Every year the European Union labor laws change and 2018 continues the trend. For an overview and insight into key changes that will impact companies who employ EU citizens, we spent some time with industry experts Ragu Bhargava, Co-Founder and CEO of Global Upside, and Gita Bhargava, Co-Founder and COO of Mihi. Both Global Upside and Mihi make it their business to be on top of labor laws around the world to help their customers maintain compliance, keep employees happy, and manage their costs.
In Part 1, we reviewed key labor law changes for Germany, the UK, and France. In Part 2 of this series, we focus on Italy, Spain, the Netherlands, and Ireland. Here are some of the most noteworthy changes and proposed changes in HR and labor law we’d like to share for these additional countries.
As shared in Part 1, one of the most significant changes happening in the EU is pay equality is moving from the ‘morally right’ thing to do, to a legislated right for employees. Companies will need objective evidence that they are providing equitable pay to those of different genders in the same job. Human Resources will play an important role as they evaluate jobs, classes, and titles. They may even find themselves presenting to boards.
Another significant change to keep close track of is the EU’s General Data Privacy Regulation (GDPR), which will have sweeping implications when going into effect on 25 May 2018. There are also yearly changes in taxes that affect global payroll, so it’s important to understand which of those will affect your employees.
ITALY
Decree Regarding Freelancers and Smart Working
A new decree aiming to reform the labor law and practices was incorporated in Italy on 10 May 2017.
According to the new rule, the penalty payable in case of unfair termination increases with the length of service: 2 months’ salary per year of employment, with a minimum of 4 months and a maximum of 24 months. Also, both parties now know in advance what is the maximum possible risk (or opportunity) on termination: quick settlements are now much easier.
Law Changes Regarding Retirement Age
According to a decree, effective from 1 January 2019, the age requirement for receiving retirement benefits set up in the Italian legislation will increase by 5 months. The current retirement age in Italy is 66 years and 7 months for men, and 65 years and 7 months for women.
Social Security Contribution
Organizations that by 31 August 2018, will enter into company level agreements aiming for work-life balance can apply to the Social Security Institute (INPS) by 15 September 2018 for partial exemption from their social security contributions.
To get the benefit of this reduction, companies need to implement at least two of the following measures.
- Parental Benefits:
- providing or increasing parental or paternity leave;
- setting up nursery or kindergarten or leisure areas; and
- training courses for encouraging employees returning from maternity leave.
- Flexible Work: flexible or smart work hours and part-time work hours for employees.
- Company Welfare: welfare packages or services to benefit employees. For example, tie up with healthcare companies to provide healthcare facilities to employees.
2018 Workers’ Quota Decree Rolled Out
The government of Italy has published a decree containing a cap on the number of workers from outside the EEA allowed in the country. The announced cap is 30,850 workers.
The allocation of the quota is below.
- More than 50% of the quota are reserved for seasonal work (18,000 workers, up from 17,000 in 2017).
- A large portion of the remaining quotas are reserved for permit conversion (9,850 – down from 10,850 in 2017) to allow foreign nationals who already have a residence permit in Italy or the EU to change status.
- The remaining quotas are reserved for self-employed work (2,400 workers) and special categories (600 workers) of foreign nationals.
Whistleblowers
On 29 December 2017, new rules regulating whistleblowing in the workplace came into force. This is significant, as it is the first time in Italy that a law protects ‘whistleblowers’ from victimization at the hands of their employer. Important to note, employers are also required to preserve the anonymity of the employee.
SPAIN
The employment/labor law reforms in Spain are likely to revolve around the following areas:
- Treatment of permanent and temporary workers, along with severance entitlements
- Gender pay issues and equal pay rights, as in the rest of the EU
- Gita notes the requirement of tracking hours for full-time and part-time employees are changing. Record keeping will become important for full-time, as well as for part-time workers
- The EU trade secret directive offers a greater opportunity to protect trade secrets, especially for those companies that are proactive
- Of course, GDPR, effective 25 May 2018, also applies to companies in Spain or those doing business with or employing citizens of Spain
THE NETHERLANDS
Change in The Law of Terminations
On 10 October 2017, the Netherlands incorporated new changes in the Dutch Labor law. Following are some of the most important changes that will impact businesses.
Any Ground for Termination must be Sufficiently Substantiated
Partial substantiation of several termination grounds combined will not constitute a sufficiently substantiated ground for termination. The new government coalition is considering allowing several partially substantiated grounds together to be sufficient, though with a higher severance payout.
Extension of Statutory Severance Payment Entitlement
The existing law that an employee must be employed for a minimum of 2 years to be entitled to the statutory severance payment will lapse. This means that employees are entitled to the statutory severance payment from the beginning of their employment. In addition, the formula for the statutory severance payment will be amended in such a way that employees will no longer receive a higher severance after 10 years of employment.
Fixed-Term Employment Contracts – Extension of Maximum Period
The period after which successive fixed-term contracts will automatically change into an indefinite term contract will be extended from 2 years to 3 years.
Extension of the Probationary Period
For the first indefinite contract, the maximum probationary period will be extended from 2 months to 5 months. In the case of definite term contracts less than 2 years, the maximum probationary period will be for 1 month, which is no change. Definite contracts for 6 months or less may not be subject to any probationary period. For definite contracts of 2 years or longer, the maximum probationary period will increase from 2 months to 3 months.
New Partner Leave on Childbirth
Effective 1 January 2019, partner leave on childbirth has been extended to 5 days from 2 days of full pay, to be taken within four weeks. Also, entitlement to supplementary partner leave of 5 weeks will be introduced. This leave must be taken in the first 6 months after the childbirth. During the leave period, employees will receive an allowance from the Labour Office which will be 70% of the maximum daily wage.
Contract Rights for Zero Hour Work
Under specific circumstances, workers who work under a zero hours contract need not respond to a call for work immediately or within a certain timeframe. These workers will also be entitled to compensation if a shift gets cancelled.
Terminations
If an employer wishes to terminate an employment contract which has existed for two or more years, the employer must pay a mandatory transition fee. The amount they must pay depends on the employee’s age and length of service. This cap increased to €79,000 on 1 January 2018, up from €77,000.
Pensions
The State Pension Age increased to 66 years on 1 January 2018. It will gradually increase to 67 years and three months by 2023.
Data Privacy
Just like everywhere else, the EU GDPR will take effect in the Netherlands on 25 May 2018. It will replace the current Personal Data Protection Act. GDPR introduces stricter rules on processing personal data. The Dutch Implementation Act is still in discussion, but further developments on this are expected.
IRELAND
Irish law may see the following proposed changes in 2018.
Parental Leave Extension
There has been a proposal to extend parental leave from 18 to 26 weeks.
Code of Practice on Longer Working (Related to Retirement Age)
The Equality (Miscellaneous Provisions) Act 2015, effective 1 January 2016, amended the rules on mandatory retirement age and age discrimination. This has been supplemented by the recent Industrial Relations Act 1990 (Code of Practice on Longer Working) (Declaration) Order 2017, which provides guidance for employers, employees, and their representatives on the best principles and practices to follow between employers and employees as they approach retirement; this includes responding to requests to work beyond the retirement age in the employment concerned.
Therefore, while the right of employers to set a mandatory retirement age still exists, it is now only permitted if:
1. It is objectively and reasonably justified by a legitimate aim, and
2. the means of achieving that aim are appropriate and necessary.
- Minimum WageOn 1 January 2018, the minimum wage was increased from the existing €9.25 to €9.55.
Call for Pay Increases in Addition to Cost of Living Increases
A recent call from the Irish Congress of Trade Unions (ICTU) for pay increases of 3.1% this year in addition to cost of living increases related to housing and childcare cost has created concern in the business community.
For more updates on 2018 EU Labor Laws, read Part 1 of this blog series, covering Germany, France, and the UK.
About Our Experts
Ragu Bhargava is the Co-Founder and CEO of Global Upside. His mantra is “impossible is not in my vocabulary” and he has helped Global Upside’s clients successfully navigate some of trickiest business environments. Global Upside is a leader in helping companies transform their finance, accounting, and human resources functions in over 100 countries.
Gita Bhargava is the Co-Founder and COO of Mihi . With a 20-year track record of operational excellence and innovative problem solving, she led the vision and development of Mihi’s global human capital management software which automates attendance/ leave management and benefits administration globally, so companies stay compliant in 100+ countries. Under her leadership, Mihi is rapidly expanding into new companies, languages and countries worldwide.
Global Upside and Mihi care about employment law changes. They are a trusted service provider to their clients, who lean on them to stay out of trouble. Because they know when laws change, they can help their clients stay out of trouble. Also, since they are an advisor, they can help companies with the practical application of the changing laws. When clients call, they can understand the question, the situation, and the ultimate answer. They also proactively alert companies to upcoming law changes, such as changes to the minimum wage.
For more updates on EU Labor Law’s, read Part 1 in this blog series, where we cover France, Germany, and the UK.
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