The opposition party in Singapore says their payout scheme will be a ‘modest’ safety net for retrenched workers
The Workers’ Party (WP) recently outlined a payout scheme meant to help retrenched workers avoid disruptions in their financial obligations by having employers and employees each contribute .05% of their monthly salary to a company retrenchment fund.
“Under the opposition party’s proposed scheme, employers and employees would each contribute about $1.90 every month, based on the average wage of $3,782 in 2014,” reported TODAYOnline.
Retrenched workers can then expect to receive 40% of their last drawn salary over the next six months and while earners between $500 and $1,000 will get top-ups of $200 to their original payout, those earning below $500 will receive a payout equivalent to their last drawn salary.
Retrenched workers would need to prove that they are actively looking for jobs, however, if they are to receive payouts beyond the first month. They will be asked to sign a declaration that will be periodically audited and penalties will be imposed on those who make false declaration, said the WP.
They added that they have made the scheme deliberately conservative so it would be easier for companies to adapt but it “should be introduced early when unemployment is low so that we can build up a resilient system with healthy reserves that can be drawn upon in years of poor economic growth and high redundancy”.
Economists and the academia are on the fence with this proposal with some saying it is more prudent than relying on taxpayer’s money while others are concerned about the sustainability of the scheme.
Some also argued that it could cause a moral hazard as workers might make themselves redundant to get the payouts.
The 17-page consultation paper is up for public consultation over the next month.