Economy

FKE eyes cover for businesses in job loss insurance

Wednesday September 27 2023

The executive director and CEO of the Federation of Kenya Employers (FKE), Jacqueline Mugo. FILE PHOTO | NMG

Employers will push for a share of the proposed contributory fund aimed at cushioning workers affected by involuntary job losses to protect cash-strapped firms hit by economic hardship.

The Federation of Kenya Employers (FKE) said it would propose a clause to the Unemployment Insurance Authority Bill to have part of the fund bailing out firms hit by unforeseen economic crises such as Covid-19.

The cushion is expected to keep the hardest companies from going under by enabling them to keep workers on payroll until normalcy returns.

Read: Employers' headache as pay deductions cross two thirds

The Bill, sponsored by Ikolomani lawmaker Benard Shinali, seeks to create a fund that will offer a stipend for months to workers who lose jobs for reasons not of their making such as redundancies.

If it becomes law, salaried workers will be deducted three percent of their basic pay monthly, according to initial proposals by Mr Shinali, an amount which employers will match.

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The proposed State relief will also ensure that the affected employees and dependants continue to access medical cover for the duration of the cushion.

FKE, however, said giving cash to workers who lose jobs alone was not sustainable in a country where formal employment was increasingly thinning.

“Enterprises also need support during hard economic times. So as we think about employees, we should also think about ways of cushioning enterprises from collapse under the weight of taxes and levies,” FKE executive director Jacqueline Mugo said.

“Such [unemployment insurance] schemes have worked well in either developed or upper-middle-income countries, which have comprehensive social protection plans. The nine elements of Social Protection include unemployment support to reduce and prevent poverty, vulnerability, and social exclusion.”

The scheme being proposed by the employers [technically Employment Insurance Fund] in part reflects the German State-funded safety net known as Kurzarbeit, which keeps salaries flowing to workers even when their work has dried up.

The German scheme got renewed attention worldwide during the pandemic era when governments around the world grappled with the economic fallout that left millions jobless.

At the time, the European Commission used the German programme as a model for a regional effort to encourage workers to be furloughed, not sacked.

France, Italy, Belgium, and the Netherlands were among the European countries that allowed distressed companies to tap government funds to pay salaries when they had little or no income.

Read: Employers, workers oppose more taxes to fund unemployment cover

“These kinds of changes are best led by the relevant ministry which should ideally form a tripartite technical team to conduct an in-depth examination and analysis and thereafter propose the best way forward,” Ms Mugo said. “This is an important conversation given the harsh economic realities the country is facing".

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