With details of the Redundancy Insurance Scheme doing rounds in this year’s Committee of Supply (COS) debates, the Workers’ party has called in for contributions from employers and employees to fund 0.05 percent of their monthly salaries to provide “modest payouts” to the retrenched workers.

While economists and a Member of Parliament (MP) told TODAY that the scheme would be more prudent than relying on taxpayers’ monies to provide any support for affected workers, they also raised questions over its sustainability and whether companies have the appetite for extra labour costs during the current lean times.

The 17-page public consultation released on Monday will be put up for public consultation for a month. However, as per the proposed scheme by the opposition party, the contributions demanded are much higher amounting to S$1.90 every month, based on the average wage of S$3,782 in 2014.

As per the law, when workers are laid off they will be given payout of 40 percent of their last drawn salary for six months. This amount allocated is the ‘modest safety net’ to help workers manage their mortgage repayments and healthcare costs, among other things.

However, to avail for payouts beyond the first month, retrenched workers need to show that they are actively seeking employment by signing a declaration that will be audited periodically. Penalties will be levied on those who make false declarations.

There will be top-ups for those earning below S$1,000. Those with wages below S$500 per month will receive payouts equivalent to their last-drawn salary, while those earning between S$500 and S$1,000 will get a top-up of S$200 to their original payouts.

Considering the previous redundancy figures and median gross monthly incomes, the Workers’ party (WP) has calculated that the funds would be surplus and the Government need not make efforts to top up funds for this scheme.

If the scheme runs successfully for few years, even in a year of redundancy the top-up from the Government will not be needed as there will be sufficient reserves from the accumulated surplus.

WP added that the scheme has been made “deliberately conservative” with the premium and payout set at a “relatively modest level” for employers and employees to understand and accept.

Commenting on WP’s proposal, SIM University senior lecturer Walter Theseira believes that no matter how well-designed the unemployment insurance schemes are, they are expected to lengthen the duration of unemployment, since it encourages people to find better jobs that fit their requirements, other than the first job they come across.

A decade ago, a similar scheme mooted by the Singapore Human Resources Institute (SHRI) and its social enterprise Spec. Former SHRI executive director David Ang was discontinued after some two years because insurance firms wanted to raise premiums.

Pasir Ris-Punggol GRC Member of Parliament Zainal Sapari, deputy chairperson of the Manpower Government Parliamentary Committee, told TODAY that, “Similar schemes in other countries ran into problems, due to lack of enough time to grow the fund such that it could cover the payouts during an economic downturn. Having such a scheme could also create a moral hazard, where workers would intentionally make themselves redundant to get the payouts.”

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