Safeguarding private sector employees

Mohammad Kashem served a private company for 20 years. One fine morning when he was getting ready to go to his office, he had a sudden heart attack. Unfortunately, he could not recover, left this world, leaving behind a family of four members – his elderly mother, wife and two children.

Kashem was the breadwinner of the family. The entire family was at the mercy of his minuscule salary. Like most of the private sector employees in Bangladesh, he was literally living from hand to mouth and had no savings whatsoever.

To add to the despairs, the organisation Kashem worked for neither had any insurance policy nor the after-service benefits. Consequently, after his passing, the family found itself in a dire state, with no clue how to survive.

Kashem represents millions of private sectors employees who devote their best part of life working for organisations yet are unable to ensure a secure life. What should be done to deal with this unkind situation? There should be some components in the compensation that would take care of the uncertainties associated with life.

For instance, medical allowances could be of help.

Employees and their family members do get sick. There are very a few companies that reimburse medical expenses for the employees and their immediate family members. Some companies offer a lump sum monthly amount, while most firms do not provide any such facility.

Health insurance to cover medical expenses is a popular and widely used tool in many countries. Employers, insurance companies, and the government should jointly work to come up with a cost-effective, comprehensive medical coverage plan.

There is a restriction in the existing tax law that says a company can pay 10 per cent of the annual basic salary, Tk 120,000, or whichever is lower as a medical allowance to an employee. If the company pays more than the specified amount, the additional amount is taxed. This restriction should be lifted to encourage firms to help the employees whenever they face any unfortunate medical emergency.

Another component could be life insurance. Anytime an employee can meet an accident that may lead to disability or even death. To address the challenge, life insurance coverage must be ensured for all employees. The regulatory authority would decide a minimum value. However, if the organisations want, they can go for higher insurance coverage.

A contributory provident fund can be put in place. From the basic salary of an employee, a certain percentage would be deducted, and the organisation would add a similar amount to top that up. The total amount will be invested.

At the time of separation, the employee will be awarded the total amount plus the interest earned.

One-month basic salary could be added for each completed year of service in the form of gratuity. This provision is already included in our labour law. However, not all organisations abide by this. Gratuity is also given at the time of separation.

A universal pension scheme can be introduced. Discussions have been going on since 2015 to put in place a pension scheme for the private sector employees and self-employed persons. In the budget speech of 2019-20, the finance minister proposed to form a Universal Pension Authority to implement the plan. However, the plan is yet to take any shape.

India, Nepal and Bhutan have already implemented the scheme. In fact, 186 countries have some kind of pension scheme for everyone.

In India, the scheme is known as the Employee Pension Scheme (EPS), which guarantees monthly pension after the retirement of the employees. The family of the employee gets the pension in case the employee expires.

Both the employee and the employer contribute at the rate of 12 per cent of the basic wages and dearness allowance per month. The government contributes 1.16 per cent of the basic pay in the pension account.

The entire 12 per cent of an employee's contribution is added towards the employee provident fund (EPF), while 8.33 per cent of the employer's contribution is diverted to the EPS, and 3.67 per cent is invested in the EPF. The fund is managed by a statutory body, the Employee Provident Fund Organisation.

It is always easier said than done! To implement the employee benefits, private organisations have to spend, which would naturally increase their costs. What would be the incentives for the companies to invest?

A study styled Employee Benefit Trends Study (EBTS) conducted by MetLife shows that good benefits packages contribute to increase loyalty, productivity, and job satisfaction, and reduce absenteeism and attract talents.

Studies suggest that a large number of private sector employees are worried about their healthcare, the uncertainty post-retirement and unforeseen mishap. A study shows 23 per cent of employees are less productive because of these worries. The same survey showed that 58 per cent of employees had lost sleep because of the worrying about future.

Sleepy, worried employees lack focus at work and thus are less productive. On the contrary, appropriate fringe benefits help employees reduce their stress and become more productive.

The EBTS reveals that 51 per cent of employees agree that benefits increase their productivity. The productivity rises by 20 per cent. Another study shows that 25 per cent of companies with the largest health promotion budgets have seen a 16 per cent year-on-year reduction in productivity loss. So, increased productivity means reduced cost of production or services that eventually impacts the bottom-line positively.

Companies that offer considerate benefits are more likely to attract better talents and retain them, which eventually boils down to managing their businesses efficiently.

So, in order to safeguard private sector employees, we need a regulatory framework first. The framework will outline the minimum of benefits an organisation must ensure. The government should take immediate action to introduce the universal pension scheme. 

Policy support like tax benefits and soft loans to organisations with the best of the employee benefits will also encourage private enterprises.

Concerted efforts from the regulators, thinks-tanks and employers are essential to protect the interests of millions of private sector employees who play a massive role in the county's impressive journey towards building a prosperous Bangladesh.

The author is chairman and managing director of BASF Bangladesh Ltd. Views are personal.