ECJ: Freedom of movement under association agreement

The European Court of Justice (ECJ) held a hearing on October 8th 2008 to consider a German court's request for a preliminary ruling on EU freedom of movement rights for Turkish truck drivers operating out of their home state.

The EEC-Turkey association agreement provides a framework for progressively securing free movement for Turkish workers and freedom for Turkish businesses to provide services within the European Union. The agreement has been qualified, extended and reinterpreted many times since its conclusion in 1963 and has often been ignored by individual EU member states when revising their individual immigration laws.

The current ECJ case arose because of changes to German law requiring Turkish truck drivers resident in Turkey to possess visas in order to drive their vehicles on German roads – even though no such obligation existed on the date on which the relevant protocol to the association agreement entered into force. An ECJ decision can be expected in six months time (C-228/06 Soysal and Others).

Russian Federation: Employer contribution rate set to rise

The Russian government has decided to phase out its current unified social tax (UST) and replace it with a social insurance system (SIS).

UST is an employer cost and requires no contributions from employees. It appears that the cost of the SIS will also be met entirely by employers. However, the three-band UST is built around a basic contribution rate of 26 percent. This will be reduced to a much simpler two-band scale, but with an increased basic contribution rate.

From 2010, companies will have to pay out SIS at a rate of 34 percent of gross pay for those earning less than 415,000 roubles (EUR 11,673) a year, but only at a flat rate of  RUB 141,100  (EUR 3,970) a year for employees above that threshold. Companies currently enjoying tax breaks will be given a five-year exemption once the new system is introduced.

Spain: Voluntary repatriation scheme

The Spanish government has approved a voluntary repatriation scheme for non-EU citizens who are currently unemployed.

The scheme will provide an immediate payment equal to 40 percent of the maximum unemployment benefits for which they qualify, followed by the balance of benefits once they have returned to their home state. Those who sign up must undertake not to return to Spain for at least three years, although they will be guaranteed the reissue of work and residence permits once that period has expired.

It is not yet clear whether such individuals may still be entitled to gain entry to other EU member states and therefore have the right to cross back into Spain on short visits using a Schengen visa.

United Kingdom: 28 percent of DB schemes remain open

Results from the latest survey of UK workplace pension provision have just been published by the National Association of Pension Funds. These show that although 28 percent of defined benefit schemes remain open, one-third of trustee boards operating such schemes are considering either switching to a defined contribution structure or taking austerity measures.

Pension funds continue to diversify their portfolios with a sharp reduction in the proportion invested in UK equities. Between 2006 and 2008 there was a rise from 27.7 percent to 31.2 percent in the proportion of funds held in fixed-interest assets.

The average contribution level for defined contribution schemes amounts to 11 percent from employees and 7 percent from employers. The average size of an individual saver's fund is GBP 13,500.

OTHER EUROPEAN NEWS IN BRIEF

Bulgaria:
Discussions on a wide range of employment-related issues took place recently between BSP, the principal party in Bulgaria's coalition government, and both sides of industry. Concerns were expressed about responsibility for funding future health and social security provisions. The finance minister, Plamen Oresharski, revealed that in the draft 2009 budget the ratio of contributions was 8:10:12 between employees, employers and the state. Unions pressed for an increase in the minimum wage next year above the planned rate of BGL 240 (EUR 122.72 euros) per month, whilst BSP agreed to bring forward a new bill on the settlement of labour disputes.

Denmark:
Delegates at this autumn's convention of the Danish conservative party have voted to abolish the Sunday trading law. This removes the majority support in the Danish parliament for retention of an effective ban on Sunday opening for larger non-food stores. Currently, opening restrictions are only lifted on the first Sunday of each month, on Sundays during December and on six other Sundays during the year.

Europe: Science and technology occupations
According to the EU statistical agency Eurostat, 31 percent of people employed in the EU during 2006 were in science and technology occupations. 18 percent of these were professional scientists and engineers, of which more than half were employed in four EU member states - France, Germany, Italy and the UK. However, the country with the highest share of professional to other science and technology workers was the Irish Republic (74 percent), whilst the countries with the lowest shares were Turkey, Luxembourg, Bulgaria, Slovakia and Lithuania (all less than 30 percent).

Finland:
Following the opening of infringement proceedings by the European Commission, the Finnish government has agreed to amend its requirement for EEA companies to have a representative resident in Finland with unlimited responsibility for tax debts. Companies based in other EEA states will therefore now be able to open branch offices in Finland and service the Finnish market from outside the country without the obligation to register a local subsidiary company.

France:
France's social security finance bill for 2009 includes a provision allowing employers to reimburse up to 50 percent of employee commuting costs on a completely tax-free basis. The old 'cheque transport' scheme based on transport vouchers would be replaced by the funding of public transport season tickets through a company's normal expense system - a facility currently only operating in the Ile-de-France. Under a further clause in the bill employees using private transport to commute to work could be reimbursed by employers up to a limit of 200 euros a year (twice the current cheque transport level).

Germany:
A streamlined system for funding healthcare in Germany will come into effect next year. Instead of joint employee and employer health insurance premiums being paid directly to a wide range of non-profit insurers, they will be channelled through a federal government 'central health fund' that will share out proceeds to the insurers. It will no longer be possible to shop around for the lowest premium, because the central fund will apply a unitary contribution rate. A final decision on the rate has not yet been made, but the German cabinet has recently approved a provisional level of 15.5 percent.

Montenegro:
Over the first eight months of 2008, gross wage levels in Montenegro rose by an average of 24.4 percent compared with the same period last year. However, annual price inflation in Montenegro was running at 10.8 percent in August 2008. The highest wage increases were in construction, agriculture and the public sector, with manufacturing wages rising at 15.4 percent and those in retail and wholesale trade at 14.7 percent.

Netherlands:
Over the year to June/August 2008, unemployment in the Netherlands fell from 4.4 percent to 3.8 percent of the national labour force. For women in the 25 to 44 year age group, the trend has been even more pronounced with a fall from 4.4 percent to 3.5 percent. However, 10.6 percent of economically active women under the age of 25 are still registered as unemployed.

Poland:
New personal income tax rates will come into effect in Poland on January 1st 2009. Those earning below PLN 85,528 (EUR 24,874) a year will pay 18 percent tax on all income above PLN 556.02 (EUR 161.62), whilst those earning above PLN 85,528 (EUR 24,874) will pay 32 percent on their earnings above that threshold. Current personal income tax rates in Poland range from 19 percent to 40 percent.

Sweden:
Over the year to Q2 2008, the average level of sickness absence in the Swedish private sector increased from 0.84 to 0.92 days per employee. There was also a slight rise in the number of sickness periods compared to 2007.

Switzerland:
Switzerland will hold a referendum on 8 February  next year to determine whether the current agreement with the European Union on the free movement of labour should be renewed on 1 May 2009. The Swiss federal parliament has decided to extend the agreement to include citizens from the two latest EU accession states, Bulgaria and Romania. However, failure to secure popular support for the agreement could be damaging to the Swiss economy, as it depends heavily on foreign resident labour as well as commuters crossing its open borders from neighbouring countries each day.

United Kingdom:
Pregnant workers in the UK whose expected week of confinement is on or after 5 October 2008 will be entitled to retain all their terms and conditions of employment whilst they are on additional maternity leave (AML). This includes all elements in their employment package except wages and salaries.

Many of the new rules for those on AML governing the treatment of employee benefits, annual leave and monetary payments apart from regular wages and salaries are far from straightforward. Certain anomalies also persist concerning additional adoption leave. Clarification about these issues can be found in a new Baker & McKenzie briefing paper, available free of charge to FedEE members. To obtain a copy, please contact Leanne.Roblin@bakernet.com.

Click here to read FedEE's HR news round up September 2008.

Copyright: FedEE Services Ltd 2008.