HR European news roundup – July 2010

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A selection of the latest European HR news from the Federation of European Employers (FedEE).

Bulgaria: Employers fear rise in social security costs

Talks between the Bulgarian government and both sides of industry about pensions reform have broken down.

Trade unions insisted that Prime Minister Boyko Borissov should be directly involved in meetings prior to any decision to amend the social insurance code. Employers, on the other hand, are opposed to significant increases in social security contributions and making non-payment a criminal offence.

One solution posed by the government is to increase the contribution period to achieve a full pension by three years to 40 years for men and 37 years for women, effective 1 July 2011. This could be achieved whilst retaining the retirement age at 63 years for men and 60 years for women. However, employers would retain their right to retire employees when they reached retirement age, provided they had achieved the right to a full state pension.

EU: New limits to bonuses and severance deals
The European Parliament has voted in favour of amendments to the Capital Requirements Directive that place strict limits on bonus payments in the financial sector.

Under the proposal employees in local and foreign-owned banks and hedge-funds will only be able to be paid 30 percent of their bonus payments at the end of the year when they were earned (20 percent in the case of large bonuses). The remaining payments will be conditional on the achievement of longer term results. Half of the total bonus will be paid in the form of "contingent capital" (that can be clawed-back if the institution runs into trouble), with an option for conversion to shares. Moreover, at least 40 percent of cash bonuses (60 percent for larger bonuses) would have to be deferred for between three and five years. If bonuses are paid in the form of pension benefits they will have to be held initially as a corporate asset for a minimum of five years.

Limits will also be placed on the payment of golden handshakes for departing executives.

Russian Federation: Penalties for non-payment of wages

Currently the Russian Criminal Code contains several ambiguities that allow individual managers to avoid responsibility for non-payment of wages. Consequently wage arrears remain high and, according to the Russian Statistics Agency, on 1 June 2010 arrears amounted to RUB 3.2bn.

To tackle this problem the Russian President, Dmitry Medvedev, has sent a bill to the state Duma (parliament) that amends Article 145.1 of the Criminal Code and establishes a new penalty for partial non-payment of wages.

Under the proposed amendment any person authorized to make a decision on the payment of wages, redundancy compensation, pensions, scholarships, grants and other payments may be subject to a fine of up to RUB 500,000 or imprisonment for up to three years (five years for serious or repeated offences) if arrears exist in full for a period of two months or more. If arrears amount to only part of the sum originally due the penalty is a fine of up to RUB 120,000, disqualification from holding a company directorship or imprisonment for up to one year.

Other European news in brief

The date set for ending anti-crisis measures in Belgium has been extended by three months to 30 September 2010. The measures include a facility to operate on a short- time basis if company turnover reduces by at least 15 percent.

The Danish government's tax reform plans will progressively reduce the income tax deductions that commuters may claim. Between 2012 and 2019 the average annual deduction will fall from DKK 5,166 (EUR 693) to 4,030 kroner (EUR 541) and the hardest hit will be long- distance commuters.

The European Court of Justice (ECJ) has decided that it is lawful to suspend certain types of allowances when an employee is unable to work due to pregnancy. The ECJ distinguished between "the actual performance of duties and functions within a role" such as overtime premia and sick pay where no ongoing payments are due, and "the occupational status of the pregnant employee" such as payments linked to seniority, length of service and professional qualifications where payments should continue. In cases where an employee is simply transferred to another job for health and safety reasons during pregnancy the employee is entitled to receive at least the same level of remuneration as that received by others performing the same job, including any applicable allowances and bonuses. [C-471/08 and C-194/08].

The French Court of Cassation (Supreme Court) has reached an important judgement that clarifies an employer's right to waive non-compete clauses on termination of an employment relationship. According to the court, if a non-complete clause is contained in an employment contract then an employer may not cancel or curtail it in any way once it has been activated. However, it remains uncertain at what point a right to waive such a clause may be applied. In the absence of further guidance it may therefore be assumed that a decision to waive a non-compete restriction must be made at the time when the employee is notified of their dismissal [Cass Soc, July 13, 2010, No. 09-41626].


Over the last ten years the number of people who qualify for wealth tax in France has trebled to 566,000. The current threshold for tax to apply is EUR 790,000. The value of an estate is normally determined on January 1st of the year when an individual qualifies and tax is payable on the total of worldwide assets. However, foreign assets do not qualify for the first five years of residency in France.

According to the Federal Ministry of Health absenteeism in German businesses rose during the first half of 2010 to its highest point in the last five years. 3.58 percent of working days were lost due to absence - a rise of 10 percent on the comparable period last year. Women were more prone to absence than men and its incidence was highest on Mondays.

Irish Republic
The Irish Labour Court has recommended that the legally-binding basic rate for craft workers and general operatives in the private construction sector should be cut by 7.5 percent. The reduction will also apply to pay-related allowances. This decision is based on a former link with the public sector and follows cuts in the pay rates of construction workers employed by local authorities. However, the court added the proviso that the cuts should only be regarded as a temporary measure and held that the lower industry rates should be reviewed in January 2012.

The Lithuanian parliament has voted in support of a cut in financial support for parental leave. Currently parents receive 90 percent of their salary for the first year and 75 percent for a second year of leave. From next July the normal period of parental leave will be reduced to one year, although the social security system will meet 100 percent of an employee's salary up to a modest income limit. Employees will be given the option to extend leave for up to two years, but if they do extend their leave period their benefits will be reduced to 70 percent of their salary during the first year and 40 percent in the second.


The Polish statutory minimum wage will rise on 1 January 2011 by 5.2 percent to PLN 1,386 (EUR 346) per month. Increases will also be made to the minimum allowance for working at night.

United Kingdom
A new temporary limit has been placed on highly-skilled migrant workers from outside the EU entering the UK to work without an existing job offer. This is being achieved by raising the points-based threshold for entry and applying an annual cap of 5,400. The limit will apply until March 2011 when a new permanent quota will come into force. The size of the final quota will be determined by the government after consultation with employers.

Copyright: FedEE Services Ltd 2010

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