Home Business Laid-off workers to get jobless pay for 6 months

Laid-off workers to get jobless pay for 6 months


Economy

Laid-off workers to get jobless pay for 6 months


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Labour Cabinet Secretary Simon Chelugui. PHOTO | LUCY WANJIRU | NMG

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Summary

  • The Ministry of Labour says workers will be required to contribute to the yet-to-be-formed Unemployment Insurance Fund (UIF).
  • Employees will contribute one percent of their pay that will be matched by employers towards the fund that aims at generating at least Sh45 billion annually.
  • The monthly stipend will be offered for six months in a period when the State hopes workers affected by job cuts would have tapped new work or entered business.

Salaried employees who become jobless will get a fraction of their pay for six months from a State-backed fund aimed at cushioning workers laid off or are unable to work due to illness.

The Ministry of Labour says workers will be required to contribute to the yet to be formed Unemployment Insurance Fund (UIF).

Employees will contribute one percent of their pay that will be matched by employers towards the fund that aims at generating at least Sh45 billion annually on implementation.

While offering relief to sacked workers, it looks set to add to the cost of doing business in an economic setting where employers pay mandatory fees monthly to staff health and pension schemes.

The monthly stipend will be offered for six months in a period when the State hopes workers affected by job cuts would have tapped new work or entered business.

“The reason for capping it (relief) for that period is because we don’t want people to sit and imagine that they are going to earn from that fund,” Labour Principal Secretary Peter Tum said.

“Within these six months, what we will be saying is that you will be actively seeking employment and re-skilling yourself.”

The fund is part of the post-Covid recovery blueprint to ease the pain of loss of income, put money in people’s pockets and spur demand for firms’ goods and services. The State targets implementing the fund within the next financial year starting July 2022.

Thousands of workers lost jobs amid the Covid-19 economic fallout that led to business closures and firms dipping into losses.

Young people were the hardest hit by the job cuts compared to their counterparts aged above 35 years. 

A hiring freeze on the back of sluggish corporate earnings is a major blow to jobseekers, especially the close to one million who graduate from various educational institutions every year.

The unemployment fund, to be managed by the Social Protection Department under the Labour ministry, mirrors that of South Africa — which has so far disbursed huge amounts of money to support of millions of workers and businesses affected by the vagaries of the Covid-19 pandemic.

The South African scheme, which was established in 2002, also involves employees contributing one percent of their pay which is matched up by employers.

South Africa had by last February disbursed 58.15 billion rand (Sh376.97 billion) through its Covid-19 Temporary Employer-Employee Relief Scheme (Covid-19 TERS) to help millions of workers hit by the national lockdowns to stem the spread of Covid.

The unemployment benefit ranges from 38 percent of income for high income earners to a ceiling of 60 percent for the lowest income earners, according to information on International Labour Organisation’s website. They are paid for a maximum period of 238 days (about eight months). 

It applies for those have been fired, retrenched or if their contracts have expired, but not those who resign, abscond duty or suspended.  

The Federation of Kenya Employers (FKE) wants the proposed fund to also cushion cash-strapped firms to enable them to keep workers on payroll during unforeseen crises until the economy stabilises.

“This is a timely and noble conversation given the impact Covid-19 continues to have on jobs, livelihoods and enterprises. However, we should bear in mind that Covid-19 has also impacted enterprises which are also in need of support,” FKE executive director Jacqueline Mugo told a recent forum on the UIF.

“Enterprises should not be left to their own fate. We need to build enterprise resilience and recovery at the same time if we are to absorb and retain our people in decent jobs.”

Ms Mugo says such schemes have worked well in either developed or upper middle-income countries, which have comprehensive social protection plans.

She reckons that low-income countries such as Kenya could struggle to sustain it.

The employers’ lobby says its research had shown that such a fund, supported by employers and employees, had not been “effective in economies with high unemployment and underemployment rates”.

The Labour ministry had initially targeted concluding stakeholder consultations by December, but now says they were likely to extend to end of this fiscal year in June 2022.

“We were working with the timeline of this calendar year because being contributory it’s something that we can domicile within the ministry and activate it through contribution provided that policy framework and stakeholder validation process is complete,” Mr Tum said. 

“But these are negotiations which should be handled carefully and timelines could keep changing. Our projection is that we will be able to execute this within this financial year.”
 



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