inSights

Policy Briefing
ISSUE 7, JULY 2009 Manila, Philippines

Exploring the Possibility of a Philippine Unemployment Insurance Scheme

The susceptibility of the Philippine economy to international financial turmoil gravely affects the welfare of its labor force since economic crises usually cause involuntary unemployment to workers. The absence of unemployment insurance in the Philippines entails lesser social protection to the Filipino worker amidst the hardships resulting from economic instabilities.
Several countries have utilized unemployment insurance to temporarily sustain the needs of their unemployed workers who are on the process of seeking reemployment. Conversely, the Philippines does not have a similar program that will provide a worker with temporary income after an involuntary loss of unemployment. At the onset of the global financial crisis, renewed talks about the possibility of introducing unemployment insurance in the Philippines have surfaced amidst the massive unemployment caused by the economic downturn. In studying the most feasible unemployment insurance scheme in the Philippines, it is very important to take a closer look on the experience of other countries with existing unemployment insurance programs. Identifying the key features of such country experiences, and understanding the applicability of these features in the PhilipThis paper was written by Benjamin M. Dalumpines III, research associate at the Institute for Labor Studies. ISSUE 7 Exploring the Possibility of a Philippine Unemployment Insurance Scheme

POLICY PRESCRIPTIONS
The proposed Philippine model for unemployment insurance utilizes the relevant features of the experience of other countries. This hybrid Philippine scheme can be represented by the following diagram:

INSTITUTE FOR LABOR STUDIES pines, will be very essential in designing a possible option for the country. This policy brief provides important inputs and options for policymakers involved in the creation of unemployment insurance scheme in the country. It aims to facilitate policymaking by serving as a springboard for renewed policy debates and discussions. Key Features of Unemployment Insurance The Insured Persons. In order to qualify in unemployment insurance schemes, countries with existing unemployment programs have their respective sets of eligibility requirements that must be satisfied by the applicant. Although there are variations in the requirements for unemployment insurance, certain criteria are similar. These are: being unemployed (have met the qualifications of being unemployed); have paid premiums for a predetermined length of time (reference base period and insured period); have filed application accordingly; and have met other eligibility requirements. Unemployment Benefits. Article 1 of the ILO C44 (Unemployment Provision Convention of 1934) stipulates that countries which ratify the said convention must adopt schemes that will provide benefits and allowances to the unemployed insured workers. Benefit is a form of payment related to contributions paid in respect of the beneficiary's employment whether under a compulsory or a voluntary scheme (Art. 1a). Existing unemployment benefit schemes from other countries illustrate two forms of benefits. The first one, which is financed by contributions from the employers and employees, is called unemployment insurance. The other form, which is universally provided to the unemployed workers, is unemployment assistance. The entitlement to receive unemployment insurance is based on the fulfillment of the conditions concerning the qualifying (insured) period of the claimant during the reference base period. A qualified claimant will receive periodical payments of a portion of his/her salary prior to becoming unemployed for a certain duration depending on how long the worker has been paying the premium for unemployment insurance. Eligibility. From the schemes of other countries, the most basic eligibility requirement to become entitled to receiving unemployment benefits is the involuntary loss of employment. Whenever a worker who has complied with the conditions during the qualifying period becomes unemployed involuntarily due to the economic conditions (business decision) of the company, such worker may be entitled to receive benefits from the unemployment insurance fund. However, the claimant must still meet other eligibility requirements to ensure that s/he belongs to the group of unemployed workers eligible to receive the benefits. ISSUE 7 Exploring the Possibility of a Philippine Unemployment Insurance Scheme

Information. Ideas. Insights. Contribution Rate. Financing is one of the most crucial elements in the creation of any unemployment insurance model. In many countries where an existing unemployment insurance system is in place, the scheme is funded through the contributions of the employer, employee, and sometimes the government. The government also takes charge in the administration and implementation of insurance benefits, including the management of the funds. Procedures in Claiming Unemployment Insurance. Certain procedures must be followed by a claimant prior to the receipt of unemployment benefit payments. Several necessary documents (prerequisites) must be submitted to the concerned social security agency in order to validate the entitlement of the claimant to receive the benefits. The processing time, as provided by the ILO C168, must not exceed seven days. Roles of Government Agencies. The gargantuan tasks of implementation and administration of unemployment insurance, as seen in all countries that have existing unemployment benefit schemes, fall on the hands of government institutions. Government agencies have the responsibility of ensuring that the funds for unemployment insurance are properly collected, invested and disbursed. Careful management of the funds must be observed by the concerned government agencies since its sustainability relies chiefly on how it is handled. Linking Unemployment Insurance to Labor Policies. For any unemployment insurance program to be successful, it must be integrated to an active labor market policy. It must be of prime consideration that the unemployment insurance scheme of the Philippines does not only provide for monetary needs of the insured workers once these workers get unemployed. The main aim of unemployment insurance should be to aid involuntarily laid-off and retrenched workers in seeking reemployment. One of the provisions of ILO C168 (Employment Promotion and Protection against Unemployment Convention in 1988) stipulates that unemployment insurance must contribute to the promotion of full, productive and freely-chosen employment (Art. 2). In all countries where unemployment insurance is functioning, policies that stimulate job-creation complement the unemployment insurance scheme.

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