Our regular human resources management news roundup from across Europe from the Federation of European Employers (FedEE).

Europe: Trends in tax-free overtime pay

The introduction of tax-free overtime in France on 1October 2007 appears to have been largely trouble-free for French employers, and public opinion polls in France have indicated this may have been the new government's most popular reform.

But attempting to regulate overtime through the tax or social security system is not a French invention. A number of other EU countries have previously taken a similar path.

Austria: Additional employment income for working overtime is exempt from tax (within certain limits) provided it is paid by an employer as a legal obligation either under the terms of an individual employment contract or collective bargaining agreement.

Germany: Overtime hours and excess work compensation are not regarded as regular income. They are therefore not subject to deductions for compulsory health insurance.

Italy: Overtime income is currently subject to an additional levy applied through the social insurance fund (INPS). This ranges from 5% for working hours between 40 and 44 per week to 15% for all weekly working time in excess of 48 hours. Under an agreement with Italy's social partners concluded on July 23rd
2007 this levy will be lifted as part of a policy to support measures that increase the competitiveness of enterprises.

Luxembourg: Currently overtime income is free from tax up to a limit of 1800 euros per annum. Budgetary proposals for 2008 include a total tax exemption for all overtime hours.

Malta: Social security contributions are not currently payable on variable overtime payments as they only apply to basic wages or salaries. A proposal to make overtime income tax-free has been made by Alfred Sant, leader of the opposition in Malta's parliament. Unlike in France, however, his proposals are strongly supported by the trade union movement.

Hungary: Pay demands rise in face of central bank concerns

National wage policy discussions between employers, trade unions and government representatives on Hungary's Interest Reconciliation Council (OET) have been taking place throughout the autumn.

Although the government has tabled a proposed limit for pay increase of 4.5% next year, trade unions have increased their initial 8%-9% demand to 10%. Meanwhile the governor of the Central Bank has stressed that pay increases must be strictly aligned to productivity growth. The government is seeking to reduce price inflation from around 8% this year to 4.9% in 2008, whilst the central bank has set a price inflation target of 2.9%-3.1% in 2009. Until there is any reduction in wage demands, it is unlikely that the central bank will reduce interest rates from its current 7.5% level.

Netherlands: Top incomes concession at cost of dismissal reform

Recent horse-trading between members of the Netherland's ruling coalition has resulted in proposals for the relaxation of dismissal law effectively being dropped in return for concessions over the thorny issue of top incomes.

A cabinet proposal to restrict deductibility of pension premiums for incomes above 185,000 euros per year from 2009 has been withdrawn. Instead, there will be heavier taxation on leaving premiums (golden handshakes) for company executives and on the stock and option bonuses they receive. In a further concession, the substantial increase in the 'eigenwoningforfait' tax on home ownership for houses worth more than one million euros will be introduced in stages instead of all at once.

Other European news in brief

Bulgaria: Bulgaria's parliament has voted at first reading to approve an amendment to the taxation law introducing a 10% flat rate of income tax. If the new tax comes into force, it will be the lowest of its kind in Europe and will help to increase the size of the formal economy in a country where over one-third of all workers receive untaxed cash payments for their services.
The other European countries currently operating flat-tax systems are Albania, Romania and Slovakia.

EU: It is only a few weeks to go before the adoption of the euro by Cyprus and Malta. A final assessment by the European Commission has found that both countries are well prepared for the changeover. The frontloading of commercial banks and the dual display of prices is now underway and each country's central bank estimates that the banking sector will have available for circulation most of the banknotes and coins required to operate each economy before the euro is launched on 1st January 2008.

Finland: The Finnish interior ministry is drawing up plans to introduce a new job-seekers' visa for non-EEA nationals.
Currently visas are issued for three months and a combined work/residence permit must be applied for in an individual's home country before travelling to Finland. The new visa will permit foreign job-seekers to visit Finland for up to six months. If they find work during their stay, they may commence employment immediately and apply for the necessary permits without returning to their home country.

France: A French labour conciliation board has found that an employer does not invalidate a dismissal for serious fault if they agree to pay the employee during a notice period. A serious fault is that which makes it impossible to maintain the services of an employee. If an employer asks an employee found to be at serious fault to depart from company premises, but continues to pay them during a notice period, the board found that the payment does not in itself indicate that the grounds for dismissal are in question.

Republic of Ireland: The Irish congress of trade unions has revealed that union membership in the Irish Republic has fallen from 45% in 1994 to 35.6% today. Around 75% of private sector workers are not union members and public sector membership is concentrated in the civil service, hospitals and education.

Poland: Average gross monthly remuneration in Poland during Q3
2007 was 2703.41 zlotys (741.88 euros). Remuneration in the enterprise sector rose by 9.5% over the year to September 2007.

Slovakia: The unemployment rate in Slovakia fell from 8.3% in September 2007 to a record low of 7.9% in October 2007.
Employment growth was highest in the sale and maintenance of motor vehicles (+21%), transport (+5.7%), retail trade, hotels and restaurants (+5.6%) and construction (+5.2%). The Slovak economy expanded by 9.4% over the year to Q3 2007, but a 2% fall in the economic sentiment indicator between October and November 2007 indicates that a slowdown is on its way.

Fedee news

Employment law programme

A fully-updated audio-visual introduction to employment law in the Netherlands is now available in the FedEE law programme.
The presentation has been prepared and written by Joseph van Vlijmen, Partner and Head of Employment Group, Baker & McKenzie, Amsterdam. Jos also chairs the firm's European Employment Law Practice Group.

http://www.fedee.com/enterlaw.shtml

FedEE is currently running a special offer at reduced rates for membership through to January 2009.

Copyright: FedEE Services Ltd 2007