Is it time to introduce unemployment insurance?

Business

An Hour Ago

During an interactive session at an industrial relations workshop, when the question of severance pay came up, a young entrepreneur asked if she was paying fair wages to an employee, then why did she have to plan for the significant “contingent liability” of severance pay for the future? The answer is, of course, because the law says you must.

And the next question inevitably was: “But why? If I have paid a fair wage, paid for the value of the work that was done, week by week, month by month, when the market changes, as it inevitably does, and I no longer need the worker, why do I have to pay the worker all over again? It is not fair!”

Firstly, we have to disabuse people of the belief that “life is supposed to be fair.” The Severance Pay Act was legislated so that people, who, having trained for and worked in one job to support themselves and a family, lose that job for whatever reason, will be given a chance to survive while they look for another means of support.

One of the objectives of a socialist philosophy is to ensure that all people in a society can survive decently whether they have a job or not.

That is why there are public hospitals, schools, transportation, security services, lighting, law enforcement, fire services, road maintenance etc.

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When we don’t get them to the standard we think we should be getting, we complain loudly and righteously. We must recognise how fortunate we are. But someone has to pay for them.

If we can’t do it ourselves, as individuals, we have to draw from our fellow citizens, so that the culture and community can survive.

We do that by contributing, each of us, our share in little bits. By paying taxes. Because very few of us can afford to maintain roads by ourselves or put out big fires, supply ourselves with water in the dry season or ensure that trash and sewage is removed, doctors are on standby in case we get hit and public health is maintained.

We each contribute according to our ability to make sure each of us can be supported equally according to our needs. Not our wants, but what we need to survive.

Well, that is the theory, anyway. The operative words are equal. And if you are lucky enough to live in a society that accepts that, laws get passed to ensure that that will happen.

One of those laws is the Severance Pay Act. It exists so that when a worker, through no fault of their own, loses one source of income, they will have enough income to survive until they can find another. It is not a guarantee, it is an opportunity.

Severance is paid by the employer for a limited period of time only after someone, who has worked for over a year and only if their old job is genuinely surplus to the employer’s needs.

The legislation that makes the payment mandatory also limits it and the wording is interestingly ambiguous.

It doesn’t specify what “surplus” means, but it does say it means the termination must be on the grounds of “redundancy” and that means “surplus for whatever cause.”

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It could mean that the employee was hired for a preordained length of time which could be seasonal, for example for a minimum of the three months before Christmas, but attracts severance pay liability only if that is for at least one hundred days each year, and they are knowingly hired for three consecutive seasons.

The act says “seasons” not three consecutive years, because there may be more than one such season in a year. For example, more than one harvest in a year for those working in horticultural endeavours or more than one religious festival for a faith-based organisation.

If the same person is hired in that position each time, they will be among the employees covered for the “contingent liability” of severance pay if they are made redundant for whatever reason.

In the agricultural industries, the reason could be drought or a fungus infection that the government suddenly declares the crop to be illegal.

The intention is that agricultural workers who have tied their lives to working on someone else’s land, when that work ceases should continue to have at least some income.

It is what a socialistic government does.

Severance pay is no longer payable, no matter how long someone has worked for the same organisation, if it closes down for good and ceases to operate.

Over the years there have been various arguments that this is also “unfair” but no one has come up with a remedy other than to demand the government “stand the bounce,” but they have not offered to put that into law unless it can seize the deceased’s assets and those are most often swallowed up in debt to a bank.

Also exempt from severance pay are, to quote section three, subsection (one) (e) of the Retrenchment and Severance Pay Act, “Workers employed on a specific fixed term basis or workers engaged to perform a specific task over an estimated period of time where these conditions are made known at the time of employment.”

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An example of this form of employment would be someone hired to be a caretaker over a property or an enterprise for four months every year while the owner or operator is out of the country looking for goods.

Severance pay may involve a not unsubstantial amount of money which is why it is called a “contingent liability.”

A theoretical example would be where a maintenance person is paid $2,000 a week and has been employed in this capacity continuously over the past 20 years. The employer decides to dispose of the asset to another person or organisation “for whatever cause,” as the act says.

This being TT, recently it may be due to criminal gangs menacing the industry or as has been revealed in the news lately, threats of kidnapping.

The amount of severance owed to the maintenance employee will be: where he has served the employer without a break in service for five years or more, in addition to his entitlement under section 18, subsection one, which is two weeks’ pay for each such year of service – two weeks at $2,000 multiplied by four years, which would amount to $8,000.

Then add on the second amount which would be three weeks at $3,000 basic salary multiplied by 16 years – $48,000. Adding the two figures the maintenance employee gets $56,000.

If my math is correct, sounds like a lot. But jobs like that for digitally unqualified people are scarce.

Is it enough to support them for the rest of their lives? Or pay for technical re-training?

Currency devalues by seven per cent a year and prices escalate by almost five per cent.

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The entrepreneur can’t afford it nor can the worker, not for long. Is it time to introduce unemployment insurance?