Employment in the Nigerian economy, like in any other economy, is driven by the private sector, comprised of multinational companies, Small and Medium Enterprises (SMEs) and the informal private sector. The private sector accounts for more than 60% of the employed labour force of the country.
The dawn of 2020 ushered in a new decade and an optimistic private sector anticipating a better year with the early appropriation of the 2020 budget, the encouraging provisions of the amended Finance Act and the International Monetary Fund (IMF) forecast 2.5% growth for the Nigerian economy. Unfortunately, the first quarter of the year witnessed a downturn in economic activities well below the projected growth rate, as government grappled with the implementation of the 2020 budget.
By March 2020, in the unanticipated twist of events, the economy was brought to a standstill with the onslaught of the COVID-19 virus in Nigeria which shut down the economy for five weeks and counting. This last straw hit both the public and private sector; COVID-19 could not have come at a worse time. Nobody was prepared for this! Employee cost, a reflection of the welfare/compensation of employees, became a major target for cost savings and a formidable ethical dilemma for employers in the face of the COVID-19 lockdown. Employees are the backbone of every organization, they drive productivity. They are also the major drivers of consumer spending in any economy and hence economic growth. Therefore, employers cannot afford decisions or actions that can drive a wedge between them and their employees, neither can the government turn a blind eye to situations that jeopardize the welfare of employees.
THE ETHICAL DILEMMA
Unfortunately, the COVID-19 pandemic and the consequent lockdown, amongst other things, has brought to light the abysmal state of welfare security for the Nigerian employee. Nigerian employers including the federal government, were completely ill prepared for the ensuing dilemma: employee welfare vs. economic/business survival. UGN Consulting Services carried out a survey to find out the standpoint of various Nigerian employers and employees to this dilemma and identified five alternative courses of action that an employer affected by the lockdown could take to resolve and address the dilemma.
SHOULD THIS HAVE BEEN A DILEMMA?
No! The realities of the COVID-19 pandemic lockdown on employee welfare and business finances should not have been an ethical dilemma for Nigerian employers nor its government if they had carried out proper business risk assessment and management, and put in place proper social welfare and enabling interventions, respectively, as obtains in other developed economies like the US, Canada and the UK.
For instance, the Canadian government for 75 years has had an Employment Insurance programme for its residents that provides temporary financial assistance to individuals who lose their jobs through no fault of theirs, who are available for and able to work but cannot find a job2. The Employment Insurance (EI) program is overseen by the Canada Employee Insurance Commission (CEIC) that sets annual EI premium rate
An employee or self-employed person registered with the CEIC pays an annual premium of 1.58% (for 2020) of his/her insurable earnings. Employers are required to pay 1.4 times the premium rate of the employees; that is, 2.21% (for 2020) of the employee’s insurable earnings. So a registered employee/self-employed person who has been out of work through no fault of his/hers, such as due to the COVID-19 lockdown, and is without pay for at least seven days is entitled to receive 55% of his/her average weekly earnings up to a maximum amount Of $543 per week for a period of 14 weeks up to a maximum of 45weeks.
The above shows the preparedness and proactiveness of a government and its people to effectively face and manage risks and uncertainties that may significantly impact its economy. An employer operating under such a government faces no ethical dilemma as policies and structures are well in place and operating effectively to contain as much as possible the impact of unforeseen events on its business without jeopardizing the welfare of its employees. Hence, decision-making is made easy.
LESSONS FOR NIGERIA
The Nigerian employer and most especially the Nigerian government have a lot to learn from the above cases in point. Effective social welfare schemes and pro-active preparedness for unforeseen disruptions of the economy are vital lessons to be learnt from the Employment Insurance initiative of the Canadian government. The Employment insurance ran by the CEIC of Canada is fairly similar to Nigeria’s Employee compensation scheme ran by the Nigeria Social Insurance Trust Fund (NSITF). However, the NSITF is in dire need of rejigging to achieve robustness and effectiveness like the CEIC.
NSITF is the institution of the Federal government of Nigeria that carters for the welfare of employees in the event of employment related accidents and injuries. It oversees the implementation of the Employees’ Compensation Act 2010 (ECA 2010). Over the past 50 years the NSITF has evolved from a Provident fund scheme to a social insurance scheme and presently to the employees’ compensation scheme in 20103
The ECA 2010 applies to all employers and employees in the public and private sectors (ECA 2010 section 2.1) except for members of the armed forces. Employers are required to pay 1% of their total monthly payroll cost to the fund. Our review of the ECA 2010, the NSITF and public opinion in the light of its counterparts in other countries and the COVID-19 pandemic revealed the following gaps:
i. Inadequate coverage of employees’ risks The ECA 2010 does not cover employees for loss of employment due to no fault of theirs such as pandemics, natural disasters and mass layoff.
ii. Poor levels of enrollment/compliance
According to the Corporate Affairs Commission (CAC), as at March 2019, there are 3.1million registered companies in Nigeria4, whereas only about 100,000 employers are registered with the NSITF 5
iii. Absence of specific policy/provisions for the self-employed and informal sector
iv. Lack of confidence of the private sector in the NSITF and its mandate
v. Prohibition of employees from contribution (ECA 2010, section 14)
This prohibition may be a major limiting factor in reaching and catering for the informal sector employees.
Our survey showed that most employers and even employees in the private sector will be willing to contribute to an employment insurance scheme of the government. Only 9.4% of respondents will be unwilling to contribute.
We recommend that:
i. the ECA 2010 be amended to include compensation for insured employees who lose their jobs through no fault of theirs, in the event of pandemics like COVID-19, natural disasters, mass layoff for a pre-stated period of time.
ii. the ECA 2010 be amended to specifically and clearly include the self-employed as insurable persons under the scheme and hence beneficiaries;
iii. the ECA 2010 be amended to allow employees contribute to the fund. This could be made mandatory or optional;
iv. the NSITF come up with clear guidelines and implement procedures that will make for direct registration by employees with the fund. This will go a long way to harness the informal private sector and inspire greater compliance in the organized private sector.
v. the NSITF to come up with guidelines for the setup and operation of third party agents (Employment compensation agencies) that will be regulated by the fund. These agencies are to act like intermediaries between the NSITF and enrollees /the public;
vi. amendment of the ECA 2010 to include the establishment of an audit committeeas a mandatory board committee. This will enhance good corporate governance especially in the area of internal controls and financial reporting.
vii. the federal government and NSITF’s managementtake necessary measures to secure the confidence of the public in NSITF’s ability to deliver on its mandates by establishing processes for greater transparency and strict adherence to ethical business conduct.
Furthermore, our survey findings revealed that employers and even employees are ready to buy insurance cover against business disruptions due to pandemics, in the event of no government interventions.
Employers should negotiate and or revise relevant insurance policies with their insurers to cover such events. Insurance companies should be proactive by coming up with insurance policy products for business disruptions due to pandemics at affordable premiums.
We call on Nigerian employers and the Federal government to arise to their responsibilities, embrace these lessons and brace up for the future – for the sustenance and security of our people, institutions and the economy at large.
Written by Mrs. Obichukwu I. Nwazota B.Sc., ACCA, Managing Consultant at UGN Consulting Services Ltd.
UGN Consulting Services Ltd is a financial and management consulting firm in Nigeria.
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