Transcript HR Exchange Forum October 5th 2004 Royal Holloway University of London

HR Exchange Forum
October 5th 2004
Royal Holloway University of
London
Snapshot of the results of the
CHRP Employee Absence Survey
Jacquie Mahoney
Corporate HR Partners Ltd
Employee Absence Survey 2004
Following the survey we ran last year on employee assistance and
absence programmes, this is a topic where we have continued to
receive questions from clients, and specifically around policies and
strategies to manage this.
Most Human Resources professionals constantly need to check where the
market is sitting and what are the changes which are developing in
order to keep their employment practices at the optimum.
We thought it would be helpful to assess where the market currently sits
one year on, and devised another quick and simple email based survey
which we circulated amongst clients, members of our affinity groups,
friends and other interested contacts.
Companies in the Survey
Responses
• There were 25 responses to the survey.
• Respondents were mostly from high-tech
industries and included software, hardware,
electronics, market research, telecoms,
sheltered housing, pharmaceuticals and
retail.
• UK based employee numbers ranged from
46 to 22,000, with a median of 350.
Questionnaire
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Absence Control Procedures
Days Lost
Sickness Policy/typical problems
Self Certification/Doctors Certificates
Sickness Payments/Services
Rehabilitation/Preventative Policies
EAP
Mental Health/Stress
General Wellness
Health Benefits Insurance
PHI
Medicals
Snapshot of the results of the
International Salary Movements
Survey 2005
Andrew Strathdee
Corporate HR Partners Ltd
Salary Movements 2005
• Undergoing analysis at the moment
• Can still participate at any time – let me have your
data
• UK figures to date
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Lowest 0%
LQ 3%
M 3.75%
UQ 4%
Max 5%
How to Manage Your Boss
Christina Osbourne
Chief Executive
Business Solutions
Coffee
A Guide to the Pensions Reform
2006
Andrew Strathdee
Corporate HR Partners Ltd
The Pensions Crisis
• Four main issues
– Deficits in Funding (esp DB Plans) (Taxation,
Aging population, Stock market performance)
– Resulting switch from DB to DC
– Companies withdrawing /closing plans –
leaving some with no benefits
– Increasing legislative complexity – currently 8
different sets of rules!
What is the Government doing?
• Two actions
– First - Pensions Bill
• New Protection fund
• New funding standard
• Additional Requirements
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Pensions Regulator
Trustee Requirements
LPI Pension Increases
Priorities on Windup
Financial Education
What is the Government doing?
• Two actions
– Second - Tax Simplification
• Single Regime for all tax privileged
arrangements
• Applies from 6th April 2006 – “A” Day
• Legislation in Finance Act 2004
The new regime - headlines
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£1.5m lifetime allowance (£1.8m for 2010/11)
DB benefits valued at 20:1, regardless of age
DC benefits at Market Value
Transitional protection
25% recovery charge on “excess assets”
Personal contributions up to 100% of earnings
£215k pa tax free contribution/accrual (10:1
conversion factor for DB Benefits)
The new regime
• Up to 25% of value of benefits (max LTA
may be taken as tax free cash
• Pension to start between 55 and 75 (from
2010) (increased from 50 currently)
• Flexibility to draw pension and continue
working
• LTA applies to death in service lump sum
benefits (dependents benefits not included)
(LTA = LifeTime Allowance)
Contributions
• Annual contributions
– Members will be able to put in up to the lower of
annual earnings or £215,000 in the 2006/07 tax year.
The maximum limit will be increased by £10,000 each
year until it reaches £255,000 in 2010/11.
– Everyone will be able to put in a minimum of £3,600 a
year, as they can now, so anyone will still be able to
contribute to a pension even if they're not earning.
Big Pension Pots
• Headline grabbing and complex
– Single Lifetime Allowance of £1.5m for 2006/07. If
the value of all pension funds exceed this amount
and the member retires in 2006/07, any excess will
be taxed at punitive rates of up to 55% (although
this partly reflects tax relief of up to 40% received
when contributing to pension in the first place).
– The lifetime allowance will increase to £1.6m in
2007/08 and then by £50,000 each year until 2010/11,
when it will be £1.8m.
Big Pension Pots
• Headline grabbing and complex
– The amount of people that will be hit by this limit
has been hotly disputed. It will be fairly small but, to
put it in perspective, £1.5m will provide for an
inflation-proofed joint income of around £70,000 at
current annuity rates. This amount can be reached
if you were able to invest £800 a month for 40 years
(and increased the amount you invested each year in
line with inflation).
Big Pension Pots
Excess taxed @25%
Excess over £1.5m
£1.5m
DC benefits @market value
DB at 20:1 capital value
Tax free lump sum 25% of
Fund up to £375k
Excess as pension less 25%
Tax or if cash 55%
Big Pension Pots
Fund at retirement (say 2014)
Excess over LTA
Recovery Charge (25%)
Net Fund
£1,900,000
£400,000
£100,000
£1,800,000
Pension taxed at 40% (which is 55% overall)
If taken as lump sum taxed at 55% i.e. £220,000
Can take up to £375k of LTA as tax free lump sum
Recovery Charge
• Should be deducted by Trustees from
Benefits
• Assessable on individual through self
assessment
• On death, payable by personal
representatives
• Assessed when benefit comes into payment
Protection
• Primary protection
– Register within 3 years of A-day
– Identify total value of rights in excess of £1.5m
at A-Day
– Protects percentage of LTA (which increases to
£1.8m by 2010/11 tax year
Transitional Arrangements
• Enhanced protection
– Can be used even if value is less than £1.5m at A-day
– Any benefit in excess of current IR limits must be
forfeit
– No additional benefits can be earned on any pension
arrangement after A-day (life cover can continue)
– Pre A-day benefits linked to future pay increases or
actual investment return if DC Plan
– No Recovery Charge
– Can subsequently opt out of enhanced protection
Small Pension Pots
• Currently, all pension pots of more than £2,500 have to
be used to purchase an annuity. However, from A-Day,
1% of the Lifetime Allowance in cash can be taken. So,
in 2006/07, if the total of all of an individuals pension
funds is less than £15,000 will be able to take this
amount in cash. In addition, up to 25% of this amount
will be available tax free. (The Association Of British
Insurers reckons the average annuity purchase at the
moment is not much more than £20,000, so this
proposal will affect a lot of people.)
• Impact: Anyone who has got a small pension pot that
they're about to convert, it might be worth hanging on until
after A-Day.
Death in Service Benefits
• No automatic Earnings Cap or maximum multiple
of pay
• Lump sum up to LTA no tax, over LTA taxed at
55%
• Dependents pension does not count to LTA but is
taxed in payment
• Increases potential benefits which can be provided
but has effect on company’ costs and is subject to
insurance limits
• Consider change in plan design – due to different
treatment of pension and lump sum
Considerations for Trustees
• Current checks removed regarding members
exceeding IR limits (contributions and
benefits)
• Recovery Charge should be deducted by
Trustees
• Changes to Rules, Plan booklet, employee
announcements etc.
• Member information
Where Next?
• Finance Act 2005 (possible changes
– Regulations summer (?) 2004
• Pensions Bill 2004
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With Lords Committee this month
Regulations shortly
Codes of Practice shortly
Royal Assent November 2004
Round Robin
What’s New in Europe ?
Quick review of what’s happening in
EU countries
Andrew Strathdee
EU
• Working Time
– Continuing saga – proposed revisions published
• Voluntary 48 hr opt-out retained, but
– Individual consent every time limit reached
– Union or works council – collective agreement
– Reference period extended from 4 to 12 months by
agreement
– On call time will be classed as inactive, so not necessarily
working time!
EU
• Discrimination
– Commission goes to the European
Court of Justice to enforce EU antidiscrimination law
• Six?? Member States have failed to
transpose two anti-discrimination
Directives. The Directives, which prohibit
discrimination on racial or ethnic origin, age,
disability, religion and sexual orientation,
were due to be incorporated into national
law last year. The Commission will refer
Austria, Germany, Finland, Greece, and
Luxembourg to the European Court of
Justice.
EU
Odile Quintin, Director General,Employment and Social Affairs
starts off the European anti discrimination Truck tour of 10 countries –
Hungary, Slovakia, Czech Republic, Poland,
Latvia, Denmark, United Kingdom, Ireland, France and Italy.
EU
New Report “On a Framework for the promotion of Employee Financial
Participation”
•Participation should be voluntary for both the enterprise and employees
•Access should normally be open to all employees
•It should be set up and managed in a clear and transparent way
•It should use a pre-determined formula that should be linked to an enterprise’s
performance or results.
•It should be applied regularly basis rather than on a one-off basis
•It should avoid unreasonable investment risks for the employees
 It should not be used as a substitute for wages or salary
 It should comply with the Information and Consultation Directive, requiring
enterprises to consult with their employees before a plan was introduced but
would not require prior negotiation or agreement with employees or their
representatives
•It should comply with EU labour law and should not treat the opportunity of
belonging to the plan as an “acquired right” or as an item to be included in
compensation for dismissal or as part of a basis for pension provision
•It should contain rules based on EU legal and regulatory requirements
EU
• Eurobarometer Paternity Leave Survey
– 75% knew of the rights
– 84% had not used it or did not intend to use it
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18% “could not afford it”
42% said compensation was inadequate
31% said “did not want career affected”
20% said “did not want career interrupted”
19% said “parental leave is more for women”
10% said “Did not want to be stuck and home and have less
social life”!
– (answers are multiple so add to more than 100%)
EU
• Paternity Leave Survey
– Usage:
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Sweden – 34%
Denmark – 10%
Finland – 9%
Germany, Spain, Austria, Ireland, Portugal – 1%
Luxembourg – 0%
– Definitely a resounding success, then!
EU
• Forrester Jobs Off-shoring Survey
– Off-shoring likely to be low for most EU
Countries
– UK most affected, off-shoring 75% of total EU
jobs to move
– Greece, Ireland, Portugal and Spain have been
most worried but unnecessarily
– India and China will be major recipients
Austria
• Apprenticeship system in crisis
– Austria has lowest youth unemployment in EU
– Young people seeking apprenticeships exceeds
places by 3.5 to 1
– Youth population will continue to grow until
2008
– Target of 7,800 jobs by the end of November
– Apprentices not being kept after completion –
accusations of “cheap labour”.
Belgium
• Measures to increase employment agreed
– Target to grow start-ups and medium size firms
– Eight part plan
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Reduce income tax
Improve transition between education and work
Streamline work training, certifying acquired competences
Targeting training for the unemployed
Privatising some state employment activities
Job Market - Stop older workers leaving and induce
youger workers to enter
• Jobs in the social economy (sheltered workshops, ironing,
cleaning, running errands!)
• Anti discrimination programme
Cyprus
• Major programme to control budget deficit
– Has been helped by better then expected revenues
– Action to control wage inflation, supported by
employers, but may lead to industrial action
– Inflation only increases for civil service and no
career point progression
– Tax amnesty implemented until 31st December, only
taking 5% until December 6.5%, thereafter
punitive!
Czech Republic
• Growth in industry has not led to
employment improvement
– Q1 9%, Q2 13%, 36% increase in export
demand
– Real wages growth 6% for H1
– employment rates in industry fell by 4% due to
modernisation and restructuring
– Unemployment still 10% due to new graduates,
not anticipated to fall due to rising productivity
Denmark
• Danish Government have completed an analysis of
19 OECD Countries on impact of labour market
policies – conclusions:
– High level of compensation, strong trade unions
and a high level of taxation on labour tends to
increase unemployment.
– Stricter control over the job search activities of the
unemployed and a high level of spending on
active measures lowers unemployment.
Denmark
• Government is to conduct a campaign against the
black market economy
– Publicity that it is anti-social and risky
– Financial sanctions for those caught
• Aging government sector is problematic
– 35% of government workers over 50
– 21% of private sector workers
• Restructuring of public employment service from
2007
Estonia
• Employers reject Works Council proposals
– Proposal to incorporate EU rules into national law
– Too much power to Trades Unions to appoint employee
reps
– Employer concerns over plan to make them finance
health care salaries, via increased sickness payments.
Estonia
Estonia bids for EU social fund projects (€30billion)
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Training and retraining measures
Increasing employability of disadvantaged groups
Supporting women’s return to the labour market
Improving quality of labour market services.
• Major strike over health workers pay pending
Finland
• 2005 Budget under review
– Incomes settlement targeted with moderate pay rises
tied to tax reductions for average earners
– Wealth tax changes by increasing threshold and
lowering rate
– Extension of domestic help credit to improve
employment of domestic staff
• Credit for work done by parents/grandparents
• 30% of wages plus employer contributions eligible for relief
Finland
• New Privacy law
– Tight regulation of employee monitoring
• Bans CCTV except for security
• Safeguards email
• Enables drug testing of employees where justified
by nature of job or when employee suspected under
influence or for job applicants where job involves a
risk to others
Finland
• New Education programme starts well
– New programme to raise education level of those with
only basic education aged 30 - 59
– 57% of those enrolled are between 45 and 59
– 3 out of 4 are women
– 50% are improving computer skills
• Proposal to Government to make employers pay
25% of travel costs as tax free benefit – active
consideration being given
France
• Unions Block 35 hour week changes
• Negotiations mentioned last time collapsed last
week
• Problems will occur as recent deals have frozen
pay levels and extended working week, so will
the government let this continue?
France
• Last time - Private bill introduced to extend
negotiating period for settling disputes on
redundancy with Government support, extending
current suspension of Social Modernisation Law
from July 2004 to sometime in 2005.
• This time – both sides of industry have given up
on agreement – over to the Government….
France
• New 5 Year Social Cohesion Plan
announced
– Number of people on social assistance doubled
in 15 years
– Job creation initiative for 250,000 jobs by
reducing barriers to entry to the market and
assisting 100,000 unemployed into self
employment
Germany
• New Pension law passed in June for
implementation on 1/1/2005.
– Contributions to state schemes will be tax
deductible increasing from 60% in 2005 to
100% in 2025
– State pensions will become fully tax deductible
between 2005 and 2040 in stages.
– Will only affect recipients of Occupational
schemes , due to other reliefs
Germany
• New Tax Regulations for Direct
Insurances, Pensionskassen and
Pensionsfonds
– Contributions will be tax free for these up
to 4% of the CCB + €1800 = €4272 for
2004.
– Benefits to be paid in annuities – or flat
sum limited to 30%
Germany
• Changes to unemployment benefits system
have caused unrest
– Government has agreed to amendments
– Childrens saving limit increased to €4100 from
birth
– Benefits will now be paid for January 2005,
instead of waiting until February
– Proposal to create a minimum wage above
which job seekers could not reasonably
refuse, but no union agreement
Greece
• Country has problems with labour market demand
mainly for unskilled or semiskilled whilst demand
for higher education is high
• Many graduates in lower level jobs than
qualifications would expect
• New survey indicates that demand for higher skills
will grow over next three years, mainly in the
private sector
• As an effect of EU is starting to develop more
sophisticated businesses.
Hungary
• Unemployment remains at 5.9%
• Employment rate still only 50.4% so many
economically inactive
• Inflation 6.9% and H1 earnings up 10.1%
• Grey economy continues to expand – 10,000 companies
broke law officially paying minimum wage but
enhanced with additional payments – difficult to police
• Despite low level of economic activity, there is a
mismatch between skills and demand so increasing
number of foreign workers being employed
Ireland
• Employment grew by 2.4%, whilst
unemployment remained at 4.4%
• 85% of new jobs fulltime and filled by
males
• Population increased by 1.6% (emigration
falling , returners and immigrants remain
the same)
• Emigrants younger than immigrants!
Italy
• Employment issues dominated by liquidity
crisis in Alitalia
– Confrontation and strikes likely
– Solutions include redundancies and incresed
working hours
• Pensions reform grinds on – little progress
in balancing winners and losers
Latvia
• Average wages increased by 9%, although 63% of
Latvians perceive they were better off 15 years
ago and 26% better off last year
• Main issue is price increases following EU
accession.
• Government offering tax breaks on employer
loans to employees studying for science and
technology qualifications from 2005 to 2009
• Major housing cost issue looming due to return of
denationalise housing to revious owners resulting
in rent increases
Lithuania
• Issue over grey market employment employees
being paid low wages to minimise tax and NI.
Foreign companies pay four times salary for same
qualifications, so suspicion that local companies
are hiding payments.
• NI is 34%, 31% to company
• Inspectors finding breaches of employment
conditions in hours and rest periods, holidays, pay
and termination payments – up 33%
Malta
• Unemployment at 5.8 or 7.2% depending on
chosen measure!
• National Action Plan on Employment, by 2010
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Raise employment by 3%
Raise female employment by 7%
Reduce youth unemployment by 13%
Skill shortages a major issue
Removing illegal foreign workers
Netherlands
• Protests over dismissal compensation reform
– Decision of offset compensation against unemployment
benefits.
• Curbs to collective agreements under way
– Agreements after Nov 2004 will not apply generally to the
industry sector – only childcare and holidays
– Unions and employers protesting since it acts as job pricing
cartel.
• Decision to make employers fund 25% of sick pay costs
for temps.
– Expected by end of year, funded via increased contributions to
unemployment levy
Norway
• Downturn in fulltime employment has been
matched by an increase in part time and
temporary work
– Manufacturing decline is reason for reduction
in fulltime, whist part time and temp jobs are in
public sector and construction
• Market for Graduates is very good with
high employment
Poland
• Main issue still unemployment, but the grey
economy is also a problem
– New plan developed with EU money to move
workers from inefficient industries such as coal
mining to others, with compensation
– Plan to deal with social insurance to reduce grey
economy
– Cost cutting on benefits such as cutting sickness
benefit from 100 to 80% after certain periods of
absence
Portugal
• Structural changes are taking place in the
employment market with 15 – 24 year olds
decreasing in numbers
– Population over 25 increased
– Graduate unemployment increased
– Government training programmes being
introduced to improve this
– Unemployment rate at 6.3% with employment
at 52.1%
Russia
• Monthly rate of inflation fell to 0.4% from
0.9% in q3
• Annual rate now at 7.6 compared to 8.3%
Slovakia
• Minimum wage increases to SKK6,500 from 1st
October
– This is 45% of average wage in 2003
• Hungary is a huge recruiter in Slovakia – Slovak
workers increased Hungarian employment in one
district by 3%
• EU agrees to advance payments from social fund
to self employed as part of set up assistance
Slovenia
• Debate on the length of the working week
– Current contractual hours = 40
– Current actual hours = 41
– Some companies are negotiating collective
agreements to increase standard hours to 42.5
– Objective to increase economic efficiency and
legalise current actual hours.
P LV S
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Spain
• Latest unemployment figures worst for
20years growing by 0.83% for the month
– Male employment grew by 3.3%, Female fell
by 0.81%
– However male unemployment is 7%, female
16%
– Over 25’s unemployment increased by 1.6%,
below 25 fell by 0.43%
• Labour costs grew by 3.2% over YTD
Sweden
• Unemployment at 5.7%
• Major issue is that GM want to close down
Saab factory losing 20,000 jobs
• Decision to be made in q1 2005
South Africa
• New Green Paper published
– Seeks to recast Basic Conditions of Employment Act
and the Wages Act
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Set employment standards
Encourage market flexibility
Promote collective bargaining
Support employment creation
Encourage compliance with standards
Promote a healthy work environment
Reduce administrative burdens
Establish clear rights
Address discrimination against women
Meet International Standards
South Africa
• New Green Paper published
– Comprehensive attempt to update legislation
– Will apply to private and public sector
– Introduces new bodies to administer and
monitor
Switzerland
• Pensions reform continues – minimum rate
for mandatory occupational pensions
increased to 2.5%
• Phase 2 begins in January 2005 and Phase 3
in January 2006
• It is a complicated and technical reform
• Women’s retirement age increases from 62
to 64
Any Other Business?
Lunch