The ILO standards on unemployment

The International Labour Organization (ILO) has adopted conventions which set international labour standards. Three important conventions on unemployment benefits are: a) Ensuring Benefit or Allowances to the Involuntarily Unemployed Convention, 1934 (No. 44); b) Social Security (Minimum Standards) Convention, 1952 (No. 102); c) Employment Promotion and Protection (Unemployment) Convention, 1988 (No. 168) and Recommendation (No. 176).

a) A landmark in unemployment benefits systems was the adoption by the ILO in 1934 of the Ensuring Benefit or Allowances to the Involuntarily Unemployed Convention, 1934 (No. 44). This convention required ratifying states to set up a system for the payments of benefits to the involuntarily unemployed. It laid down minimum requirements as to coverage of the population, conditions of receiving unemployment benefits, and duration of benefits.

b) Detailed provisions regarding unemployment benefits were later laid down in the Social Security (Minimum Standards) Convention, 1952 (No. 102), which specified how the periodical payments were to be calculated.

c) In 1988, the ILO adopted the Employment Promotion and Protection (Unemployment) Convention No. 168 which provided for benefits in cases of full unemployment and partial unemployment.

The unemployment benefits system should be designed to protect persons who are in paid employment. However, the ILO allows some possible exceptions such as self-employed persons; domestic workers; homeworkers; workers whose employment is of a permanent character in the service of the government; seasonal workers; young workers under a prescribed age; and members of the employer's family. Unemployment benefits should be provided in the form of periodical payments.¹⁷³

The ILO has emphasised that each member state should maintain an unemployment benefits system to protect the persons who are involuntarily unemployed. Each state may determine the method or methods of protection, whether by a contributory or non-contributory system, or by a combination of these two systems.

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However, even if a state protects all residents, whose resources, during the contingency, do not exceed prescribed limits, the protection afforded may be limited, in the light of the resources of the beneficiary and his/her family.

2.2.1. Variety of unemployment benefits systems

According to the ILO standards there are mainly two types of statutory unemployment benefits systems:

1) unemployment insurance system and 2) unemployment assistance system.

Most of the industrialized countries (e.g. nearly all of the OECD countries) administer unemployment insurance systems. Only a few industrialized countries (e.g. Australia and New Zealand) rely solely on unemployment assistance systems. Some countries operate both systems.

Countries which have unemployment insurance systems also provide unemployment assistance or social assistance to support workers who fail to qualify for insurance benefits or who have exhausted their insurance rights. While unemployment assistance systems cater for the unemployed only, social assistance programmes are open to all who only need fulfil a means-test requirement. The social assistance programme is mentioned because an unemployed person might exhaust the unemployment insurance or unemployment assistance available and his/her last resort would be social assistance.

2.2.2. Persons protected

The unemployment benefits system (including both the unemployment insurance and unemployment assistance systems) should be designed to protect persons who are in paid employment, since they are exposed to the risk of involuntary unemployment. If it is deemed necessary, there could be exceptions in respect of

a) self-employed persons,

b) persons employed in domestic service, c) homeworkers,

d) workers whose employment is of a permanent character in the service of the government, a local authority or a public utility undertaking,

e) non-manual workers whose earnings are considered by the competent authority to be sufficiently high for them to ensure their own protection against the risk of unemployment,

f) workers whose employment is of a seasonal character, if the season is normally of less than six months' duration and they are not ordinarily employed during the remainder of the year in other employment,

g) young workers under a prescribed age,

h) workers who exceed a prescribed age and are in receipt of a retirement or old-age pension,

i) persons engaged only occasionally in employment, and j) members of the employer's family.

2.2.3. Benefits to be provided

In cases of unemployment, benefits should be provided in the form of periodical payments calculated in such a way as to provide the beneficiary with partial and transitional wage replacement and, at the same time, to avoid creating disincentives either to work or to employment creation.

In cases of underemployment¹⁷⁴, benefits should be payable in a way to be determined by national laws or regulations to unemployed persons whose employment has been reduced.

2.2.4. Conditions for payment of unemployment benefits

The right to receive unemployment benefits may be made subject to compliance by the claimant with the following conditions:

1) the unemployed person is capable of work, available for work, and willing to work, and

2) the unemployed person seeks work by registering at a public employment exchange or at some other offices approved by the competent authority, and attends there regularly.

2.2.5. Conditions for disqualifying the claimants for unemployment benefits

A claimant may be disqualified for the receipt of unemployment benefits for an appropriate period:

1) if the claimant has lost employment as a direct result of a stoppage of work due to a labour dispute,

2) if the claimant has lost employment due to misconduct or has left it voluntarily without just cause,

3) if the claimant has tried to obtain fraudulently any unemployment benefits, or

174 The concept of underemployment has been introduced for identifying the situations of partial lack of work.

According to the ILO, the ―underemployed‖ comprise all persons in paid or self-employment, involuntarily working less than the normal duration of work determined for the economic activity, who were seeking or available for additional work during the reference period. Thus, the definition sets forth three criteria for identification of ―underemployed‖: (i) working less than normal duration; (ii) doing so on an involuntary basis; and (iii) seeking or being available for additional work during the reference period. All three criteria must be satisfied simultaneously before a person can be classified as ―underemployed‖. Source:

http://www.legco.gov.hk/yr98-99/english/sec/library/989rp05.pdf (12.03.2011)

4) if the claimant fails to comply with the instruction of a public employment exchange or other competent authority with regard to applying for employment, or if it is proved by the competent authority that the claimant has failed or neglected to avail himself of a reasonable opportunity of suitable employment.

2.2.6. Qualifying period

The right to receive unemployment benefits may be made conditional upon the completion of a qualifying period, involving:

1) the payment of a prescribed number of contributions within a prescribed period preceding the lodge of a claim to benefits or preceding the commencement of the period of unemployment;

2) employment for a prescribed period preceding the claim to unemployment benefits, or

3) a combination of the above alternatives.

The purpose of the qualifying period is to make certain that the claimant is properly within the scope of the system. The length of the qualifying period proposed by the ILO is twenty six (26) weeks of employment in the past fifty two (52) weeks.

2.2.7. Benefit rates

If the unemployment benefits are based on the contributions of or on behalf of the person protected or on previous earnings, they should be fixed at not less than 45% of previous earnings or the statutory minimum wage or of the wage of an ordinary worker, or at a level which provides the minimum essential for basic living expenses, whichever is the highest.

The commonly observed rates of unemployment benefits are 50% to 60% of a claimant's previous earnings, within maximum and minimum limits. Most unemployment benefits systems add a supplement for a dependent spouse and children.

The ratio of benefits to previous earnings is known as ―replacement rate‖ or

―replacement ratio‖.

2.2.8. Duration of benefits

In the case of full unemployment, the initial duration of payment of the unemployment insurance benefits may be limited to twenty six (26) weeks in each spell of unemployment, or to thirty nine (39) weeks over any period of twenty four (24) months.

In the event of unemployment continuing beyond the initial period of benefits, the duration of payment of benefits, which may be calculated in the light of the resources of the beneficiary and the respective family, may be limited to a prescribed period.

2.2.9. Waiting period

The ILO allows a waiting period of the first seven days in each case of suspension of earnings. This is to reduce the administrative and financial burden caused by short spells of unemployment as the employment exchange office may be able to place the claimant in a suitable job during that time. The waiting period may be waived if a spell of unemployment starts very soon after a previous spell ends. In the case of seasonal workers, the duration of the benefits and the waiting period may be adapted to their conditions of employment.

Almost all national unemployment benefits systems prescribe initial waiting period between the last day of employment and the first day on which benefits are paid. Most waiting periods are three to seven days.

2.2.10. Administration of unemployment benefits systems

The ILO recommends a close liaison between the employment exchange office and the social security office since claimants are required to attend the former to prove their eligibility for benefits and to collect their benefits from the latter.¹⁷⁵

3. European Code of Social Security 3.1. Introduction to the European Code of Social Security

The European Code of Social Security, its Protocol and the European Code of Social Security (Revised) are the basic standard-setting instruments of the Council of Europe in the field of social security. Although the Code and the Protocol date back to 1964 they have proved to be valuable tools in defining common European social security standards that can be used for orientation in the reform process going on in many European countries, especially in Central and Eastern Europe.

The underlying idea of these instruments is to promote a social security model based on social justice. The state is deemed to be responsible for establishing and maintaining a stable and financially sound social security system. Those who cannot earn their own living because of sickness, unemployment, old age, employment injury, occupational disease, maternity, invalidity, or death of the breadwinner should be guaranteed a decent standard of living; those who have to look after children should be supported by the society. The European Code of Social Security (Revised), the most recent instrument, dating from 1990, reflects some of the developments in social security philosophy towards the end of the century without abandoning the fundamental concepts laid down in the European Code of Social Security and its Protocol.

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These specialised social security instruments form an essential component of the protection of human rights through the Council of Europe. The ―right to social security‖

is enshrined in one of the basic human rights instruments of the Council of Europe, namely in the European Social Charter. States having ratified the revised European Social Charter and having accepted Article 12, paragraph 2, are obliged to maintain the social security system at a satisfactory level at least equal to that necessary for the ratification of the European Code of Social Security. Therefore, the promotion of the European Code of Social Security is seen as one of the core tasks of the Council of Europe in order to secure common values in the field of social cohesion in its member countries.

It is worth noting that the standards of the Council of Europe in the field of social security are closely linked to the conventions of the ILO. Convention No. 102 (Social Security Minimum Standards) served as a model for the elabouration of the European Code of Social Security. Moreover, the higher standards enshrined in the Protocol to the European Code of Social Security and in the later social security conventions of the ILO also largely coincide. The control of the implementation of the social security standards of the Council of Europe is based on institutional co-operation between the Council of Europe and the ILO. The two organisations work together closely in promoting their standards. The overall aim of this co-operation is to combine the efforts of the two international organisations devoted to the promotion of social justice and to avoid divergences in the interpretation of international social standards.¹⁷⁶