George Kirkaldy, Contributor
I HAVE read the opinions and suggestions of the various pundits for and against the repeal of the Employment (Termination and Redundancy Payments) Act. I have seen the call of the various editorials for dialogue on the subject, particularly that of October 12, 2004, and sensible and practical dialogue there should indeed be.
As the Ministry of Labour Officer closely associated with the passage of the 'offending' act, I believe I could make a small or, at least, an informative contribution to the debate.
THE HISTORY
The idea of redundancy payments was first formally discussed in the mid-1950s when the term used was severance payments. A committee was set up by the Ministry of Labour to study the matter and make recommendations thereon. On this committee were such 'greats' as Sir Alex-ander Bustamante, Sir Robert Kirkwood, the sugar mogul, L.E. Ashenheim, Douglas Judah, Hubert Arnold and other respected representatives of the trade unions and employers.
The committee recommended and set out details of a Severance Pay Code (non-statutory) which should be followed. When it came to the signing of the document Sir Alexander refused to do so unless the Government agreed to include Government employees in its coverage. The Government declined to do so, explaining that its employees were covered by a Provident Fund Scheme and other procedures which could deal with severance.
I mention this committee to show that the principle of redundancy payments is not something that 'sprang out of the hat' in the 1970s, but was actually accepted long before then by employer stalwarts of competence and great experience as shown above notwithstanding the known position of the United States that you are paid a salary, not paid and compensated, to do a job of work. Additionally, it was accepted, bearing in mind the right of the employer to reorganise his business and control his workforce in the interests of efficiency. Mind you, acceptance then did not extend to a legal requirement, but it could be said that it bolstered the concept of collective bargaining in that area. Could these stalwarts have been wrong?
I suspect that apart from the cost of the redundancy exercise, some employers now feel that the Act is prejudicial to their right to manage. Indeed, The Gleaner editorial of October 12, 2004, brings this out when it said, "The right of the worker to redundancy payment as a business fails or needs to restructure in order to survive the challenge of globalisation surely has a counterpart in the right of the employer to employ sound business strategies to rescue his entrepreneurial investment." No argument there.
PERCEPTION BY EMPLOYERS
I believe too the interpretation placed in some quarters on the status of the Labour Relations Code with particular reference to paragraph 11 dealing with consultation in the event of redundancy has a large part to play in that perception by employers. I understand their dissatisfaction, particularly in relation to one ludicrous I.D.T. Award where the employer made several attempts to consult, all being thwarted by inaction on the other side yet it was held as failure on the part of the employer to consult. Incidentally, Justice Downer in the Institute of Jamaica Appeal Court case held: "It is questionable whether paragraph 11 of the Code dealing with redundancy is within the scope of section 3 of the Act," and that subsidiary legislation such as the Code cannot alter or add to the substantive provisions of the Employment (Termination and Redundancy Payments) Act.
This article is not intended to deal with the Code, but as one of the framers, I have always held that it is not law which must be followed blindly, but a Code that endeavours to set out guidelines which must be evaluated in the context of the happenings in the particular issue.
In the 1974 Act the proposals, which were discussed by the Labour Advisory Council (LAC) and passed by the House without objections, were based somewhat on the U.K. legislation (the Redundancy Payments Act of 1965) with a difference, in that in the U.K. an employer can claim a refund from the redundancy fund established under section 26 of that Act.
The establishment of a fund did not find favour with our local players for a number of reasons. I recall some employers holding the view that they would not contribute to a fund "to bail out inefficient employers who had to resort to redundancy to sustain their business". The unions, as expected, felt that workers should not have to contribute when termination was at the initiative of the employer. Of course, the other reason for rejection by the unions was the fact that the payment for redundancy without monetary input by the worker was already entrenched in collective bargaining regardless of the extent of coverage of such bargaining.
Looking back, I would say that a substantial objection to the Act could be that it should have found a way to establish a fund for payment in cases of redundancy and thus relieve local employers of the heavy payments "in one fell swoop", rather than having no law at all on the subject.
I daresay what went wrong with the Act (not to mention some I.D.T. awards) to make it unpalatable for today's employers, is a number of amendments which resulted in large redundancy payments putting pressure on organisations with shaky financial positions endeavouring to restructure for survival. This situation of heavy payments was not envisaged by framers of the original legislation as may be seen below.
When the Act was first enacted, certain 'safeguards' were inserted to offer employers some protection against abnormally large payments and likewise to safeguard the jobs of those employees still at work by the continued operation of the enterprise. This was the pattern in the U.K. Act of 1965.
In the first place the maximum number of years in respect of which the claim could be made was limited to 20. This limit was removed completely in 1985.
The second 'safeguard' was to limit the extent of the then two weeks pay for each year of service to $400. This was increased in November 1975, to $500 and removed completely in 1985, so that the claim would thereafter be in respect of the full wage or salary at the time of termination. Neither of the above amendments was the subject of discussion with the employers as far as I am aware. One wonders why the minister could have departed in one stroke from the well-reasoned and responsible principle laid down in the Act by the then Government and accepted by Parliament in 1974.
The third 'safeguard' was limiting entitlement to two weeks pay for each year of service irrespective of length of service once the qualifying period of two years of continuous employment was worked. This entitlement of two weeks was subsequently increased to three weeks for each year of service after the tenth year. Now, this two weeks pay is for each year of service and not a flat amount as in the Holidays with Pay Order, so that the longer the duration of the service the higher the redundancy payment. Was it then necessary to add the extra week for each year of service after the tenth year? In all this, it must be emphasised that the Act indicated that all the entitlements were a minimum and did not preclude the parties from agreeing to, or negotiating improved entitlements having regard to prevailing circumstances and ability to pay.
Supplementary to redundancy pay is the payment in lieu of notice revised upwards in 1986. Taken by itself the notice period would seem fair, but it does increase the cost of redundancy payment. For example, with all the amendments since 1974, an employee with 25 years service would be entitled to a whopping 77 weeks pay for redundancy and notice as compared to 58 weeks pay under the original provisions, an increase of 32.7 per cent in weeks and at the maximum rate of pay at the time of termination, instead of a proportion of pay. Naturally, not all redundancy exercises cover employees with 25 years service, but one has to consider the numbers and pay trends involved.
REPEAL A LAW
I like to think in practical terms and now dwell on what may, or may not, be ideal. Certainly, with knowledge of the local political situation and the strong trade union lobby I doubt whether even Supreme Ventures would take a bet on any Government in Jamaica having the courage to repeal a law such as the Employment (Termination and Redun-dancy Payments) Act. So, assuming that the International Monetary Fund and the employers are correct in saying that the Act is a deterrent to investment, (the minister of labour has taken the charge seriously and commissioned someone to check on it), what is the alternative?
Clearly, one approach would be to consider amendments which would ease the financial pressures on a business operation yet offer some compensation to workers for their years of service, which is exactly the principle behind the redundancy payment calculation in the original Act before it was subjected to over-enthusiasm by a Minister. Naturally, if we were to return to the 1974 principle of limiting the weekly wage entitlement to a stated sum instead of the total wage at the point of termination, it would have to be based on the present level of wages and certainly above the national minimum wage and this figure would have to be adjusted upwards from time to time. As envisaged by the principal Act, the parties would be free to agree on better terms. But would the trade unions and workers buy into it? Would it be a question of what we have, we hold?
Another approach could be to make another attempt to set up a Redundancy Fund as recommended in an International Labour Organisation recommendation on the subject, but it would take time for the fund to be capable of meeting the claims.
Finally, a few words about two proposals put forward. The first is that emanating from Sameer Younis for a Redundancy Savings Scheme. There is merit in the proposal and it should be properly considered and evaluated. I particularly like the idea of calculating the employee's benefit at the effective date of the proposed scheme which would mean the employer meeting any redundancy payment up to that point and the scheme taking care of the future. This would take care of the inability of the Redundancy Fund mentioned by me to meet immediate claims.
The difference between the Redundancy Fund and Sameer's Redundancy Savings Scheme is that the former is a straight redundancy exercise whilst the latter is more complicated involving redundancy, savings and retirement benefits and what would be its relationship with existing pension schemes? What both proposals would run up against is the cry of another wage deduction on top of all the others despite the savings idea in Sameer's scheme.
FUTURE IMPLEMENTATION
The other proposal is for the introduction of Unemployment Benefit with contributions from both employer and employee. A very good idea which should be examined for possible future implementation, but not as a substitute for redundancy payment. Let us look at the intention behind both payments for the reasoning behind my observation. Redundancy payment whether or not you like it, is regarded as compensation for years of 'faithful' service which has been terminated at the initiative of the employer, whilst unemployment benefit is paid to tide over a worker until he finds another job usually a short-term exercise and in the Jamaican context a difficult one having regard to the less than favourable job situation. In the United Kingdom both schemes are in operation, but the employer is cushioned by the Redundancy Fund established by law whilst unemployment benefit (the 'dole' as it is popularly known) is a social security expenditure.
In looking for solutions it should not be a question of "what we have, we hold", a welcome departure from which is the co-operative approach by the unions in the LAC in relation to the proposed Flexi-work Week in the light of global competition with, inter alia, overtime coming after 40 hours worked instead of the present eight hours in a day. It's also a question of accepting change in the national interest and our ultimate good.
The world of work, particularly for the skilled, is changing with the outsourcing of work and other cost reduction exercises and we must recognise and accept the fact that the extent of fringe benefit practices is lessening. Consequently, we must prepare ourselves to accept more responsibility for many of the things (benefits) we take for granted as being the responsibility of others, particularly as we may find ourselves working for more than one business enterprise.
George Kirkaldy C.D. is a retired industrial relations specialist.
