Employment Reforms Update

Employment Reforms Update Australian High Commission 29 Sept 2015

TLAC • In 2010 Tripartite Labour Advisory Council (TLAC) established, to replace Labour Advisory Board • Tripartite: Employers, Workers, Government • Employers reps: Astrid Boulekone, Robert Bohn, Dick Eade, replaced by Anita Jowitt after May 2012 • Workers reps: LoreenBani, Ephraim Kalsakau, MathildeButal • Govt reps: Jimmy Rantes, Bethuel Solomon, Judith Melsul

ERB • In 2011 TLAC starts to work on ERB, using an old draft, and assisted by ILO • Many meetings but no broad public consultation • A draft is produced in June 2012 • 2012 – 2014 Tripartite meetings to develop draft fail to happen • In July 2014 a tripartite social protection project launched, in part to try to get discussion on maternity and unemployment/severance moving ahead • This paper completed and endorsed by TLAC in Dec 2014 • Dec 2014 TLAC agrees to a schedule of meetings to work through ERB in detail, part by part • Meetings do not happen

Employers actions to consult on ERB • July 2013 business forum does not support much of the ERB content on benefits • Survey launched July 2014 • 397 business from throughout country respond • Multiple consultation meetings in Santo and Vila from Nov – Feb once survey results are out • May 2015 VCCI council asks to try to separate out “Employment Act” parts of ERB • August 2015 this approach rejected after validation meeting • In process of finalising revised position paper, recommending amendments to the Employment Act

Employer position

General principles • Employers want a fair, workable situation that will lead to employment growth and private sector led development for the good of all of Vanuatu • The current law is not seen to be fair and workable • Survey results show that many businesses laid off staff or reduced wages and conditions after 2008/2009 • This is bad for workers, and particularly the large number of young school leavers and female workers

General principles • Easy to understand and use • Flexible • Minimise red tape • Benefits should be at a similar level to other Pacific countries • Realistic for the Vanuatu context • Should not stop small ni Vanuatu entrepreneurs from being able to grow and develop their businesses • Reduce political interference

Does ERB meet these principles? Not as currently drafted – many changes are needed

Moving forward? The employers’ position is that: • Further detailed discussion of the content ERB, following the plan at the December 2014 TLAC is needed in order to determine consensus policy positions. • TLAC should come to policy agreements and then new employment laws drafted, starting with a “clean slate” on the drafting. • As the development of the ERB is likely to take some time, in the interim the Employment Act should be amended to introduce provisions that provide better job security for workers and increase job opportunities by removing existing barriers to employment. Particular areas are identified for amendment are: • Formation of employment contracts • Termination and payments on termination • Leave benefits

Proposed position • Law should promote more job opportunities and more job security for workers • Job security: • There should be more certainty around making contracts • There should be restrictions on terminating employment without any reason • Severance allowance creates barriers to full time ongoing employment and should be restructured into a different type of unemployment payment

Proposed position 2 • Law should promote more job opportunities and more job security for workers • Job opportunities: • Leave benefits are costly and prevent employment. They should be set at levels that are benchmarked against other Pacific countries • Severance allowance forces struggling businesses to close down which leads to job losses and should be restructured into a different type of unemployment payment

Amending the Employment Act to promote job security

Making contracts • If workers ask then contracts must be in writing • A simple, optional pro forma to be provided in the Employment Act • Casual workers who work in regular systematic employment for 6 months or more are deemed to be on contracts for an indefinite period • Workers on fixed term contracts that are renewed more than 3 times are deemed to be on contracts for an indefinite period unless there are valid operational reasons for using fixed term staff

Termination • Casual work can be terminated by either party at any time • Fixed term and fixed task contracts can expire at the end of their term • Fixed term/task contracts can be ended early if the worker commits serious misconduct or fails to perform • Indefinite contracts can only be ended if: • The worker commits serious misconduct, • The worker fails to perform and does not improve after warnings and assistance to improve • There is a redundancy situation (the business is downsizing and needs less staff) • The worker reaches 55 and is retired • The worker resigns by giving notice

Amending the Employment Act to promote job opportunities

Annual leave and sick leave • Annual leave should be a flat rate of 15 days per year • Still higher than other Pacific countries • Accrued annual leave earned under the existing law should not be lost • Sick leave should be 10 days per year • On par with other Pacific countries

Maternity benefits • Maternity leave should be 12 weeks at 50% pay • More generous than most Pacific countries • There should be more flexibility around when leave is taken • There should be more protections on terminating pregnant women • Paid nursing breaks should reflect actual needs of nursing mothers • 1 hour for each 4 hours worked up to 6 months • ½ hour for each 4 hours worked up to 12 months • More generous than most other Pacific countries

Payments on termination • The current severance allowance should be removed altogether • Existing allowances get fixed at a date set in law, so no existing allowances are lost • A payment of 1 week’s salary per year worked, capped at 3 months salary, is directly paid by the employer if the worker is terminated because of redundancy • Additional ongoing contributions (2% by employer and 2% by employee) are made to the VNPF, and can be withdrawn if needed on unemployment. • If there is no need to withdraw these funds then the retirement payment is larger

Why move from severance? • Data (VNPF, VIPA, business licenses, survey results) show the 2008/2009 changes to severance led to job losses, and more use of casual and part time work to avoid severance. • This particularly affects low wage/low skilled workers, who most need an unemployment benefit • Severance does not reach who it needs to • The proposed scheme is a benefit to workers as more workers become eligible for access to unemployment payment

Why move from severance? • Redundancy can be difficult for businesses as they are being asked to pay when they are struggling and there is a real risk that they do not have money to pay. Reducing the amount of payment in this situation helps to keep struggling businesses going • If a business goes bankrupt there is no money to pay so workers lose out altogether. Having money saved in VNPF avoids this risk for workers

Is this a final position? • Still under discussion • The last approach proposed by employers (the Employment Contracts Bill) was rejected by VCCI members after validation • The proposal is for interim amendments to remove some of the big problems in the Employment Act • Broader policy and institutional issues must be sorted out, but we also need solutions while taking the time to do this • Feasibility of moving to a pooled maternity benefit needs to be explored • Feasibility of moving to a pooled unemployment insurance needs to be explored

Employment Reforms Update