Health and Benefits
Events, developments, and opportunities in the international marketplace
CHINA: FOREIGN NATIONALS AND THEIR EMPLOYERS TO PAY FOR SOCIAL INSURANCE
Foreign national workers are no longer exempt from social security according to the Social Insurance Law which extends social welfare from July 1st on to all expatriates working in the country for more than six months. Although detailed regulations have yet to be published, contribution rates are likely to be the same as those levied on Chinese businesses and workers. The new tax may shrink workers' take home pay by 9% to 12%, but employers will take the biggest hit. Businesses currently pay social insurance tax of between 16% and 37% of the first RMB7,000 to RMB13,000 (around US$1,100-$2,000) of monthly salary, depending on location. At the top end, expatriates may end up costing their employers as much as $740 more each month. Noncompliance will risk fines of three times the amount due. In responding to a recent survey conducted by China Daily executives indicated that they are reassessing their human resource policies and salary structures in light of the new requirements and that they may eventually reduce the number of jobs available to foreign nationals.
Workers reactions were mixed with some respondents pleased to gain access to China's public hospitals, which they consider efficient and more affordable than private English speaking facilities. Most, however, expressed concern about the expense and risk involved in contributing to the government pension system when they expect to return to their home countries before retirement. Even if they do remain in China for an extended period workers will need to contribute to the government system for at least 15 years to earn a full pension. Despite draft Interim Measures entitling foreign nationals to a refund of pension contributions when they leave the country permanently, some experts question whether departures might be hindered by the status of pension accounts and whether expatriates would be able to navigate the procedures and leave with refunds in hand.
They suggest that expatriates and businesses used to the more transparent social systems of western countries may not feel comfortable with China's welfare system. At this point in time, only citizens from Germany and the Republic of Korea are exempt from participation as only these two countries have signed social security agreements with China eliminating dual social security taxation.
UKRAINE REFORMS PENSION SYSTEM UNDER IMF PRESSURE
Ukraine's Parliament recently approved an unpopular pension reform bill to meet a key requirement for aid from the International Monetary Fund. To slash spending, the Law overhauls the soviet-era pension system by gradually raising the retirement age for women from 55 to 60 years and increasing the contribution period by 10 years for all workers to receive a full pension. Now awaiting presidential approval, the government hopes the reform will motivate the IMF to resume the $15.6 aid package frozen earlier this year.
EU UNISEX INSURANCE RATING EXPECTED TO REDUCE PENSION INCOME, INCREASE PREMIUMS
EU insurers have until December 21, 2012 to come up with unisex rates and benefits for all products, from automobile insurance to life, health and annuity offerings, according to the European Court of Justice. In ruling on a challenge by a Belgian consumer group, the ECJ pronounced the insurance industry's practice of charging different rates for men and women discriminatory and in violation the EU directive for equal treatment. Although equalization will affect all insurance products, the insurance industry has warned that the implications for the retirement landscape, which is annuity based, are particularly alarming. Because women live longer than men they receive lower annual pensions for the same pot of money. Experts fear that equalizing annuity rates and benefits will end up lowering men's retirement income. For the near term, insurance rates are expected to be volatile as insurers adjust their pricing. Dr. KatrinGebert of Globex's German Partner Broker Profion GmbH predicts that German insurers will pass the uncertainty to policyholders, increasing contributions for new employee benefit contracts by 10% to 20%.
Multinationals will face continuous challenges as they navigate these and other changes in competitive practice and regulations. Globex Partner Brokers have the ability to offer valuable consulting and brokerage services in these and other key countries around the world. Contact Globex for more information.
Brought to you in association with:
GLOBEX INTERNATIONAL GROUP, 101 Maple Ave. Chester, NJ 07930, Phone: 973-541-1144, E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it , Fax: 973-541-1145
