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Economy

KAM pushes for creation of unemployment fund

KAM chief executive Phyllis Wakiaga
KAM chief executive Phyllis Wakiaga. FILE PHOTO | NMG  

Manufacturers have proposed the creation of an unemployment insurance fund to offer relief to workers who lose jobs to unforeseen crises such as the coronavirus pandemic.

In a policy proposal, the Kenya Association of Manufacturers (KAM) says such a scheme will see workers who are involuntarily forced out of work continue earning some income for the time they are unemployed or work part-time.

The insurance scheme could be funded jointly by the workers and employers akin to contributions to the National Social Security Fund (NSSF) or fully by the State.

The policy toolkit, drafted by KAM jointly with consultancy firm KPMG, and offered to the Treasury and Labour ministry comes in the wake of Covid-19, which has triggered jobs cuts and unpaid leave.

“[They] should set up an unemployment insurance fund to pay benefits to covered workers who become involuntarily unemployed and meet specified eligibility requirements to cushion them in times of unemployment,” say KAM and KPMG researchers in the document.

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About 1.72 million workers lost jobs in three months to June when Kenya imposed coronavirus-induced lockdown that included restrictions on travel, mass gathering and a dusk-to-dawn curfew.

Data from the Kenya National Bureau of Statistics (KNBS) shows the number of people in employment fell to 15.87 million between April and end of June compared to 17.59 million the previous quarter.

KPMG and KAM suggest the proposed fund should be designed to allow workers to 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”.

KAM lead researcher Simon Githuku said Kenya could borrow from Germany's and France’s frameworks in setting up such a scheme.

“This is abroad policy proposal that will require more parties to come up with suggestions on how it can be designed. It could be the employee contributing and the money is put in a kitty like an insurance scheme,” Dr Githuku told the Business Daily.

“If you reach retirement age and a pandemic or any other major crisis has not happened, it becomes part of your pension.”

The state-funded German safety net known as Kurzarbeit, which keeps salaries flowing to workers even when their work has dried up, is getting renewed attention as governments around the world grapple with the economic fallout of the coronavirus pandemic.

The European Commission is using the German programme as a model for a regional effort to encourage that workers are furloughed, not sacked.

France, Italy, Belgium, and the Netherlands are among other European countries that allow distressed companies to tap government funds to pay salaries in periods when they have little or no income.

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