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Sri Lanka should move towards income protection and unemployment insurance: IPS Researcher

ECONOMYNEXT – Sri Lanka should move towards income protection and avoid restrictive regulations that backfire on workers and look for ways to set up an unemployment insurance fund, with a Coronavirus crisis showing the need, a researcher at a Colombo-based think tank has said.

Sri Lanka’s has seen job losses amid a Coronavirus pandemic. More than 1.7 million temporary workers in the private sector are at risk of losing their jobs or wage cuts. But there was no income protection for people who lose jobs.

“This crisis shows the importance of increasing the flexibility of the labour market and the need to move towards income protection, rather than job protection,” Priyanka Jayawardena is a Research Economist at the Labour, Employment and Human Resource Development at the Institute of Policy Studies in Colombo said in paper.

“The government could facilitate permanent employment in the private sector by introducing strategic protective measures to safeguard workers’ rights and benefits, such as unemployment insurance and universal pension schemes.

Sri Lanka’s current framework is aimed providing employment security, she said.

In Sri Lanka it is difficult lay off workers has the highest severance paying country in the work for redundancy dismissal, the paper said.

“Excessively restrictive legislation discourages formal job creation and fail to provide real protection, as employers find loopholes and ways around the rules,” Jayawardena said.

When employers get temporary workers they lose the benefits and rights granted to permanent employees, she said.

Unemployment insurance and a universal pension scheme would help workers, she said.

One possibility was to convert the existing Employees Trust Fund, where a 3 percent contribution is made by the employer. When a person leaves employment, the worker can withdraw the funds under a certain time frame current rules.

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“Given that the Employees’ Trust Fund (ETF) provides some income support when unemployed, the government can consider converting the ETF to a proper UI scheme,” Jayawardene said.

“The ETF can be transformed into an UI scheme for all categories of workers, based on a fair sharing of the cost between employers, workers, and the government.

“This is an essential step towards promoting decent work and supporting transitions from the informal to the formal economy, and a job-rich recovery in Sri Lanka.”

She said data from the state statistics office showed that the unemployment rose by about 100,000 in the first quarter of 2020.

“It also indicates more job losses in the coming months, whilethose who are unemployed will be desperate to find new jobs to survive in this time of uncertainty,” Jayewadene said.

“With the existing social security system, Sri Lanka faces challenges in meeting the social security needs of a large and growing informal sector.

“A social insurance scheme could be introduced to extend coverage to those currently ineligible for any existing scheme.

“It is necessary to ensure adequate social protection coverage for all informal workers, temporary workers, daily waged workers, and self-employed workers. Such a social insurance scheme will safeguard those who have lost livelihoods in a crisis.”

In countries with social security, workers contribute to a fund, from which payments are made while the person seeks a second job. (Colombo/Sept09/2020)