EY Human Capital Conference 2012: International social security - the essential guide

2012 Human Capital Conference
23–26 October

International social security:
th essential guide
the ti l id

Disclaimer

► Ernst & Young refers to the global organization of member firms of
Ernst & Young Global Limited, each of which is a separate legal entity.
Ernst & Young LLP is a client-serving member firm of Ernst & Young
Global Limited located in the US.
► This presentation is ©2012 Ernst & Young LLP. All rights reserved. No
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► The views expressed by panelists in this session are not necessarily
those of Ernst & Young LLP LLP.
Page 2 International social security: the essential guide

Panelists

► Mike Kenyon
y ► Koyla Hache
y
► Ernst & Young LLP (UK) ► General Electric

► Gary Chandler
► Ernst & Young LLP (UK)


Agenda

► Interactive discussion in relation to some of the practical
current social security-related issues facing employers
with an internationally mobile workforce


Areas for discussion

► Recent country changes and areas of focus from an
employer perspective:
l ti
► India
► China
► European Union
► Long term
Long-term expats — the options from a social security
perspective
► Optimization p
p planning — reducing ongoing social security
g g g g y
costs within a global mobility program


India

Totalization network Signed
g
In force (effective date): (date signed):
► Belgium ( September 2009)
g (1 p ) ► Hungary ( February 2010)
g y (3 y )
► Germany (1 October 2009) ► Czech Republic (8 June 2010)
► Switzerland (29 January 2011) ► Norway (29 October 2010)
► Denmark (1 May 2011) ► Finland (12 June 2012)
► Luxembourg (1 June 2011)
► France (1 July 2011)
► South Korea (1 November 2011)
► Netherlands (1 December 2011)

Further totalizations being negotiated:
Austria, Australia Bulgaria Canada Cyprus, Greece, Italy,
Austria Australia, Bulgaria, Canada, Cyprus Greece Italy Sweden and US

India

► International worker status:
► Updated FAQs on 25 May 2012
► Further clarifications required

Discussion points:
► What are companies doing with regard to certificate of
coverage applications for Indian outbound employees
post this change?
► What is the recommended current position/action?


India

► Indian totalizations highlight another common compliance
g g p
“challenge” for employers in that the exemption in the host
location under an Indian certificate of coverage is only a
“partial” exemption.

Discussion point:
► What are companies doing with regard to these partial
exemptions?


China

► New social security law
y
► Foreign nationals working in China subject to People’s
Republic of China (
p (PRC) social security system
) y y
► Interim measures effective from 15 October 2011
► Issues to consider:
► Retroactive contributions
► Late payment surcharge after 1 January 2012 (0.05% per day)
► Different interpretation between local governments
► Partial refund of payments upon departure (process optimization)


China

Location Date Title Effective date

Xiamen 5 March 2012 Notice on the imposition of social security on foreign
p y g 6 October 2011
nationals working in China issued by Xiamen
Qingdao 4 November 2011 Notice on the imposition of social security on foreign 15 October 2011
nationals working in China issued by Qingdao
Chengdu 19 October 2011 Notice on the imposition of social security on foreign 15 October 2011
nationals (including individuals from Hong Kong,
Macau and Taiwan) working in China issued by
Chengdu

Beijing 11 October 2011 Guidance on the imposition of social security on 15 October 2011
foreign nationals working in China issued by Beijing
Suzhou 18 January 2012 Notice on the imposition of social security on foreign October 2011
nationals working in China issued by Suzhou
Zhuhai 11 October 2011 Notice on the imposition of social security on foreign 1 November 2011
nationals working in China issued by Zhuhai
Shanghai – No local variation from rules –
Shenzhen – No local variation from rules –
Guangzhou – No local variation from rules –
Tianjin – No local variation from rules –
Fuzhou
F h – No local variation f
N l l i ti from rules
l –


China

Discussion point:
► What are companies currently doing in China in relation
p y g
to social security liabilities?


EU: revised territorial coverage of the new
regulation
Austria Hungary Norway*

Belgium Iceland* Poland

g
Bulgaria Ireland Portugal
g

Czech Republic Italy Slovak Republic

Cyprus Latvia Romania

Denmark Liechtenstein* Slovenia

Estonia Lithuania Spain

Finland Luxembourg Sweden

France Malta Switzerland*

Germany Netherlands UK

Greece
G


EU: revised territorial coverage of the new
regulation

► Switzerland adoption of the new rules ( g
p (Regulation ( )
(EC)
No. 883/2004): with effect from 1 April 2012
► Norway, Liechtenstein and Iceland adoption of new
y p
legislation: from 1 June 2012
► Issues to consider:
► Transitional provisions — E101 or A1?
► Challenges in relation to treatment of cross-border third-country
nationals
► Increased focus on employer obligations in relation to multistate
workers


EU

Discussion point:
► What practical steps are companies taking in relation to
the increased focus on multistate workers?


Long-term expats

► Most totalization agreements will have a maximum p
g period
for which exemption can be obtained in the host location.
► If the individual stays beyond that p
y y period, he or she will
typically fall out of the home social scheme into the host
scheme.


Long-term expats

Discussion points:
► What does company policy say about “switching” social
tax schemes?
► Do companies notify the employee about possible impact
o benefits?
on be e s
► What are company policies in relation to social security
equalization and/or p y
q payment of voluntary contributions?
y
► What challenges do companies face with regard to
ensuring correct withholding?


Optimization planning

► Process optimization:
p ► Policy optimization:
y p
► Ensuring fully efficient end- ► Flexing the traditional home-
to-end processes/platforms country policy for certain two-
are in place so that domestic country corridors where
exemptions and/or refunds significant cost savings can
are effectively identified and be realized without significant
implemented impact on the employee or
his or her dependants



Process optimization examples:
► Exemptions:
► UK
► France
► Belgium
► Argentina
► Refunds:
► Brazil
► China
► Germany
G
► Switzerland
► Outbound population:
p p
► France
► UK



Discussion point:
► What are companies’ current thoughts on such
opportunities,
opportunities and have these changed in light of the
current global economic downturn?


Conclusion

► Increasing speed of change in social security legislation
will continue t provide challenges i relation t mobility
ill ti to id h ll in l ti to bilit
programs — from risk and cost perspectives.
► Various strategies exist to minimize ongoing social
security costs — from process and policy perspectives.
► Ability to provide substantial program savings while
protecting against any individual employee loss.


Questions


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