Employers oppose plan to pay workers job loss cash

Employers have opposed plans to offer jobless claims to laid-off workers through an unemployment contributory fund and instead want firms paid to keep redundant employees on the payroll.

Federation of Kenya Employers (FKE) argues giving cash to workers who lose jobs was not sustainable in a country where formal employment opportunities were increasingly thinning, pushing those squeezed out of employment into informal ventures.

The lobby group is instead proposing the creation of an Employment Insurance Fund, which will give cash-strapped firms funds to enable them to keep workers on payroll during unforeseen crises until the economy stabilises.

Such a scheme, the FKE argues, will enable struggling firms to remain productive while the worker maintains a disposable income, supporting the economy through a crisis.

In a blueprint labelled Post Covid-19 Economic Recovery Strategy 2020-2022, the Treasury seeks to create an Unemployment Insurance Fund (UIF), which would give short-term relief to workers who lose their jobs due to unforeseen crises such as the Covid-19 pandemic.

“Unemployment Insurance Fund works as a stop-gap measure in instances where a worker is in transition or search for employment. In Kenya, what we are facing is dwindling employment opportunities, which is pushing people into informal work,” FKE executive director Jacqueline Mugo told the Business Daily.

“On average people are staying out of employment for seven years. Paying funds for three months, for example, will not help.” The proposed UIF — where employees contribute one percent of their pay which is matched up by employers — is part of the Treasury’s post-Covid recovery plan.

The Treasury’s proposal for UIF is a reaction to Covid-19-linked economic fallout, which left nearly two million workers in Kenya jobless after firms were forced to scale down operations or shut down at the height of containment measures in April-June period.

The economy sank into a trough in that quarter, with the gross domestic product — a measure of economic output —contracting 5.7 per cent.

“Although the concept looks good on paper, the challenge is financing, providing adequate benefits and sustaining the Fund,” Ms Mugo said. “Kenya need Employment Insurance Fund to provide for wage subsidies that spur enterprise development and job creation.”

Going by last year’s wage bill of Sh2.28 trillion for the nearly 2.93 million formal sector employees — both in public and private sector — the size of the fund could hit Sh22.79 billion in a year or Sh1.9 billion a month.

The proposal for unemployment scheme was first fronted by the Kenya Association of Manufacturers and a consultancy firm which in September rooted for a scheme to enable workers either work part-time or remain “formally with the business even if not working at all to ensure quick resumption of activity once normalcy returns”.