2020 Key Payroll & Employment Law Updates

Erez Greenberg December 26, 2019

As the year 2020 approaches, new or updated labor laws will be taking effect. This means changes regarding employer and employee contributions, contract regulations, employee benefits, minimum wages and much more. This roundup is to provide you with key changes that have happened in various countries around the globe. To stay up to date on all countries visit our countrypedia.

United Kingdom

IR35 Updates

Starting April 6, 2020, the United Kingdom will begin a stricter enforcement of the IR35 legislation will take effect. Read our full article here to see all changes regarding the I35.

Parental Bereavement Leave

Parents will now have the right to 2 weeks paid leave if their child under the age of 18 dies or suffer a stillbirth from 24 weeks of pregnancy.

Written Statements

As of April 6, 2020, all new employees have the right to a written statement of employment particulars by their first day of work. These statements should include working hours, paid leave, training, probationary period, and any other benefits.

Holiday Pay

An increase to the holiday pay reference period will increase April 6th, 2020. Employers will now be required to look back at the previous 52 weeks as opposed to the old 12-week reference period when averaging weekly pay.

Amendment to Agency Workers

The Swedish derogation will be removed on April 6th ,2020 making agency workers who have finished their 12-week qualifying period, entitle to the same pay as those directly employed by an employer. By April 30th, 2020, any worker who has an existing Swedish derogation clause in their contract must be provided with a written statement notifying them that the clause will no longer have effect.

Denmark  

New Holiday Law

From September 1, 2020, a new holiday law in Denmark will come into effect that will change how holidays are earned and organized. Holidays and holiday pay that employees earn will now be available as they earn them. This ensures new employees won’t run the risk of waiting months or even over a year to take a paid vacation.

Due to the new Danish holiday act in 2020, the government is implementing a transitional period (September 2019 –August 2020). This period employees will earn holiday in the normal manner but will not be able to utilize their entitlement. Instead, the holiday pay will be frozen, stored in a government fund, and paid out to employees when they retire or leave the Danish labor market. Frozen holiday pay must be transferred to the Employees’ Fund for Outstanding Holiday Funds by 31 December 2020. Employers may choose to transfer administration to the Holiday Fund itself or self-administer the money within the fund.

Holiday earned during the transition year from September 1, 2019 to August 31, 2020 cannot be paid or paid for but will become a savings with the new Employees’ Vacation Resources fund.

Netherlands

Minimum Wage

The minimum wage in the Netherlands will increase on January 1st, 2020 to €1653.60 from €1635.60 which was set July 1st,2019. The government in the Netherlands adjusts minimum wage twice a year on these dates.

The Balance Labor Market Act (WAB)

This is a new legislation effective January 1st, 2020 that will create employment equality between employees on payroll and those who are directly employed under contract. This includes salary holiday pay, and 13th month salary.

Rollout of the WAB will be done in two phases.

Phase one which is effective January 1st, 2020 will give payroll and EoR their own legal framework creating equal treatment for all employees. Also, collective agreement for regular employment agencies does not apply to payroll or EoR employees.

Maximum term for successive fixed-term employment agreements will be changing from 4 contracts in 2 years to 3 contracts in 3 years. The new WAB will reduce employer’s unemployment insurance contribution by 5% for employees with a permanent contract as opposed to those on a fixed-term contract.

Also, probationary period for temporary contracts will be extended.

  • No probationary period for contracts less than 6 months.
  • Contracts greater than 6 months but less than two years ins 1-month period.
  • Contracts over 2 years will have a 2-month period.

Grounds for terminating a permanent employee agreement will become less strict. This means that no longer will an employer need to completely meet one of the grounds of dismissal.

Employees who are terminated will now require transitions payment from the first day working day and even during probationary period. The transitional will be lower than the 1/3 gross monthly salary that is set for employees who have worked at least a year.

Phase two which is effective January 1st, 2021 will make a new system of adequate and equal pension agreements a requirement for payroll and EoR.

Singapore

Work Injury Compensation Act

Changes to Singapore’s Work Injury Compensation Act will take effect in 2020. The changes will include compensation and medical limits, an expansion to mandatory insurance coverage to non-manual employees, an expansion to the range of compensation to also include light duties, and compulsory reporting for any work accident.

Compensation for medical expenses will increase January 1st,2020 and will only apply to accidents that occur after this date.

Compensation for death – minimum $76,000/maximum $225,00

Compensation for total permanent incapacity – minimum $97,00/maximum $289,000

Maximum limit for medical expenses – Up to $45,000 or up to 1 year from date of accident, whichever comes first.

April 1st, 2020 salary threshold for non-manual employees will raise to $2,100. Employer will still be required to purchase insurance for all manual employees, regardless of salary.

South Korea

Minimum Wage

2020 minimum wage – 8,590 won

Family care Leave

The current law grants 90 days of leave, of which 30 must be used and used consecutively. Starting January 1, 2020, ten of the days will be to be used on a single-day basis. The amendment will also expand the scope of what leave can be taken for and will be extended to grandparents and grandchildren.

Health Insurance

South Korea will raise Health Insurance contributions for both the employee and employer. This hike will reduce the employee’s net income and raise the employers’ total costs. I recommend that the CSM update all clients based in South Korea to make them aware of the upcoming changes. The employer and employee will now contribute 3.3335% each.

Sweden

Employment Protection Act

The age in Sweden in which an employee is protected from termination will be increasing. Beginning January 1st, 2020, once an employee reaches the age of 68 an employer may terminate them without just cause. The age will increase to 69 in the year 2023.

Minimum Retirement Age for Contributory Pensions

The minimum age will increase to 62 and will again rise to age 63 in 2023 and 64 in 2026.

Minimum Retirement Age for the Guarantee Pension

The minimum age will increase to 66 in 2023 and will once again rise to 67 in the year 2026.

Argentina

Minimum Wage

The Argentine government has decided to raise the minimum wage by 35% over three installments in an attempt to boost purchasing power and deescalate the financial crises. This will increase the minimum wage in Argentina from 12,500 pesos to 16,875 pesos per month.

Social Security

The minimum non-taxable amount for the payment of employer contributions will rise from 7,003.68 pesos to 15,810.81 pesos on January 2020.

Contributions are:

Employer –

  • Argentine Integrated Pension System – 11.07%
  • PAMI – 1.62%
  • Family Allowance (AAFF) – 4.83%
  • National EmploymentFund – 0.98%

Total to social security scheme 18.50%

To the National Social Work Regime

  • Social work – 6%

Total Contributions – 24.5%

Employee –

  • Argentine Integrated Pension System – 11%
  • PAMI – 3%
  • Social work – 3%

Total Contributions – 17%

Brazil

Social Security

A social security reform has been approved by Brazil’s legislature and will change the monthly social security contribution rates for employees. The new rates and brackets will take effect starting in February 2020.

The new employee monthly contribution rates for the private sector are:

  • 5% for those earning up to the minimum wage. (was previously 8%)
  • 9% if earnings are between minimum wage and 2,000 Reals
  • 12% for earnings more than 2,00 and up to 3,000 Reals
  • 14% for earnings for earnings between 3,000 and 5,839.45 Reals

Public-sector employees currently are generally assessed a flat social tax rate of 11%.

The new monthly contribution rates in the public sector include the four new private sector rates, as well as the following four additional brackets:

  • 5% for earnings of 5,839.46 reals and up to 10,000 Reals (
  • 5% for earnings of more than 10,000 and up to 20,000 Reals
  • 19% for earnings of more than 20,000 and up to 39,000 Reals
  • 22% for earnings of more than 39,000 reals.

Changes to retirement are also part of the reform, with the retirement age of men set to 65, and 62 for women. Both men and women need a minimum 15 years of contributions toward the National Social Insurance Institute (INSS). Those who have not yet entered the labor force will need to contribute at least 20 years.

Estonia  

Pensions

The government in Estonia has reached an agreement that will transform the second pillar of the pension system – the individual account – into a voluntary program, as well as increase benefits. This change will allow for participants to continue to accrue money in the scheme, discontinue contributing to the scheme but keep accrued money in the fund, or stop making payments and withdraw the money they have accrued. If parliament approves, the plan is for the new reform to come into force January 1st, 2020. The change towards the program is the result of low investment returns and high management fees that have occurred since the introduction of the pension program.

The current pension program in Estonia is a built on a three-pillar system; state pension, individual accounts, and supplementary funded pension. The changes being made are towards the individual account that is funded by the employer and the employee. Currently employers contribute 4% of gross monthly payroll to the account and employees contribute 2%.

Indonesia

Due to inflation of 3.39% and an economic growth of 5.12%, the Ministry of Manpower in Indonesia has decided to raise the minimum wage. The hike, which is set to take place January 1st, 2020, will be a mandatory increase of 8.51% for all provinces and districts. There are currently seven provinces that will require minimum wage adjustment; Central Kalimantan, Gorontalo, West Sulawesi, East Nusa Tenggara, West Papua, Maluku and North Maluku.

Ireland

Social Security

Employer social security contributions in Ireland will be increasing from 10.95% in 2019 to 11.05% in 2020.

Poland

Minimum Wage

The monthly minimum wage in Poland is set to increase over the next four years. In 2020 and 2021 the increase will be 15% raising minimum wage from 2,250 zlotys to 3,000 zlotys, and 10% each following year until 2024 where it will reach 4,000 zlotys.

The decision to raise the minimum wage follows the recent labor law changes of tax exemption for employees under the age of 26, the increase of old age pensions, and the raising of children benefits.  The government’s plan to afford the hike is to remove the current cap on social security contributions for annual salaries over 142,900.

Poland’s government’s decisions to drastically raise minimum wage is an effort to rid itself of its reputation of being a source for cheap labor in hopes of attracting investors who can instead help build an economy based on innovation and modernization.

However, current predictions are that the minimum wage increase along with social security changes will cause net salaries to drop and cause company costs to rise.

Switzerland  

Tax Law Reform

On September 1st, 2019, Zurich approved the reform and will now be on the same federal cantonal tax law framework. This is in relation to a tax reform bill in Switzerland that will go into force January 1st, 2020 and will implement new measures enforcing all cantons be subject to the same federal taxation rate.

The key changes that will take affect due to the law change are:

  • corporate income tax rate in the Canton of Zurich will be reduced from 21.15% to 19.7%.
  • patent box with a relief of 90%.
  • Additional 50% deduction on R&D costs
  • deduction on equity financing
  • maximum limitation of reliefs of 70% on profits subject to cantonal tax.
  • partial taxation (50%) of dividends received from investments of at least 10% for private individuals.

Taiwan

Minimum wage

Starting in January 2020, minimum wage in Taiwan will rise to NT$23.800 monthly/NT$158 hourly.

Thailand

Minimum wage

Starting January 1st, minimum wage will increase from 313THB to 336THB.

Severance Pay

Maxim payment for severance will be increased from 300 days salary for employees of 10 years of service to 400 days salary for employees with 20 years continuous service.

Maternity Leave

Employed expectant mothers in Thailand will now be granted a minimum of 98 days of maternity leave. 45 days out of these 98 days are paid. Whether the remaining days are paid for or not depends on the employer’s agreement with the pregnant employee.