ICE Newsletter No. 14 (Nov 17)

Canada, Colombia, France, Poland and more – find out here what’s been happening in the world of compliance around the world and let us know if we can be of any assistance to your business.


Federal and provincial reforms translate into more benefits for employees

The Canadian federal government adopted significant reforms to the Employment Insurance Act and the Canada Labour Code with the introduction of Bill C-44, which was enacted into law on 22 June 2017. Three of its sections came into force with immediate effect, whilst those dealing with employment insurance amendments are to come into force at a later date (these introduce revisions to benefits provided to parents, expectant mothers and family members caring for those critically ill).

However, those with operations in Canada should be aware that the changes do not affect only federally regulated employers,  the reforms have also been proposed by a number of provinces with the aim of amending their own employment and labour legislation, which is becoming increasingly more employee-friendly.

Alberta is an example where changes similar to the federal ones were passed and are to come into effect from the beginning of 2018. But the province went further, also allowing changes that affect overtime and holiday pay, rest periods as well as some others perceived as more controversial (such as those introducing new administrative penalties and mandatory audit procedures).

Similarly, the government of Ontario has been busy working on their Bill 148: the Fair Workplaces, Better Jobs Act 2017. Throughout the summer there have been meetings with motions being passed and incorporated to the Bill. The many proposed changes are expected to be introduced on a rolling basis from January 2018 and they include: an increase to the minimum wage; part-time, casual, temporary, seasonal employees being entitled to same pay rate as comparable full-time employees; increase to pregnancy, parental and family medical leave as well as the introduction of new types of leave, such as domestic violence and child death leave. Additionally, as part of the Bill, Ontario will be cracking down on employers that misclassify workers as independent contractors by reversing the burden of proof (that the worker is not an employee) to the hiring company. Furthermore, the province will be hiring more employment standards officers to assist with enforcement efforts and increasing the penalties payable for compliance breaches. The Bill will be further debated and have a Third Reading, so the timelines may still change.

Finally, it is also worth noting the minimum wage was increased in Alberta, Manitoba, Newfoundland & Labrador, Ontario and Saskatchewan – the most recent in a string of wage hikes across Canada, with Alberta and Ontario slowly moving towards a $15 per hour minimum wage rate over the next two years.


New obligations for employers

The Colombian government approved Law 1857 at the end of July 2017, which modifies sections of the Law 1361/2009 on protection measures for families, introducing new obligations for employers.

First, the new law gives the power to employers to adapt schedules and working conditions to facilitate the fulfilment of family duties and enable better integration of the employee and his/her family.

Second, every six months, the employer has the obligation to promote a day for employees to share with their families, in a space/premises provided by the employer . As long as this is provided by the employer, this can be organised any day of the week, including the compulsory weekly rest day.  However, if the employer cannot facilitate the day as required, then it must allow employees to take a day off in addition to any standard weekly rest (not to be counted or confused with annual leave), however in this case the employer may require the employee to compensate the time taken off.

The new obligations apply to public and private employers, including Temporary Work Agencies.


President Macron postpones tax reform and implements more employment changes

In November last year we shared about the French government plans to introduce a PAYE type of system from January 2018 in order to withhold personal income tax at source. However, earlier in the summer, Prime Minister Edouard Philippe announced what Emmanuel Macron had already promised during his campaign – if he won the presidency, the tax reform would be postponed until 1 January 2019.  This was then further confirmed by a Decree published in the Official Journal in September 2017.

During 2018 the new system will be tested with a few volunteer companies to verify its feasibility, which means the majority of employees will still have to file their personal income tax return in May 2018 for their 2017 income. As a result of the decision, the exceptional tax credit known locally as CIMR (“Crédit d’Impôt de Modernisation du Recouvrement) will be granted for income taxes due on 2018 regular income so that there is no double payment of taxes in 2019 once the PAYE system goes live.

Also in September, a number of employment changes signed by President Macron came into force, including:

  • workers with more than 8 months seniority  up to 10 years of service have had their legal minimum dismissal indemnity per year of service increased to a quarter of the average monthly remuneration (previously this awarded only to those with more than a year of service); after 10 years seniority onwards, the indemnity equals to a third of the average monthly remuneration.
  • A cap applied to unfair dismissal damages awarded by court based on years of service (i.e.: a maximum of 20 months for employees with 29 years of service or more).
  • Claims can be brought before a labour court up to 12 months after a termination (as opposed to the previous limitations of 1 to 2 years, depending on the reason for termination).

There are more decrees to be implemented affecting other aspects of employment and labour relations, such as employee representative bodies, hierarchy of labour norms and the possibility for small companies to enter into in-house collective agreements.


The price of non-compliance

A company director ended up being sentenced to 21 days’ imprisonment after his company made only partial payment following civil claims brought by the MPF (Mandatory Provident Fund) Authority as an attempt to recover outstanding MPF contributions and surcharges. The director received a court order but still failed to make the full payment, which amounted to HKD 380,000. According to the MPF Schemes Ordinance, failure to make a timely payment of the compulsory contributions is an offence that can result in a fine of up to HKD 450,000, with the company’s director potentially facing up to four years in prison.

On a separate case, another company director was prosecuted by the Labour Department for failing to comply with the Labour Tribunal awards due to employees under the Employment Ordinance. The payments amounted to HKD130,000 and should have been paid within 14 days. According to the Employment Ordinance, failure to comply with the requirement by the Labour Tribunal to pay amounts to an employee (whether for wages, end of year payment, maternity leave pay and severance payment, etc) may result in a fine of up to HKD350,000 and imprisonment for three years of any officer (director, manager, secretary, etc) who consented,

Under the Employment Ordinance, if the Labour Tribunal requires the employer to pay any specified amount (such as wages, end of year payment, maternity leave pay and severance payment, etc.) and the employer wilfully and without reasonable excuse fails to do so within 14 days, the employer is liable to a fine of up to HKD 350,000 and imprisonment for three years. Where this offence is committed by a corporate body, with the consent, connivance or neglect of any director, manager, secretary or other similar officer that person may be convicted as well.

These two cases show that, even if not on the news every day, there is true risk and a high price to pay for non-compliance.


Bonus Occupazione 2018 – the new government incentive to help companies hire young workers

With the view of facilitating youth employment, the Italian government has drafted a new package of incentives to help companies employing young people. The so called Employment Bonus 2018 will replace the Bonus 2017, which is currently in place as part of the European plan to combat youth unemployment. It is aimed at companies hiring students enrolled in the programme (National Youth Initiative Operational Programme) by reducing their employer’s social security contributions. The annual allowance is capped at €8,060 and paid in 12 monthly instalments (for hires under an indefinite term contract and half of that for hires using fixed-term contracts).  Starting next year companies will receive tax relief and have a reduction of 50% of the employer’s social security contributions for the first three years of employment whenever engaging young workers under an indefinite term contract (extended to hires starting in November and December 2017). The cap will be €3000 per year and applicable to the INPS contributions only (not INAIL).

Currently, employers can benefit from the government aid when they employ young people (aged 16 to 29 years old) referred to as NEET (Not engaged in education, employment or training). In 2018 the age limit will be increased to 34 and then reduced again to 29 in 2019.

It is hoped that the incentives will stimulate the labour market and help create 300,000 new jobs.


New recording requirement for local employers

In order to ensure foreign employers seconding employees to Luxembourg and those based in country are treated equally, the legislators have amended the Article 211-29 of the Labour Code, introducing a new obligation for employers. Local companies must add to a special record or file the start and end times as well as total hours worked each day for every employee, in addition to existing requirements. This recent change and a new law related to the secondment of employees that entered into force earlier this year mean foreign and local employers now have the same record-keeping obligations on working hours.


In October, the Dutch coalition agreement was presented, proposing a series of changes to the labour law.

Back in 2015, fixed-term contracts had been limited to a maximum total duration of two years  (a contracting exceeding that period would automatically convert to an indefinite term one). The new coalition plans to extend the tenure to three years. In addition, the possibilities to deviate from the six-month ‘gap’ (between contracts) in a collective labour agreement (CBA) will be expanded. Currently, this deviation can only be used for certain seasonal work.

In previous newsletters, we covered the reforms regarding the engagement of independent contractors (commonly referred to as ZZP-eers), the abolition of the VAR certificate and introduction of the DBA with its model contracts with the aim of ensuring contractors’ tax position – however the legislation was never fully enforced and is, in fact, being replaced. Instead the new coalition is proposing a completely new regime, where contractors will be categorised based on their remuneration, as follows:

  • The first group consists of independent contractors earning up to 125% of the applicable minimum wage (or the lowest pay scale of the CBA, if there is one). So those with earnings between €15 and €18 an hour, engaged under a long-term contract, or still, performing regular business activities, will be deemed to have an employment contract.
  • The second group includes contractors earning more than the first group (average of €15 to €18 an hour) but with an hourly rate under €75. In this case, an independent contractor statement is to be issued following the completion of an online questionnaire, giving companies the assurance of a definite tax position of the contractor (unless the web form is completed incorrectly). This assessment will not be based so heavily on the formal aspects of authority anymore, but will rather focus more on actual facts and circumstances.
  • Finally, the third group includes all contractors who earn €75 or more per hour, are engaged for shorter periods (less than a year) and perform work that is not seen as the normal business activities of the client. These will be given the possibility to opt out of payroll taxes.

There are also measures that will make termination of employment easier and less expensive, enable longer probationary periods, reduce the period of sick pay payable by small businesses and increase the rights of workers engaged under zero-hour contracts as well as those engaged through payroll companies.


Recent changes to temporary work market

The Act on the Employment of Temporary Workers was recently amended, introducing a series of changes and limitations aimed at improving the temporary work market. The main points can be summarised as follows:

  • A client can use the services of a temporary agency worker for a maximum of 18 months over a period of 36 months. This addresses directly previous market practices where a worker would be supplied to the same client for longer periods by multiple agencies (sometimes part of the same group).
  • In order to enforce the new tenure limit and facilitate audits carried out by labour inspectors, employers are required to keep an individual record of  start and end dates of their temporary workers (either in written or electronic format) during the 36-month period and maintain these for the following 36 months. Also, it is worth noting this should be a joint effort by the agency and client.
  • With a view to ensuring equal treatment of temporary workers, clients must make remuneration information available to the temporary agency, including details of the internal remuneration regulations in force and any changes to these.
  • Pregnant temporary workers who have been supplied to a client for at least two months in total will be guaranteed employment until their delivery date, ensuring the right to a maternity benefit after the birth of the child and, therefore, equalising the rights of temporary workers and regular employees.


Labour Protection Act to be further amended

Following a number of amendments on retirement and work regulations provisions that became effective from 1 September 2017, more changes are to be made to the Labour Protection Act with the aim of providing additional benefits to employees. Even though the new amendments have only been approved in principle and may still be reviewed, the current draft legislation introduces a definition of remuneration (differentiating it from wages) and includes other changes, such as:

  • An increased severance package for people who are laid off after working for a company for over 20 years (equivalent to 400 days’ pay);
  • The right to a new minimum of three days paid business leave per year for all employees.
  • The right to resign and receive severance pay in case the employer relocates.
  • The interest rate applicable when an employer defaults on certain payments (in lieu of notice and when the employer temporarily ceases operating) has increased from 7.5 to 15%.

Finally the draft clarifies the fact that maternity leave includes leave taken for pre-natal and post-natal appointments.


Off-payroll rules potentially being extended to the private sector

It transpired at the end of October that, as feared by many, the Treasury is indeed looking to extend the off-payroll IR35 rules to the private sector. Whilst no clear statements have been made on the subject, it is believed that reforms are under consideration.

Back in April this year, the public sector saw the implementation of the reformed IR35 rules, with the liability of determining the engagement status being transferred from the contractor supplying services through a Personal Services Company (PSC) to the public sector client.  As a result, many more public sector employers are now deducting tax and national insurance contributions at source from contractors’ pay. In a recent newspaper interview,  the Financial Secretary to the Treasury, Mel Stride, indicated that 90,000 additional public sector workers were taxed as employees in the first three months following the reforms. Stride also suggested there was an issue of fairness between the two sectors that needed to be addressed, which has been perceived as a strong hint as to what the government plans are.

The Chancellor, Philip Hammond, will be delivering his Budget on the 22nd November and the staffing industry will, no doubt, be watching closely to find out if (and when) the private sector will face similar off-payroll working rules.

Parental Bereavement Bill supported by the government

Details of new proposed legislation entitling working parents to paid leave following the death of a child were published by the Department for Business, Energy and Industrial Strategy. The Parental Bereavement (Pay and Leave) Bill proposes that employed parents who lose a child under the age of 18 have the right to two weeks’ paid leave to grieve, which could be taken at any time up to 56 days after the child’s death.

Employees with a minimum of 26 weeks’ continuous service will be eligible for statutory parental bereavement pay (at their prescribed statutory weekly rate or at 90% of their average weekly earnings – whichever is lower) , for which employers will be able to recover some or all the cost from the Government.

It is believed that the Bill will be enacted and become law in 2020.

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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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