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Employment insurance, need of the hour

— PHOTO AFP

SUCCOUR FOR JOBLESS: A job fair sponsored by the Colorado state government in Denver. The U.S. Labour Department reported that new claims for unemployment benefits jumped to their highest level in seven years due to the slowing economy.

After receiving a pink slip, what next? How can a person, who loses his employment, eke out a living? This big question stares a middle-level employee, who, for reasons best known to his employer, gets a pink slip.

Five years on, a person evolves his own style of living; and if he finds himself at the crossroads, who comes to his rescue immediately?

We have imported a large part of American culture, including information technology, outsourcing, and high flying lifestyles, for good or bad.

What we haven’t is to show subsistence for those rendered jobless due to layoffs. The only answer is ‘employment insurance’ or ‘unemployment insurance’, whichever way it is called, like in the U.S. and Canada.

Laying off of employees has not been new, but it has become rampant what with the fluctuating financial health and fledgling projects of software companies.

The U.S. Department of Labour envisages contribution from employers and a small portion is borne by the employees, who fulfil the eligibility criteria, every month only to draw subsistence allowance for a specified period in the event of their losing a job, including due to a layoff.

Of course, the claimant of such an insurance has to establish that he/she lost the job due to lack of availability of work and hence the layoff. Even if anybody is shown the door due to underperformance also, most of them manage somehow to fit into the framework of rules and become eligible for unemployment allowance, says Suchitra, who secured a job in six months after losing her job in Lucent Technologies a few years ago in the U.S.

It is the Federal Government’s enactment that provides unemployment allowance. The States too have different laws in sync with this Act. The claimant has to, however, prove that he is applying for at least two jobs a week. Usually the unemployment allowance is extended for 26 weeks.

However, India does not offer any such insurance. Asked if any general insurance company offers such insurance, Oriental Insurance Company Chairman M. Ramadoss said there was no such insurance plan available in India.

There may be insurance given to employers for offering compensation to employees in case of any accident. Of course, the issue of employment insurance is being debated, said Neeraj Kumar, General Manager of Oriental Insurance Company. Even the IT companies do not pay insurance to enable the retrenched staff to fend for themselves. The Congress party discussed such insurance for the unorganised sector in 2004. But there has been no follow-up action on this. The draft Common Minimum Programme had proposed a two per cent cess on the salaries of organised sector employees to finance the employment insurance scheme for the unorganised sector. The issue was discussed on May 21, 2004. For this purpose, the Common Minimum Programme refers to a 1995 labour and social welfare scheme, ‘Insurance Fund for Employees’.

The draft said: “Without this, hiring and firing will extract a huge political price.” Any amendment to the Industrial Disputes Act will also require an insurance scheme. A committee to study the 1995 scheme has been suggested in the draft programme.

Why all this?

Giving pink slips even to employees with five years of experience has become the order of the day in the IT industry. Besides, a fat pay hike is passé for IT employees. A star performer got a niggardly 10 per cent increase in the recent appraisals.

The companies, especially the biggies, normally keep sufficient number of staff on the bench (without any specific assignment) so that they can jumpstart the work on new projects.

Satyam Computers, for instance, keeps 3.5-5 per cent of its total employees on the bench, according to S. V. Krishnan, Global HR head of the company.

Sampath Shetty, Vice-President, TeamLease Service, a staffing company, says: “In case an employee is shunted out by way of layoff, he/she should take up assignments with small and medium companies, settling for lesser pay, rather than scouting for a job with big-ticket companies, especially in the IT sector.” In a market that is passing through a tough time due to meltdown of global economy, there will be certain transition of people from the direct rolls of the organisations to contractual employment. Flexi-staffing is a proposition for the companies rather than holding the burden month on month. “As the markets evolve, it becomes acceptable even in India,” Mr. Shetty said.

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