The New Today


Consign NIS unemployment benefit into a special fund

This latest string of public articles delves into the ‘capacity and seriousness’ of the National Insurance Scheme (NIS) and by extension the Government of Grenada, in implementing a ‘successful, satisfying and significant’ permanent Unemployment Assistance Benefit Scheme.

The ‘reasonableness and usefulness’ for such an initiative is unquestionable. The pursuit though for full ‘information and disclosure’ about the Scheme, and thereby also prompting the ‘attention and preoccupation’ of the citizens to understand what is involved and what should be expected, is relevant.

It is indeed relevant, especially when considering the manner by which the Scheme has been ventured and the prevailing conditions about the national economy, the labour market and the standard of living of the people. Furthermore; there is the need for clarifications about the ‘confusing and conflicting’ statements by the officials of the Government and the NIS about the Scheme.

In attempting to conclude this series on the Scheme, it is the considered position that the undertaking is nothing more than a taxation avenue to ease the Government in rendering ‘ready’ welfare relief to unemployed individuals in times of critical crisis.

The NIS advises in a dispatch on 01 March 2023 that the commencement of the Scheme takes effect 01 May 2023, and will be “funded with a contribution rate of 1% shared equally between employee and employer …. NIS contribution rate will be 6.5% for employers and 5.5% for employees, bringing the total to 12% effective February 1, 2023”.

The 1% increase in the contribution rate to NIS for funding the Scheme was raised by the Social Security Minister with the responsibility for the NIS, Mr. Philip Telesford, during a Post Cabinet Press Briefing on 24 January 2023.

What are some of the related areas to be cautious about, in protecting the interest of the employees? The ‘safety and sustainability’ of the Scheme is critical.  With this understanding then, NIS should see it appropriate to assure the citizens that it has undergone drastic improvements in its administrative operations, especially in terms of the required integrity towards ‘compliance and surveillance’ regarding the deductions and recordings of the contributions.

The rippling effects of the increase in the contribution rate should not be escaped or be ignored, and proper provisions should have been prepared to deal with such as anticipated. As is typical with increases in taxations; the percentage contribution by employers on behalf of employees will be recouped with increases in the prices of the goods and services offered, and with increases in short-term contractual employments having the employees being responsible for paying the total contribution rate.

There are many grey areas about the Scheme, as the most recent internet-circulated article “Grenada Unemployment Benefit Scheme Commences Scarily” highlights. The NIS’ March dispatch seems to present the “key principles” of the Scheme; and a ‘clear and comprehensive’ legislative framework should be promoted soon.

This framework should also speak about the safety and sustainability of the Scheme. By ‘goodwill and accountability’, the NIS should prepare also to tell the citizens about the ‘foundation size’ of the pool for the “unemployment benefit”, which has been amassed from the 1% of the earnings of registered employees who have contributed over the months of February, March and April.

It would also be of great interest for the citizens to know of any intent by Government to match or complement this initial sum, in setting a ‘sound start-up’ for the Scheme, as well as of the minimum starting amount as recommended by the Actuary.

Should this 1% contribution-collection be risked with the pension contributions, and/or should the financial accounting system for the Scheme be mingled with the operational funds of NIS?  Would the funds for the Scheme be in the custody of an escrow, separated from the National Insurance Fund and outside of the ‘reach and influence’ of the Government?

During the 13 September 2022 Post-Cabinet Press Briefing of the 23 June 2022 administration of the National Democratic Congress (NDC), Prime Minister Dickon Mitchell stirred the fears of the Grenadian people, by stating that the 04 April 1983 NIS is “staring bankruptcy in its face if we (‘Government’) do not take the necessary corrective measures to ensure that the fund (‘National Insurance Fund’) is put on a sustainable path”.

Related:  Grenada transforming its identity and legacy at Golden Jubilee - Part II

In the 2023 National Budget Statement read on 05 December 2022, Mr. Mitchell specifies thus; “the NIS will be bankrupt in the next 10-12 years …. Therefore, we will implement the following recommendations of the Actuary next year ….

  1. Increase the pensionable age on a phased basis from 60 to 65, starting with a move to 61 by January 2024.
  2. Gradually increase the contribution rate …. from its current level of 11% to 16 % by 2031, starting with an increase in 2023 to 6.5% and 5.5%”, a 0.5% increase for employers and employees, respectively”.

About or on 22 February 2023, NIS Director Dorsett Cromwell relates to the public in a similar sense as the Prime Minister; thus; “…. the current contribution rate cannot keep the NIS afloat for much longer”.

Mr. Cromwell also displays the pattern of the increases in the contribution rate and the pensionable age, with ‘reassuring rationales’ for doing so, including changes to the range of benefits and the amounts for some benefits.

By contextualizing the official reports on the state and operations of the NIS, with the introduction of the Scheme, the previous circulated two-part article “More Pressure On Grenada NIS By New NDC Government!“ explores pertinent concerns and generates stimulating inputs.

Although those concerns may be taken as ‘worthless and irrelevant’, with the apparent favorable review and support by the Actuary for the Scheme, suspicions prevail because of the lack of transparency and openness on the part of NIS.

Further considering that the ‘intent and extent‘ of the Scheme by NIS, is not limited to rendering assistance benefits for involuntary unemployment in the “event of a natural disaster, pandemic, or other such shocks”, more ‘attention and credit’ should be given to the pivotal concern, as reiterated thus: “what mathematical model, risk analysis and regulatory reform have been applied for successfully meeting the overall demands on NIS’s funds, when considering the scary financial condition painted about NIS, the past experiences of NIS with lost investments, the old areas of contention for the life of NIS, as well as the introduction of any additional ‘new’ benefits to be serviced by NIS?”

It is indeed awkward to be ‘conclusive and correct’ about the real purpose for embarking on the Scheme; as it can be a ‘false pretense’ to boost the reserves of the NIS, for saving it from the expressed imminent bankruptcy.

The NIS’ communique also advises that “workers in the private sector, public sector, statutory bodies, work permit holders, and the self-employed are eligible for this benefit …. while many are eligible for this benefit, some conditions must be met to qualify”.

Again, what are some of the areas to be cautious about in this case, particularly on the issue of equity, since it appears that it will be mandatory for all employees to contribute to the Scheme?

How ‘stringent, tedious and burdensome’ would be the qualifying factors, especially for the self-employed? Would it be fair to have employees in ‘permanent or established or guaranteed’ posts contribute, but with no returns? Should employees who are dismissed from employments due to political and/or industrial unrest, or by the employees defending constitutional rights such as with the COVID-19 vaccination episode, be disqualified for the benefit?

The Grenada’s 1974 Independence Constitution provides for the Protection of Fundamental Rights and Freedoms, including “the right to work” which should be within the declaration of the International Labour Organisation on Fundamental Principles and Rights at Work.

In this regard, the Government has a fiduciary responsibility to generate and / or to facilitate ‘decent’ employments for its citizens; and this should also imply that in the absence of employment opportunities and / or employment losses, the Government ought to provide subsistence allowances to all ‘employable’ individuals.

In the broadest sense; employment is essential for the political stability and economic development of the nation, as well as for the existence and prosperity of the citizens.

This accounts for the technical and financial assistances countries receive from international institutions, such as the World Bank approving US$25 million for Grenada’s COVID-19 Crisis Response and Fiscal Management Development Policy Credit.

J.K. Roberts