ICE June 2015 Newsletter

Here is the latest ICE newsletter with updates on 14 countries. Again a lot happened in the last couple of months so hopefully this will help summarise some of the many changes and developments that have affected or will affect our industry in the months to come.

Should you have any queries or need assistance with anything, please don’t hesitate to contact me.

Happy reading,


Changes to the 457 visa implemented

When the government announced in March its intentions to implement some proposed changes to the 457 programme, many feared this wouldn’t materialise but on the 18th of April 2015 some of those changes were indeed implemented. The aim of this process is to increase flexibility and reduce restrictions under the programme. Changes implemented so far affect:

  • the English language requirement (meaning applicants will have to get an average score of five across all components instead of a score of five in each component);
  • the term of a standard business sponsorship has increased from 3 to 5 years (start-ups have had their term extended from 12 to 18 months);
  • and when the salary of a highly paid 457 applicant is in excess of $180,000, there will be no longer a requirement for the employer to demonstrate that this is being done in line with the Australian market, meaning the threshold is now in line with the marginal tax rate. (Temporary skilled Migration Income Threshold has also been frozen at $53,900).


Bilateral Social Security Agreement signed between China and Canada

China and Canada signed an “Agreement on Social Security” aiming to address issues faced by employees working outside of their home country and having to make contributions to both the Canadian Pension Plan and the equivalent fund in China in respect of the same employment. This will obviously help employees and employers make some savings in situations where employees have relocated between the two countries. However it is important to note that other aspects of the Chinese social security contributions such as medical, unemployment, maternity and work injury do not seem to have been addressed in the Agreement.

There is still no confirmed date as to when the Agreement will come into force as both countries have yet to comply with the legally mandated approval procedures in their respective jurisdictions.

China has also commenced bilateral social security agreement negotiations with 15 other countries and have signed similar agreements with Germany, Korea, Denmark and Finland.


Bill on restrictive covenants will give employees more flexibility but make things harder for employers

New rules on restrictive covenants in employment contracts are expected to come into force in July 2015. Restrictions on the use of non-compete and non-solicitation clauses will apply not only to salaried employees, as is the case now, but also to all employees who hold a position of “very special responsibility”. Non-hire clauses will be prohibited, with the exception of the transfer of undertakings and the hire of temporary workers, where non-hire clauses may be used in limited circumstances.

The bill suggests that, in future it will be possible for an employer to bind an employee to a non-compete or non-solicitation clause for up to one year only and if using both clauses at the same time, the binding period cannot exceed six months. As extra motivation for choosing to use short-term restrictive covenants, it is proposed that the employer pay the employee a higher monthly compensation if the employer uses restrictive covenants with a restriction period that exceeds six months.

Another point to note is that the employer will have to pay a lump sum of two months’ full salary when an employee who is bound by a restrictive covenant is dismissed and the employer’s right to offset income obtained from other employment will partly cease. Even if the employee finds other employment, the employer must pay the two months’ full salary and for the remaining part of the restriction period the employee must receive monthly compensation ranging from 16% to 24% of his or her salary.


Minimum wage liability for non-German companies (subcontractor liability)

As mentioned in the previous newsletter, the Minimum Wage Act entered into force at the beginning of this year and it affects all companies registered in Germany employing workers in country. As per Section 13 of the act, a company also has liability for its contractors (and their subcontractors) to ensure the statutory minimum wage is being paid to all their employees.

This being the case, it is vital that those involved in a supply chain such as MSP providers are careful to select contractors and obtain contractual assurance of compliance with the act.

Failure to draft an appropriate contract could result in a fine of up to €500,000 as it is an administrative offence to commission a contractor (whether aware of negligently unaware) to carry out work or services, if that contractor fails to pay the minimum wage or commissions a subcontractor who fails to pay the minimum wage.

Here we would like to highlight that the subcontractor liability is not as explicit and there is still no case law or legal commentary to assist with this, so companies are encouraged to pay special attention to this area to avoid being caught in a non-compliant situation, verifying international service contracts contain general clauses to cover the risks linked to this type of engagement as it relates to the German minimum wage.

Restriction on Croatians lifted

Labour market restrictions that had been imposed on Croatian nationals for two years since the country’s accession to the EU will be lifted from the 1st of July 2015, meaning Croatian companies can now also send employees without qualifications to Germany (skilled workers, those with a university degree, researchers and seasonal workers had already been granted free access).


Extended Visa Validity Implemented for Certain Visa Types

As of the 4th of May 4 2015, foreign nationals applying for visas under the General Employment Policy (GEP), Admission Scheme for Mainland Talent Professionals (ASMTP), and Qualified Migration Admission Scheme (QMAS) now receive an initial period of stay of two years, as long as their offer of employment is for at least two years. Two three-year visa extensions are available thereafter.

For those applicants earning a salary exceeding HK$2 million before tax (approx. US$256,410) during the first two years should obtain a subsequent six-year visa extension from the Hong Kong Immigration Department.

Previously, applicants (regardless of salary level) seeking visas under these programs were granted an initial stay of one year, followed by two extensions of two years each and then a three-year extension.


Service tax changes

The current service tax rate of 12.36% will be increased to 14% as per proposed amendment to Section 66B of the Finance Act but the government hasn’t determined yet the effective date for the amendment. This is all in line with the objective to introduce Goods and Services Tax (GST) in April 2016. Once that regime is in place, all goods and services will be liable to a single tax rate, which will potentially be higher than the current rate.

By introducing GST as well as a revamped direct tax regime, the Indian Finance Minister is hoping for greater transparency and investment opportunities across the country.


Trusted partner initiative to help frequent users of employment permits system to speed up the process

In May the Employment Permits Section of the Department of Jobs, Enterprise and Innovation launched the “Trusted Partner Initiative”, which is a fast track method to help frequent users of the employment permits system so they can conclude their application process as quickly as possible. The scheme aims to improve efficiency by reducing turnaround time for applications as well as the administrative burden for applicants.

As a general rule, employers in Ireland and EEA contractors who have been awarded a contract in Ireland with an Irish company, as long as registered with the Revenue Commissioners as an employer, can benefit from the scheme. Those who apply and succeed will be granted Trusted Partner status for two years at no cost.

Whilst the requirements of each employment permit will still need to be met, Trusted Partners will not have to submit their details every time, which will reduce paperwork for those companies and consequently reduce the processing time quite significantly.


Bill on Worker Dispatch Law passed after third attempt

The bill to revise Japan’s “Worker Dispatch Law” was highly controversial and similar bills were scrapped twice in the past, but after weeks of deliberation it was passed by the House of Representatives. The bill will go to the Upper House for ratification and as hoped by Prime Minister Abe and his Liberal Democrat Party, all going well, it will be passed into law and come into force on 1st of September 2015. As a result of this, companies in Japan will no longer be under the obligation to upgrade their temporary workers to fully fledged employees after a period of three years.

The opposition parties fought tirelessly as they argue the bill will only benefit businesses and weaken the position of dispatched workers in terms of job security, highlighting the fact they already lack many of the guarantees and benefits enjoyed by regular staff.

Those backing the bill said the new rules would help temps land a regular job as, if they work in the same job for three years, the dispatch agencies will be required to ask the client/end user to hire the workers directly. If the client/end user decides not to do so, the worker engagement will be terminated and the agency will have to find the individual a new temporary job or switch the dispatch contract to a new, indefinite term one.

The classification of 26 kinds of jobs that require special skills, for which there is no limit on the period of using dispatched workers, will be abolished.

Dispatched workers will be able to continue to work in the same company as long as they change sections/departments every three years.

As for the dispatch agencies, they will be placed under strict government guidance and supervision under a new licence system.


In the April newsletter we talked about the fact that the Finance Ministry’s plans to replace the existing VAR* declaration system with the BGL** statement had been delayed. Just a few days after the newsletter was issued it transpired that the BGL had been so heavily criticised that the plans to implement it were completely shelved. The Dutch ministry then came up with an alternative system which involves a number of standard sector-based agreements that will have to be signed by both independent contractors and end-user/clients. Sample agreements will be drawn up by the tax office and be made available for general use possibly by mid-October 2015. Companies will also be able to draw up their own freelance contracts but these will have to be submitted for tax office approval.

In very few words, the alternative to the BGL provides for contracting and/or contracted parties to submit contracts to the Dutch tax authorities, which will then confirm in writing whether the withholding and remittance of payroll tax and social security contributions can be waived and, if so, for how long. The certainty granted by this assessment – which should take on average six weeks – will only apply if the actual activities are performed in accordance with the submitted contract. Should it transpire that in practice the work is not performed according to the contract, a supplemental assessment for payroll tax and social security contributions can be imposed as well as penalties.

The legislation should take effect as of the 1st of January 2016 and the current VAR system will continue to apply until then.

*Declaration of Independent Contractor Status – Verklaring arbeidsrelatie “VAR”
** Decision on Exemption from Payroll Tax Withholding – Beschikking geen loonheffingen “BGL”


Liberalisation of temporary contracts’ rules

After announcing changes to the Working Environment Act when coming into power in 2013, the Norwegian government is now in the process of implementing the legislative changes, which include: expanded powers to hire employees on temporary contracts; an increase in the retirement age; extended limits for ordinary working hours and overtime work (on a daily, weekly and monthly basis but not yearly); and extended limits for working on Sundays and public holidays.

Considering Norwegian employees have always enjoyed extensive rights and protection and the country has had some of the strictest regulations globally regarding the hiring of temporary employees, it is no surprise that these amendments are seen as controversial. As a general rule, so far, all employees were deemed as employed permanently, but the new legislation will allow companies to hire employees on temporary contracts of up to 12 months without the requirement of any special reasons.

Current regulations allow temporary engagements only if certain specific and exhaustive conditions are met and it is needless to say that all the exemptions are interpreted very strictly. The new rules will allow companies to engage temporary workers as long as they don’t count as more than 15% of the total workforce of that specific employer, but allowing at least one employee. However, there is an obligation on that employer to hire the temporary workers permanently after the expiry of their contract – if not, the company will not be allowed to hire any temporary workers to conduct work of the same nature for a period of 12 months.

Important to note that the amendments also affect the maximum duration of a temporary engagement (under the existing rules) reducing it from 4 to 3 years.


Changes to temporary work

The Act on Employment of Temporary Agency Workers in Poland has been amended affecting the period for which a temporary employee may be assigned to work for a user-undertaking (client) by a work agency. According to the Act, a worker could be assigned by an agency to an user-undertaking for up to 18 months within a period of 36 consecutive months. Due to the lack of penalties and loose interpretation, many agencies took advantage of this by working with a sister company (or more) of the same group and therefore taking in turns to supplying the same worker to the same client, which in many cases allowed a company to enjoy the services of the same worker for years.

Since the amendment to the Act in March, the government has imposed a cap of 36 months on temporary contracts, which applies to all work for a single employer, meaning workers will automatically be given an indefinite term contract if they reach the limit.

Changes to fixed-term contracts

On the 10th of April 2015 the government presented a bill including a number of amendments to the Labour Code to eliminate provisions that were deemed discriminatory and the main changes are:

  • The maximum total period of engagement under a fixed-term agreement between the same parties cannot exceed 33 months with a maximum of three consecutive agreements (initial contract plus two extensions);
  • The maximum total period cannot be extended by gaps between consecutive agreements;
  • Exceeding the maximum total period or the maximum number of consecutive agreements will automatically result in the creation of an indefinite term employment relationship;
  • A fixed-term contract can be terminated upon notice but the notice periods will be the same as indefinite term contracts (two weeks for up to six months of employment; one month for employment beyond six months; and three months if the employment lasts more than three years)

Important to note that the limits do not apply to fixed-term contracts used to: provide cover for an employee during his/her absence; perform casual or seasonal work; perform work during a term of office; or where the employer has objective reasons to derogate therefrom, in which case, the Labour Inspectorate needs to be notified about the execution of such an agreement.


Online applications only from 1st June 2015

Effective from the 1st of June, the Ministry of Manpower now only accepts online applications for the Employment Pass, S Pass, Work Permit and Training Employment Pass. Any applications submitted manually will no longer be accepted. Employers sponsoring applications for foreign workers and their dependents need to complete a registration process and create a work pass account with the Ministry of Manpower prior to submitting any applications. Important to note that this registration process may take several weeks.


Bilateral visa waiver with the EU

Since the 6th of May, citizens of the United Arab Emirates (UAE) can travel to EU member countries that are also party of the Schengen Agreement without having to obtain a visa. And in return, nationals of the EU/Schengen Area countries do not require an entry visa anymore when travelling to the UAE. The Agreement covers travel with stays limited to 90 days within any 180-day period. The programme allows visits for business (meetings), tourism, sports, artistic performances and intra-company training but it clearly excludes work, for which an appropriate work permit and relevant visa need to be obtained.

Please note the Agreement does not apply to the United Kingdom and Ireland as they are not parties to the Schengen Agreement or Switzerland, Iceland, Norway, and Liechtenstein as they are not parties to the European Union.


L-1B denial rates: India in the lead

The National Foundation for American Policy (NAFP) released its March 2015 Policy Brief, “L-1 Denial Rates Increase Again for High Skill Foreign Nationals”and it revealed that applicants of Indian origin are subjected to the highest request for evidence (65%) and denial rates (56%). The L-1B visa category allows individuals with ‘specialised knowledge’ to be transferred to the US as intra company transferees.

The specific case of denial rates for applicants of Indian origin is of interest. The next seven largest user countries of L-1B visas are as follows:

Country of origin Denial rate Request for evidence rate
Canada 4% 3%
United Kingdom 16% 35%
China 22% 44%
Japan 15% 33%
Germany 15% 37%
France 19% 36%
Mexico 21% 40%

Employers should consider the information above as they pursue L-1B applications of behalf of their specialised knowledge employees.

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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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