Regulatory roundup Q3 2024: Key updates for global employers

Staying on top of employment compliance across borders is a challenge. With regulations continuously evolving, companies operating globally face the complex task of monitoring updates across multiple jurisdictions.

To simplify things, at the start of every quarter, we will be posting a roundup of recent changes AND upcoming developments across the ever-expanding list of countries we serve at Boundless.

By outlining these changes in one place, we hope to help you benchmark your compliance infrastructure against the latest local standards. Consider this both an informational resource and a prompt to take action where needed. Here is everything to note from Q3 and Q4 of 2024.

Ireland is launching a new pension auto-enrolment scheme early next year. This scheme will automatically enrol individuals who meet certain criteria: they must not currently have a pension scheme, earn over €20,000 annually, and be aged between 23 and 60.

A significant advantage for employees is the contribution structure. For every €3 an employee contributes, their employer will also contribute €3, and the State will add an additional €1. This means a total of €7 will be added to the employee’s pension account for every €3 they put in. (Employees have the option to opt out after six months.)

This auto-enrolment scheme is mandatory for all employers in Ireland. To comply with the new legislation, employers need to take the following steps:

• Update payroll systems: Ensure payroll systems can handle the necessary enrollment instructions, accurately calculate contributions, and make payments to the National Automatic Enrolment Retirement Savings Authority (NAERSA).
• Contribute to employee pensions: Employers are required to match employee contributions up to a maximum of 6% of their earnings, with an earnings threshold of €80,000. These employer contributions are tax-deductible.
• Understand compliance requirements: It’s crucial that employers familiarise themselves with the details of the scheme and their obligations. Failure to comply can result in penalties, including fines and back payments with interest.

The Irish government has published a comprehensive employer guide that outlines the actions, costs, and terms of the auto-enrolment scheme.

Ireland’s Budget 2025 introduces several key measures impacting businesses, including:

• Minimum wage increase: The national minimum wage rises to €13.50 per hour.
• Enhanced small benefit exemption: Employers can now provide up to €1,500 in non-cash benefits to employees annually, tax-free.
• Company car benefits: A universal €10,000 relief on the Original Market Value (OMV) of company cars is extended for another year. Employees with electric company vehicles benefit from a total benefits-in-kind relief of €45,000, with a new exemption introduced for home electric vehicle chargers.
• Capital gains tax: Changes include an increased age limit for retirement relief, a clawback period for disposals over €10 million, and an increased lifetime limit for investors in innovative start-ups.
• R&D tax credit: The first-year payment threshold for the R&D tax credit will increase to €75,000, aimed at supporting smaller R&D projects.
• Support extensions: The Employment Investment Incentive, Start-Up Relief for Entrepreneurs, and Start-Up Capital Incentive are extended to the end of 2026. The Employment Investment Incentive relief limit doubles to €1 million, and the Start-Up Relief for Entrepreneurs increases to €980,000.
• VAT registration thresholds: The thresholds for VAT registration increase to €85,000 for goods and €42,500 for services.
• National training fund: The surplus in the National Training Fund will be used to fund initiatives in healthcare, veterinary, PhD stipends, and craft apprenticeships.

This budget introduces a range of changes for businesses in Ireland, with a focus on supporting innovation, start-ups, and employee benefits, while also increasing the minimum wage and adjusting tax regulations. Employers should familiarise themselves with these changes to ensure compliance and leverage new opportunities.

Two recent Workplace Relations Commission (WRC) cases in Ireland highlight the importance of correctly determining employment status. These cases applied the new five-step test established by the Supreme Court in 2023 to determine whether individuals are employees or independent contractors.

The Supreme Court ruling in Revenue Commissioner v Karshan (Midlands) Ltd t/a Domino’s Pizza [2023] IESC 24 emphasised that the level of control exercised over the individual and the reality of the working relationship are key factors in determining employment status. This means that businesses need to carefully review their arrangements with contractors, especially where those individuals provide personal services and the business exerts significant control over their work.

• Level of control is key: The degree of control the business has over the individual is a crucial factor in determining employment status.
• Personal service: If the individual is required to perform the services personally, this points towards an employment relationship.
• Contract wording is not decisive: The actual working relationship will be scrutinised, even if the contract states that the individual is an independent contractor.
• Review existing arrangements: Businesses should review their existing contracts with independent contractors to ensure they accurately reflect the working relationship and comply with the new test.
• Misclassification risks: Misclassifying employees as independent contractors can lead to significant financial penalties and legal challenges.

The Dutch government recently released its budget proposals for 2025, with a focus on creating a stable and predictable tax environment to attract multinational companies. Several key changes are expected to impact businesses operating in the Netherlands:

• 30% facility for expatriates: The proposed phase-out of the 30% tax facility for expatriates will be reversed. Instead, the 30% rate will be maintained for 2025 and 2026, and then reduced to 27% from 2027 onwards. The 30% facility is a tax advantage for certain expatriate employees working in the Netherlands, allowing them to receive 30% of their salary tax-free to cover the extra costs of living abroad.
• Conditional withholding tax (CWHT): The definition of a “cooperating group” for CWHT purposes will be amended to reduce uncertainty and clarify when the tax applies to dividend, interest, and royalty payments made to related entities in low-tax jurisdictions.
• Earnings stripping rule: The maximum interest deduction will be increased from 20% to 25% of fiscal EBITDA (earnings before interest, taxes, depreciation, and amortisation), providing some relief for businesses with significant interest expenses.
• Dividend tax repurchase facility: The planned abolition of the dividend withholding tax exemption on certain share buyback schemes will be reversed, maintaining this facility for Dutch-listed entities.
• Branch exemption: The branch exemption will be clarified to prevent double taxation for disregarded permanent establishments, ensuring that profits are exempt if they are subject to a profit-based tax in the foreign jurisdiction.

New Zealand is set to introduce a new “Gateway Test” to provide clearer guidelines for businesses when determining worker classification as independent contractors or employees. This change, expected to be part of the Employment Relations Amendment Bill introduced next year, aims to reduce ambiguity and potential misclassification.

What is the “Gateway Test”?

The Gateway Test outlines four criteria that must all be met for a worker to be considered an independent contractor:

• Written agreement: A written agreement explicitly stating the worker is an independent contractor.
• Non-exclusive work: The worker can work for other businesses, including competitors.
• Work flexibility: The worker has control over their hours and can subcontract work.
• Right to decline tasks: The worker can decline additional tasks without contract termination.

If any of these criteria are not met, the existing multi-factor tests will be used to determine the worker’s status.

This new test offers clarity but also requires businesses to review their current contractor agreements. Industries heavily reliant on contractors, such as technology and the gig economy, will need to ensure their arrangements align with the new criteria. For example, businesses must ensure contractors are not restricted from working with competitors and have genuine flexibility in their work arrangements.

While the changes are still under development, businesses can proactively prepare by:

• Auditing existing contractor agreements: Review contracts for clauses that may contradict the Gateway Test criteria.
• Assessing flexibility policies: Ensure contractors have genuine flexibility and are not treated like employees.
• Seeking legal guidance: Consult with legal professionals to ensure compliance with the new test and existing employment law.

Portugal has introduced new personal income tax (IRS) withholding tables, effective from September 2024. These tables incorporate changes to the tax code, including lower rates for the first six tax brackets, an updated specific deduction, and adjustments to the minimum tax.

To accommodate these changes, two tax models will be applied: one with lower rates for September and October, and another for the remaining months of the year. The initial lower rates aim to compensate workers and pensioners for the tax withheld between January and August.

This may result in a temporary increase in take-home pay for many individuals in September and October. However, employers must ensure they adjust their payroll systems to reflect the new tables and deduct the appropriate amount of tax in subsequent months to avoid discrepancies at the end of the year.

Portugal has introduced new personal income tax (IRS) withholding tables, effective from September 2024. These tables incorporate changes to the tax code, including lower rates for the first six tax brackets, an updated specific deduction, and adjustments to the minimum tax.

To accommodate these changes, two tax models will be applied: one with lower rates for September and October, and another for the remaining months of the year. The initial lower rates aim to compensate workers and pensioners for the tax withheld between January and August.

This may result in a temporary increase in take-home pay for many individuals in September and October. However, employers must ensure they adjust their payroll systems to reflect the new tables and deduct the appropriate amount of tax in subsequent months to avoid discrepancies at the end of the year.

Portugal is considering a new tax regime aimed at attracting and retaining young professionals. The proposed “IRS Jovem” would significantly reduce the income tax rate for individuals under 35 years old. If approved, those earning up to €81,199 annually would face a maximum tax rate of 15% on their employment income.

This change could make Portugal an even more attractive destination for young workers and entrepreneurs. The proposal is currently under discussion in Parliament, and if approved, the new regime would come into effect on January 1, 2025.

This month, the Worker Protection (Amendment of Equality Act 2010) Bill will boost the protection workers have against sexual harassment. This new law requires employers to take “reasonable steps” to prevent sexual harassment from occurring, holding them proactively accountable for fostering a safe and respectful work environment. If an Employment Tribunal finds that an employer failed to meet this duty, it can increase the compensation awarded to the employee by up to 25%.

This preventative duty is comprehensive, requiring employers to take steps to prevent sexual harassment from any source, including colleagues and third parties such as customers, clients, or members of the public.

While the legislation doesn’t precisely define “reasonable steps,” the Equality and Human Rights Commission (EHRC) has published guidance to help employers understand their obligations. Some examples of reasonable steps include:

• Implementing a robust Anti-sexual harassment policy: This policy should clearly define unacceptable conduct, outline reporting procedures, and emphasise the company’s zero-tolerance approach to sexual harassment. We recommend a stand-alone policy in addition to any general anti-bullying and harassment policies.
• Providing mandatory training: All staff should receive training on what constitutes sexual harassment, how to report it, and the support available to victims. Managers should receive additional training on handling complaints effectively.
• Encouraging reporting: Establish clear and accessible reporting mechanisms that allow employees to raise concerns comfortably and confidentially.
• Fostering a positive workplace culture: Cultivate a culture of respect where sexual harassment is not tolerated. This requires strong leadership and clear communication from senior management.
• Conducting risk assessments: Regularly assess the risk of sexual harassment, considering factors like workplace layout, working arrangements, and interactions with third parties.
• Consulting with employees: Engage with employees and their representatives (e.g., unions) to discuss preventative measures and gather feedback on the effectiveness of existing policies.
• Appointing workplace champions: Identify individuals within the workforce who can provide support and guidance to those who experience or witness sexual harassment.
• Taking measures to prevent third-party harassment: Implement strategies to minimise the risk of sexual harassment from customers, clients, or other third parties.
• Monitoring complaints and outcomes: Track all complaints, ensuring they are thoroughly investigated and resolved. Monitor the progress of employees who report harassment to prevent victimisation.

The Paternity Leave (Bereavement) Act has been passed, introducing important changes to the Employment Rights Act 1996. This new law guarantees that paternity leave (PL) is available to bereaved partners from the very first day of their employment, regardless of how long they’ve been with their employer.

As such, the Act eliminates the prerequisite of a minimum 26 weeks of employment for a mourning partner to access PL if a newborn’s mother passes away. This right also extends to cases of adoption and surrogacy, and bereaved fathers/partners can now take PL even after having utilised shared parental leave.