does not clearly recognise independent contractors, it is expected that as the use of such online platforms continues to grow, more flexible types of engagements will become a little more common in country.

On a separate important development in country, the Ministry of Human Resources and Social Security issued two new regulations strengthening labour protections that took effect on 1 January 2017. These apply to all current employers in China, both domestic and foreign-invested companies.  The first one is the ‘Measures for Grading Compliance and Integrity Level of Labour Protection Acts of Enterprises’, which establishes a yearly rating system of employer grading (A, B and C) based on their level of compliance with labour protection laws, such as execution of employment contracts, labour dispatch rules, social security contributions, limits of working hours, leave and rest breaks. The grades will be added to the company compliance file and will help determine the frequency of inspections each company shall have. The second piece of legislation –  Measures for Publicising Material Violations of Labour Protection Laws – allows the local authorities to disclose to the public significant violations committed by Chinese employers such as salary payment delays, lack of social security contributions, failure to provide special labour protections to female employees and so on, which will significantly increase the risk of reputational damage for those who fail to observe the local labour laws.


French bill on corporate due diligence

The French government is currently considering a bill that would create specific due diligence obligations for French companies. The bill is in its third version, having first been put forward by a group of parliamentarians in 2013, but only actually presented to Parliament in January 2015 and finally adopted by the lower house of French Parliament at the end of November 2016. The main objective of the bill is to ensure French companies have a vigilance plan in place to help prevent serious violations of human rights and environmental abuses by their subsidiaries and supply chain members. The new law, if passed, would affect around 100 major business groups, that is, any company headquartered in France that has either 5000 or more employees, including those employed by French subsidiaries;  or 10000 or more employees, including French and foreign subsidiaries.

The bill prescribes what should be included in the vigilance plan and extends rights to the government to supplement the required elements. The bill also contains severe penalties for violations: up to 10 million euros for grave offences, and up to 30 million euros for severe damage caused due to failure to publish or implement a plan. Finally, the bill includes an obligation to publicly disclose corporate efforts, which is similar to requirements under the California Transparency in Supply Chains Act and the UK’s Modern Slavery Act 2015, but overall the French bill has other aspects that make it more onerous than its counterparts.


Changes affecting severance payments

Even though Hong Kong has traditionally been a flexible country when it comes to the workforce organisation, there have been some small changes that would indicate the government is contemplating a slightly more protective labour environment, such as current debates on standard working hours. Considering the current situation in country, standard working hours are not subject to general legislation, meaning local workers have some of the longest working hours in the world. A Committee, created back in 2013, has recently submitted a report to the government which includes views of the public and recommendations on a standardisation of working hours, as well potential introduction of overtime compensation. Should the government decide to implement these recommendations there would be a significant impact on employers across the country.

Also, the government has proposed abolishing the controversial mechanism currently used by employers to offset severance and long service payments due to an employee against the contributions previously made to that employee’s retirement fund.  In order to help minimise the impact on employers, the government is also proposing a reduction of the severance entitlement from two-thirds of a month’s wages for each year of service (capped by HK$15,000) to half of a month’s wages. Depending on the public’s response, the government will then launch a three-month consultation period prior to proceeding with the changes.


Developments on ‘the equal pay for equal work policy’

The Prime Minister Abe continues to work on his core policies in order to eliminate excessive overwork and narrow the gap in wages and other work conditions between regular and non-regular employees (namely fixed-term and part-time employees as well as agency workers). The equal pay for equal work policy aims to tackle discrepancies related to base pay, bonus payments, retirement allowance and other benefits. This gap has become an issue of bigger importance and a subject of increased discussion as non-regular workers account for 40 percent of employed workers in country. The government plans to have the bill that would implement the policy submitted at the Diet session in the coming Autumn.

According to the guideline presented to the government, allowances and benefits which include commuting allowances, overtime pay, late night and holiday work allowances, holidays and use of facilities (i.e.: company cafeterias) must be provided equally to workers, irrespective of their employment status. As it stands though, the guideline has no legally binding power over employers so a lot more would have to be done in order to ensure the rules are indeed followed in practice.


Work permits – the new rules

As of 1 January 2017 new rules apply to the issuance and renewal of work permits in Kazakhstan. Under the new regime all foreign workers, including directors of branches and representatives who used to be exempted, will have to obtain a work permit in order to legally work in country. Worth noting that those who hold a position that used to be exempted by the old rules now risk being found in a position of violation of the local laws. The changes also reduce the timeline for a decision to be made on each application – the authorities now have 7 business days from the date the documents have been submitted. The process has been eased for employers and the following are some of the requirements that no longer apply: submission of a departure guarantee for the foreign employee at the expiry of the work permit;  carrying out special conditions related to training and the creation of additional jobs for locals; and local market research.

Duration of the work permits have been changed as follows:

  • 1st category employees will have work permits issued for a shorter period of up to 12 months, but will be allowed unlimited renewals;
  • 2nd and 3rd category employees can still have permits issued for 12 months, renewable for the same period up to three times;
  • 4th category employees can have permits issued for a maximum of 12 months, with no possible renewal.

Further changes also apply to work permits issued under intra company transfers.


Criminal Record Certificates Law modified

A new law has come into force on the 1 February 2017, amending existing legislation on criminal record certificates and determining when these can be requested by an employer, both during the recruitment process or the course of an employment relationship. Under the specific situations when information related to penalties for criminal and minor offences can be requested – known as section 3 of criminal record certificates – the individual must be informed of the same by means of a written job offer. And this can only be done if the position’s requirements justify the request.  The Section 3 of the certificate cannot be kept for longer than a month from the date of signing the employment contract. If an employment relationship already exists, the Section 3 can be requested only if specifically allowed by law or in case of a change in job position with specific requirements that would justify the request.

Similar rules apply to requests of the section 4 of criminal record certificates, which details information related to driving convictions.


DBA enforcement postponed until 2018

As previously reported, from May 2016 the VAR certificate ceased to exist in the Netherlands and was replaced by the system known as DBA, under which model agreements approved by the Dutch tax authorities would be used by independent contractors and the clients engaging them. The government had announced a transitional period of one year during which there would be more leniency when enforcing the legislation. However the months that followed the suspension of VAR and implementation of the DBA showed the desired results were not being achieved, leading the State Secretary Wiebes to write to the Lower House acknowledging the failure of the DBA. As a consequence, the transitional period and final implementation deadline has been postponed until at least 1 January 2018. During this extended period of leniency the tax authorities will not impose fines or retroactive recovery, except for cases of ‘malicious intent’. Whilst the Dutch authorities reassess the situation and try to solve issues highlighted by clients and other market players, the model agreements should continue to be used and parties should ensure there are no discrepancies between paperwork and actual practice.


Significant amendments to the Labour Standards Act come into effect

A number of amendments to the Labour Standards Act were passed in December 2016, providing improvement to workers’ rights in relation to paid leave. Some of the most important changes are:

  • Workers are now entitled to at least two days off in every seven-day period, of which one is to be recognised as a regular day off and the other as a recess day. Employers can only request workers to work on a recess day if wages are to be paid at a premium rate; on regular days off a worker can be requested to work only under exceptional circumstances.
  • National holidays have been reduced from 19 to 12 days per year.
  • Annual paid leave was increased and will benefit especially those workers with less than 5 years’ service, The new entitlements are as follows:

Between 6 months and 1 year’s service = 3 days
Between 1 and 2 years’ service = 7 days
Between 2 and 3 years’ service = 10 days
Between 3 and 5 years’ service = 14 days
Between 5 and 10 years’ service = 15 days

Employees with more than 10 years’ service are entitled to an additional day’s holiday for each additional year they work up to a maximum of 30 days annual leave.

Finally it is worth mentioning that new legislation increasing the amount of rest entitlement for shift workers is to be introduced still in 2017.


New requirements related to data entry and health and safety

A new registration requirement for companies with staff population superior to 1000 has come into force on 1 January 2017. These entities need to complete an online registration with Tas’heel (the Ministry of Human Resources and Emiratisation service provider in charge of processing work permits) confirming they are an employer. As part of the process they also need to register every staff member and appoint two – who must be UAE nationals – to enter the data.

And specifically for companies in the construction and industrial sector with over 500 staff, a local national needs to be employed to act as the Health and Safety Officer. This new requirement establishes the person will be in charge of both implementing and monitoring employee health and safety practices.

Failure to comply with the requirements above may result in Tas’heel imposing a temporary ban on work permits.

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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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