Session 9 – Unemployment insurance Celine Peyron Bista ILO, 2013

Content of the presentation ILO’s standards on unemployment protection What are the main challenges when introducing UI? How to set parameters? Lessons learnt

Protection against Unemployment in ILO Standards (up-to-date) R.176: Employment Promotion and Protection against Unemployment Recommendation, 1988 C.168: Convention concerning Employment Promotion and Protection against Unemployment, 1988 C.102: Convention concerning Minimum Standards of Social Security, 1952 (Part IV – Unemployment Benefit) R.202: Recommendation concerning national floors of social protection, R.202

Major Ideas around which the Convention No. 168 was built (1988)  Under discussion since 1972  Economic growth : best cure against unemployment with a flexible response to change; lead to creation and promotion of all forms of productive and freely chosen employment including small undertakings, cooperatives, self- employment and local initiatives for employment;  Social security = a means to promote employment and increase capability & employability (concept recalled by the SPF Recommendation)  Need for active coordination, integration and consolidation of the different means (employment assistance and economic support) serving the goal of employment promotion  By establishing a “system of protection against unemployment”.

Objective: To protect workers and their family against loss of employment and income Increase employability: To facilitate return to employment as soon as possible (including re- training) Income security: To protect the unemployed and their families against poverty DOUBLE OBJECTIVE MEASURES UI Benefits + ALMPs

6 The ILO’s Perspective The Provision of Unemployment Benefits on the basis of – Social Insurance or non-contributory schemes, – Periodical payments, and – Conditioned to active search of work. is optimal in most cases, for reasons including: – It is better-suited to ensuring the rights of workers: allows for income support even with insolvent employers (vs. severance payment); – The social insurance mechanism allows for “pooling” risks and costs (small/big enterprises, declining/raising sectors, rich/poor regions, etc…) (vs. individual saving accounts)

Major challenges to the introduction of unemployment insurance Reluctance by employers and employees, society and government. Why?  Severance pay, commonly in force in the region Employers: double payment Workers: two different compensations  Limited coverage

Workers & families Social dialogue- who gains? Employers Government Reduce hardship and poverty Minimum income replacement secured Better chance of finding suitable job Avoid financial difficulties that can lead to family conflicts Terminations easier to accept by employers and workers “ Sheltered ” workforce during temporary layoffs (higher productivity) More stable economic and business environment Less pressure in case of bankruptcy Stimulating consumer spending (reduced need for savings, ensure minimum income during recession) Reduce costs of other public assistance schemes Reduce need for ad hoc interventions Social stability: minimize unrest, delinquency and crime

How to set the parameters? It exits as many design options as schemes implemented throughout the world (78 countries) Two steps to set the parameters: 1.Social dialogue: consensus on broad scenarios 2.Feasibility study: actuarial, institutional and legal assessments

Parameters included in UI laws of: Lao PDRMyanmarIndonesia Coverage Benefit Contribution Qualifying period Severance pay

Examples of Thailand and Viet Nam ThailandViet Nam CoverageAll private sectorAll private employees > 12 months contract Enterprises> 10 employees All residentsNationals Benefit50% (involuntary) 30% (voluntary) 60% 6 months (invol.) 3 months (vol) From 3 months, up to 12 months ESES, UI allowance, HI card ContributionE=W=0.5%; G=0.25%3% (E/W/G) Qualifying period6 months/15 months12 months / 24 months Severance payMaintainedPhased out C102C168 < 50% of all employees < 85% +pu. employees & apprentices Coverage All residents Periodical and temporary Benefits 45%50% 13 weeks/12 months 26 weeks/unemploy ment period or 39 weeks/24 months N/ASuspension during UB or reduction Severance Pay

Examples of Thailand and Viet Nam ThailandViet Nam CoverageAll private sectorAll private employees > 12 months contract Enterprises> 10 employees All residentsNationals Benefit50% (involuntary) 30% (voluntary) 60% 6 months (invol.) 3 months (vol) From 3 months, up to 12 months ESES, UI allowance, HI card ContributionE=W=0.5%; G=0.25%3% (E/W/G) Qualifying period6 months/15 months12 months / 24 months Severance payMaintainedPhased out C102C168 < 50% of all employees < 85% +pu. employees & apprentices Coverage All residents Periodical and temporary Benefits 45%50% 13 weeks/12 months 26 weeks/unemploy ment period or 39 weeks/24 months N/ASuspension during UB or reduction Severance Pay

Institutional arrangements Check-list of functions Mapping of existing institutions Inst. 1Inst. 2Inst. 3… Policy making Fund Administration Collection of contributions Registration of claimants Claims processing Employment services Training counseling …

Legal implications Introduction of UI, may have implications also on other Laws:  Reasons for termination  Termination for “just cause”  Suitable employment

Next step towards implementation Establishing an implementation plan: 1.Developing UI Decrees, Prakash, Circulars, … 2.Developing the manual of procedures 3.Recruiting and training staff in the different institutions 4.Designing and implementation information campaign (general public, Employers and Workers) 5.….

Lessons learnt (Review of 14 UI/EI schemes in Asia and worldwide) Design phase should not neglect social dialogue, Parameters determined by actuarial study, Fixed by Decree or Prakas (to allow certain flexibility), Scheme kept rather simple scheme, Success relies on: - Good coordination among policy makers (SS, DOE) - Performance and service quality of public employment services (one-stop-shop).

Training course on unemployment protection 7-16 Oct. 2013, Bangkokg Design, implementation and monitoring of unemployment protection combining with ALMPs Learning from ASEAN and international practices on UI/EI, measures for non- covered workers, and youth support Methodology to design and cost unemployment protection measures ASEAN experts network Training and guidelines manual

Thank you! Celine Peyron Bista