Social protection policy in the offing

Unemployment insurance and pension schemes for the private sector are among the six proposed schemes 

Security: A draft social protection policy to promote economic security for workforce in the private sector is being reviewed by the Gross National Happiness Commission.

The labour ministry’s policy proposes six social protection schemes, which include unemployment insurance, retirement scheme for the national workforce and pension schemes for the private sector among others. The formulation of this policy is one of the 11th Plan activities.

However, according to the draft policy, the labour ministry believes that the existing disparity in benefits among the civil servants and employees in the private sector is a major reason why workers entering the labour force prefer public sector jobs. The ministry also believes that it limits the private sector’s growth and their ability to generate more jobs.

One of the important schemes that will be adopted with the implementation of the new policy is the “unemployment insurance scheme” for private sector.

The scheme will be funded by “unemployment insurance tax” collected from employers in the private sector.

This is to provide support to workers who lose their jobs or are in between jobs according to the draft policy. It protects workers and their families from dramatic shocks to their living standard when the family’s bread-earner loses job.

The scheme is also expected to allow the worker the time necessary to consider several opportunities and choose the most suitable job. This, the ministry believes, will make the labour market more efficient and raise the productive capacity of workers.

All employers in the formal sector shall pay unemployment insurance taxes as a percentage of the wage or salary paid to his or her worker. The Parliament will determine the tax rate.

All proceeds from the Unemployment Insurance taxes shall be deposited in an Unemployment Insurance Fund, which will be managed by an autonomous trust fund. However, the compensation will be given to only those who lose their jobs through no fault of their own.

Another significant clause in the policy is that the National Workforce is proposed to be covered under the national pension and provident fund (NPPF). The National Workforce shall be entitled to all benefits and compensation as an employee of the government.

The labour ministry defines the national workforce as “those Bhutanese employed by government agencies for projects works executed directly by government agencies themselves.”

The policy also aims to establish a separate pension scheme for the private sector. This scheme shall be a fully funded defined-contribution scheme that provides retirement benefits through annuities. This pension scheme shall be funded by matching contributions from both the employer and employee.

Other schemes include Workers’ Compensation, Disability Insurance and Support for older persons living in poverty.

A strong social protection system requires a well-developed financial sector that is able to provide insurance and savings schemes designed to help workers protect themselves against unforeseen shocks and smooth consumption over their lifetime, states the draft policy.

Meanwhile, National Pension and Provident Fund’s (NPPF) Chief of Pension and PF, Sonam Yeshey, in a recent interview said the NPPF is working with the labour ministry to improve the social protection system in the country. He said there are about 52,000 provident and pension accounts with the NPPF and added that the new social protection policy is expected to cover all sections of workforce.

“Currently, there is reluctance from employers to implement PF,” he said. The NPPF’s current total fund is Nu 20B (billion), which is 15 percent of the country’s GDP. However, it covers only civil servants, corporate employees, and members of armed forces, he said.

According to the policy, only 14 percent of the labour force and only 6.64 percent of the total population is covered by the NPPF.

MB Subba

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