A BILL that would create an unemployment insurance program for the country was recently reintroduced in Congress. While the idea in principle is a good one, and should even be considered a necessity, it is fraught with potential pitfalls and costs, and must be handled carefully.

House Bill 490, or the proposed "PhilJobs Act of 2020," was introduced by Marikina Rep. Stella Quimbo last month, who described the measure as "Like PhilHealth, but for jobs." The proposed program would provide any worker who involuntarily loses his or her job with 80 percent of the monthly salary for a period of three months.

The short title "PhilJobs Act of 2020" reflects the fact that the latest bill is the second try for the unemployment insurance proposal. A similar measure that consolidated three separate bills filed in the 18th Congress was approved in mid-2021 by the House committee on labor and employment but did not advance.

Under Quimbo's proposal, a new Philippine Job Insurance Corp. (PJIC), similar in organization to the Social Security System (SSS) and Government Service Insurance System (GSIS), would be created to administer the unemployment insurance program and manage the fund created from contributions from employers, employees and the government. HB 490 stipulates that the SSS would serve as the interim manager of the fund for a period of up to five years, or until the PJIC is up and running.

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Indicated contributions by employers, employees and the government for the first year of the program — the bill allows for adjustment of the actual amount based on actuarial studies of relevant factors — are 4.5 percent of the employee's annual salary each, up to P465 per month. Thus, for an employee earning P20,000 per month, the employee, his or her employer, and the government would each contribute P75 to the unemployment insurance fund, or a total of P900 per year.

HB 490 also has provisions for creating programs to assist job seekers, such as additional training. Representative Quimbo also suggested that a cash bonus — presumably the unused portion of a worker's three-month insurance allotment — could be paid to those beneficiaries who are able to find a new job in less than three months, as an added incentive.

On the positive side, the proposal does provide a much-needed program, as existing unemployment insurance schemes offered by SSS and GSIS are limited in scope and provide much smaller benefits (only 50 percent of monthly salary for a period of two months). We support the unemployment insurance program proposed by HB 490 in principle, and we believe that whatever work necessary to make it a reality should be prioritized.

However, that work must address several concerning shortcomings of the current proposal. First of all, contributions to the fund deducted from payroll should be tax-exempt. HB 490 perhaps intends that a deduction before taxes should be assumed, but it is not clearly spelled out in the bill. This is an easy correction to make.

Second, lawmakers should approach the proposal with sensitivity for how the deductions will be perceived as an additional, and perhaps unacceptable cost by employees and employers, given that everyone is still financially recovering from the pandemic. The solution to ease employee concerns is simply to ensure that once passed, the new program is implemented quickly.

Lingering issues

For employers, however, the situation is different, as many employers will perceive — correctly — that they are paying for unemployment insurance for workers other than their own. A solution to this, perhaps, is to adopt a model similar to that used in the US, wherein the employer contribution to unemployment becomes payable only when an employee is terminated. This gives incentives to employers to retain staff, but, on the other hand, also requires a robust dispute mechanism for cases in which unemployment benefits are denied.

All that being said, HB 490 is a good start. We urge Congress to move more quickly than it did in the last session to move the measure forward, while taking the necessary time, of course, to address lingering issues and possible unintended consequences of the proposal.