In the recent climate of fear due to a spate of retrenchments, the debate on unemployment insurance has intensified. However, unemployment insurance is not a new idea to Singapore as there have been previous attempts to run such plans.
As an insurance scheme, policy holders contribute funds into a common pool, which can be tapped on should the policyholders hit certain requirements.
Hence, the concept of unemployment insurance (where premiums are typically paid by the workers and companies), is fundamentally different from the concept of unemployment benefits (a welfare scheme where unemployed workers receive an allowance from the government).
Organisations which have rolled out unemployment insurance-related plans include NTUC Income, Singapore Professionals and Executives Cooperate (SPEC), and Pana Harrison. These plans were unsuccessful as the claims exceeded what the insurers were prepared to pay, or the take-up rate was low.
For example, NTUC Income launched a Retrenchment Insurance Plan in 2004 for all Singaporeans and PRs who were Income policyholders. The take-up rate was not sufficient, causing the plan to be withdrawn.
Regardless of these failures to implement a full-scale unemployment or retrenchment-related insurance plan, there are still insurance plans that incorporate an element of unemployment or retrenchment-related coverage.
A simple Google search on unemployment or retrenchment insurance revealed that Maybank, NTUC Income, and HSBC have unemployment or retrenchment-related coverage which is a subset of other types of insurance. Coverage ranges from maintenance of insurance policies in the absence of premium payments due to retrenchments, to payouts of e.g. $1,000 a month.
The question we should ask ourselves is, "What is our intent of implementing an unemployment insurance policy?"
If our intent is to help unemployed workers manage their cost of living in the absence of a regular income, there should be a mix of safety nets, such as:
• job matching to freelance or part-time work while workers are looking for a full-time job
• retrenchment relief schemes to partially offset fixed costs such as childcare fees, property taxes, and S&CC costs
• training schemes to pay for workers' upgrading to help them be more employable
We should not forget that there are costs to implementing unemployment insurance, such as the possibility of the insurance fund being overextended and failing during recessions (where there are more claims from unemployed workers than contributions from workers who managed to keep their jobs).
Unemployment insurance, if we do decide to implement it, cannot simply be a scheme to draw on a pool of funds that are contributed by workers who are still working, in order to pay workers who do not work.
Its purpose should complement existing efforts to aid unemployed workers to get back on their feet and find a new livelihood, which is the best insurance against retrenchments.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Adrian Tan is CEO of The Resource Group, a boutique HR Consultancy that focuses on helping SMEs. Before this, he was the MD of RecruitPlus which he co-founded in 2004 and led to two HR Vendor of the Year award. He was named the HR Entrepreneur of the Year by SHRI in 2013.