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News - The National Insurance Scheme: Ready for CSME
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Labour News.


The National Insurance Scheme: Ready for CSME

By Almroth Williams, National Insurance Department

 


Under the CARICOM Single Market and Economy (CSME), the free movement of labour enhances the availability of a ready pool of labour and skills and provides employment opportunities in other labour markets within the region for Barbadians. In relation to Barbados' social security system, migrant labour could compensate for the low population growth projected and concomitantly circumvent any fall off in the contributions to the National Insurance Scheme. However, there are some questions as to whether the National Insurance Scheme is ready for the potential increase of migrant workers under the CSME.

From its inception, the National Insurance Scheme was never a system of social protection for ‘Barbadian workers', but rather ‘workers in Barbados', notwithstanding their nationalities. The National Insurance and Social Security Act (Chapter 47) clearly stated:

12. (1) Subject to this Act, every person who, on or after the appointed day, being over the age of sixteen years and under pensionable age, is gainfully occupied in employment in the Island, being employment under a contract of service, shall be insured under this Act in respect of the several contingencies in relation to which benefits are provided under subsection (1) of section 2 1 and there shall be payable to or in respect of any such person, in the prescribed circumstances, any benefit payable by virtue of the said subsection.

"Every person" signifies that regardless of nationality or even legal status, all workers in Barbados are entitled to social security coverage. The "shall be" makes insurance under the Act mandatory, thereby making the employer, who denies the worker the right to be insured, liable for prosecution.

One can argue that the architects of the programme of national insurance were therefore forward thinking in the development of the legislation. There was therefore no need to amend the legislation to facilitate the free movement of labour under the CSME.

Barbados' social security system, which is a relatively mature system, has been proven and tested as an effective social safety net to anyone who worked in Barbados long enough to qualify for benefits, especially as it relates to pensions. Foreign nationals who met the requirements would receive pensions from the system even where the countries in which they reside do not have reciprocal agreements with Barbados. Other workers who had contributed but fell short of the contribution requirement for a pension would sometimes qualify for sizeable contributory grants i.e. lump sum payments.

However, the payment of lump sums as final payments at retirement has proven problematic. History is replete with examples of things that can go wrong, the main one being the squandering of funds and falling on straitened circumstances in later years.

It was therefore recognised that there was need for some mechanism that would allow for the recognition of the social security contributions made in the different territories that would allow for the payment of a pension, or rather a number of smaller pensions in each territory.

The CARICOM Agreement on Social Security


The movement of skills within the CSME prompted the conceptualization of the CARICOM Agreement on Social Security, which after a lengthy gestation period, was eventually signed in 1996 by some fourteen territories. This Agreement provided the mechanism that recognises all of the contributions made by individuals in signatory territories, even when they would be insufficient under the laws of the particular territories to entitle that person to a pension in each.

The Agreement deals strictly with the payment of pensions and not short term benefits. This is because there is no impediment to the payment of short term benefits provided the qualifying conditions are met. For example, if a worker becomes ill for two weeks and experiences an interruption of earnings, then just enough contributions in the relevant quarter (the quarter but one before the quarter in which the incapacity occurred) would qualify him/her for the benefit.

The scope of the Agreement, as outlined in Article 2, covers invalidity, disablement, old age or retirement pensions and survivors' and death benefits in the form of pensions.

Implementation of the Agreement


The various laws of the signatory territories (or contracting Parties as referred to in the Agreement) take precedence over the Agreement. Thus, if a worker qualifies for a pension on the basis of the contributions made in a territory, then the legislation would be used to compute that pension (Article 16) without reference to the Agreement.

In a case where the worker does not qualify for a pension in an individual territory, the Agreement then applies to allow for the contributions in all the signatory territories to be taken into account to determine entitlement to a pension. This is referred to in Article 17 of the Agreement as the totalisation of contribution periods. By this process, the total of the contributions made in all the signatory territories is compared with the minimum required in each territory to determine eligibility for a pension in each.

Where this eligibility is established, a pension is first computed as if all the contributions were made in each territory. The amount paid as a pension in each territory is then a proportion of the above computed pension based on the relationship of the contributions made in that territory compared to the minimum contributions required. In the application of the agreement, each territory pays its portion of the pension as computed in accordance with the formula outlined herein.

Conclusion


The CSME has the potential to help the NIS to remain vibrant and to be able to meet its obligations to the aged population of past contributors via inward migration and the scheme is ready to facilitate the free movement of labour. The National Insurance Scheme has always been able to provide some measure of social security to migrant workers. However, the CARICOM Agreement on Social Security, developed to compliment the free movement of labour under the CSME, provides a more manageable mechanism for protecting the social welfare of those workers who would migrate throughout the CSME.


Published: Monday, 15th May, 2006





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3rd Floor West, Warrens Office Complex, Warrens, St. Michael, Barbados | Tel: (246) 535-1400 | Fax: (246) 535-1573 | E-Mail: mol@labour.gov.bb