From Austria to Iceland to New Zealand – we take look at changes that took place and that are still to come but will no doubt affect the world of compliance and contingent workforce management.
Tax reform now effective
Effective from 1 January 2018, the new tax reform was enacted on 29 December 2017. The amendments affect a number of areas, some of which are listed here below:
- corporate income tax rate will be reduced from 35% to 25% by January 2020, and foreign companies should note the introduction of a PE (permanent establishment) definition, which did not exist before in the domestic legislation;
- social security rates paid by private sector employers will be gradually unified from 17% and 21% into a single rate of 19.5% by 1 January 2022;
- severance payments paid to managerial or high-ranking positions will be subject to income tax on the portion exceeding the minimum legal severance amounts established by labour legislation.
Also worth mentioning that independent workers (autónomos) have had their amount of special deduction doubled as an attempt to reduce their final taxation and bridge the gap between the tax treatment given to these workers and those engaged as employees.
Australian Modern Slavery Act
Australia will follow in the footsteps of the UK, US and France in order to strengthen their national laws on modern slavery. Following a consultation in August 2017, the Government recognised the need to encourage companies to take action so to prevent, identify and eliminate modern slavery practices in their own operations as well as in their supply chains. As a result, new draft legislation proposing ‘modern slavery in supply chains’ reporting requirement for companies operating in country is expected to be released in the coming months. The mandatory reporting will apply to companies either headquartered in Australia or that have any part of their operations in country, with at least $100 million in total annual global revenue, regardless of industry or sector.
A Parliamentary Committee inquiring into whether a Modern Slavery Act should be introduced in country released its interim report in August 2017 and the final one in December. Based on the Committee’s recommendations, a broader range of business entities should be covered by the scope of the legislation, including sole traders and the Australian Government itself. As for the revenue threshold, the Committee considered $50 million global annual revenue would provide for international consistency. Other recommendations include an opt in mechanism and the introduction of penalties for entities who fail to report from the second year of reporting onwards.
Both the Government and the Committee agreed that the reporting should be done within five months after the end of the Australian financial year.
Companies will need to start considering required actions to gain visibility of their supply chains and to identify risks in order to prepare for the possible enactment of the legislation in 2019.
A first step in the right direction – harmonisation of blue-collar and white-collar workers
Last October the Austrian parliament voted the so-called ‘Angestelltengesetz’ (Salaried Employee Act) reform which partially harmonises the legal regimes covering blue-collar and white-collar employees. Since the original legislation was passed in 1921, white-collar workers have had advantages in some areas such as sick pay, the reasons they can take paid absence from work and their periods of notice for the termination of employment. The new law addresses the discrepancies in these specific areas, which can be summarised as follows:
- Paid absence due to sickness increases for both groups from six to eight weeks after the first year of service (and is also capped at eight weeks per work year – however the cap does not apply to work accidents and occupational diseases). Employees with more than 15 and 25 years of service continue to have a higher entitlement of 10 and 12 weeks respectively. The right to continued remuneration in case of sickness and accident will apply also in case of a mutual agreement on the termination of the employment relationship beyond the ending date.
- The right to paid leave of absence for other reasons such as family bereavement and marriage, for example, has now also been extended to blue-collar workers.
These provisions will enter into force on 1 July 2018 and will govern employment relationships concluded after 30 June 2018.
The notice period applicable to blue-collar workers will be increased from two weeks to match the current range given to white-collar workers (six weeks to five months, depending on the number of years of service). The parties will be able to agree to have the termination date fall on the 15th or last day of a calendar month (instead of only at the end of a calendar quarter).
Both blue and white-collar employees who work less than an average of eight hours per week will also be subject to the same minimum notice periods given to full time employees.
The provisions regarding increased notice period for blue-collar workers will enter into force from January 2021; the one applicable to part time employees is in force as of 31 December 2017.
Please note that equal treatment still does not apply to other areas such as collective bargaining agreements, works councils and reasons for termination with immediate effect, so employers should not ignore these differences.
Once again Iceland leads the way in pay equality
As per new legislation that came into effect on 1 January 2018, Iceland has become the first country in the world to make it illegal to pay men more than women. The bill was originally passed by the Parliament back in June 2017. All companies and government agencies with more than 25 employees will not only have to obtain government certificates to prove they pay everyone in the same roles equally, but will also face fines if they fail to do so.
For the past nine years, Iceland has topped the World Economic Forum’s gender equality index and the government has committed to eradicate the gender pay gap by 2022.
Further changes implemented by the Indian government
Further to a draft bill consultation with stakeholders last September, the Indian Ministry of Labour continues to press on with its plans to replace the current local approval system used by staffing firms with a national licence, which would greatly simplify the operation of these companies. In order to obtain a licence, which is to be renewed every three years, firms will have to fulfil specific criteria, pay a fee and give a bank guarantee as security for due performance of their obligations. Based on latest reports, the bill was still pending Cabinet and Parliament approval, so more on this in the next edition.
And the changes don’t stop there, as India tries to simplify its legislation and continues to review its labour and employment practices, fixed-term contracts have now been allowed in all sectors. The move – part of the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018 – makes it possible for companies to hire workers directly (no need of mediation by a contractor) for short periods and terminate their services at the end of the assignment. Under this type of engagement the fixed-term workers are entitled to (proportional) statutory benefits available to permanent workers in the same factory (as far as hours, wages and allowances are concerned), but the employer is not required to give notice when the contract expires or is not renewed. Based on this, states will be able to amend their rules accordingly.
Bills related to labour reform debated at Diet’s session
Labour reform as well as constitutional revision are at the top of Prime Minister Shinzo Abe’s agenda for this year’s Diet session. The five-month long process started in January, with the Government planning to submit 64 bills. Amongst these is the bill that would impose a binding cap on long working hours, eliminating the gap between regular (permanent full-time) and nonregular employees, and introduce an exemption for highly skilled professionals from work-hour regulations. The last proposal has been dubbed as the ‘zero overtime pay bill’ and criticised by opposition parties as there are fears a performance-based pay system would potentially result in overwork for skilled workers and, consequently, increase the risk of karoshi (death from overwork).
The Diet session will conclude on 20 June and we will pick this up again at that point to see how much PM Abe was able to achieve of his work-style reform.
Employment law reforms announced
A bill introduced by the New Zealand Government will amend the Employment Relations Act 2000. The key points can be summarised as follows:
- The 90-day trial period will be restricted to employers with less than 20 employees; larger employers will still be able to use probationary periods, however, unlike trial periods, employees can raise claims for unjustified dismissals during these;
- Prescribed meal and rest breaks will be restored;
- Reinstatement will once again be the primary remedy to unfair dismissal;
- Greater protection relating to pay and conditions for vulnerable employees in case of a change of employer;
- Restoration of various union rights and strengthening of collective bargaining.
The Bill had its first reading on 1 February and could become law later this year.
Independent taxi drivers deemed employees
As worker classification continues to be challenge and make headlines around the world, a recent ruling by the Swiss Federal Supreme Court (FSC) regarding independent taxi drivers affiliated with a central headquarters shows how decisions can vary from country to country. Following a move back in 2014 by the Swiss Accident Insurance Institute to recognise that taxi drivers were employees for social security purposes, the FSC also reached the conclusion that these workers were employees rather than self-employed. As a consequence, up to 2000 taxi drivers currently working through central headquarters are to have a significant improvement in their social protection, with consumers ultimately paying for it as prices are likely to rise. This could also mean bad news for Uber, who is currently awaiting a decision in a pending case in country. Watch this space to find out how this may impact the gig economy in the Swiss market in the coming months.
Good Work Plan announced but many questions still remain
Flexible workers in the UK are to have their rights and protections increased following the Government’s ‘Good Work Plan’, which was drafted in response to last year’s review by Matthew Taylor into modern employment practices.
Together with the response – which included a list of day-one rights such as holiday and sick pay entitlements as well as a new right to a payslip for all workers, including casual and zero-hour workers – the government also launched four consultations: employment status, increasing transparency in the labour market, agency workers and enforcement of employment rights. Whilst the recruitment and staffing industry had a generally positive reaction to the Plan and consultations, there is no doubt a number of challenges remain with regard to worker classification, the alignment of employment status with tax status, the treatment of vulnerable workers without stifling entrepreneurship and maintaining flexibility in the labour market. Trade unions were less impressed by the government plans and questioned whether it would have any impact on modern labour practices.
We will follow up on this after the consultations have concluded in the Spring.Share this article on: