Cabinet has approved a lifeline to ensure the continued viability of the National Insurance Scheme (NIS)-administered Unemployment Fund which has been under financial pressure.
Minister of Labour and Social Security Dr Esther Byer today announced that Cabinet had accepted the National Insurance Board’s recommendation to suspend employers’ contributions to the Severance Fund for two years and increase contributions to the Unemployment Fund by the same amount for a similar period.
“The relevant legislative changes will be made in Parliament shortly and the policy implemented,” she said.
Cabinet has also agreed to provide the Fund with a further cash injection of $12.5 million.
“These measures will shore up the Fund and ensure that all Barbadians who have contributed and qualify for unemployment benefits will have protection during periods of unemployment,” Byer said.
She stressed that other social security benefits – sickness and maternity, pensions, employment injury and severance – had not been affected.
“Additionally, the investment portfolio is also sound, as investments internationally, regionally and locally are performing satisfactorily,” the Minister added.
She recalled that at the recently concluded 14th Actuarial Review, the consultant actuary noted that while the NIS had two funds to deal with periods of increasing unemployment, one of them – the Unemployment Fund – was experiencing deficits while the other, the Severance Fund, continued to generate surpluses.
The Unemployment Fund has faced rising payouts to people on the breadline, but declining contributions.
“It was therefore recommended that in order to reduce the draw-down of the investment assets of the Unemployment Fund and shore up the Fund, a sum of money be transferred to it from the Severance Fund,” the Labour Minister said.
She said the NIS Board sought an opinion from the Solicitor General on the legality of such a transfer and it was advised that such an action should not be undertaken.
As a result, Minister Byer pointed out, the Board recommended that employers’ contribution to the Severance Fund be suspended.
“This was viewed as a better option than increasing contributions by employees and employers to the Unemployment Fund, especially at this difficult time,” she said.
Byer also sought to assure Barbadians that the National Insurance Fund and Severance Fund continued to perform “extremely well” and were generating major surpluses.
“Over the 2009 to 2013 period, the National Insurance Fund generated a combined surplus of over $1.15 billion, and the Severance Fund a combined surplus of over $105 million,” she said.