A Penchant for No Pension Plan

Jahmar Clarke
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A Penchant for No Pension Plan

The new trend in the Jamaican labour market is for employers to contract their complement of workers on short term contracts. No doubt this trend has emerged as a response by employers who feel aggrieved that our labour laws are not balanced. This trend will lead to the next generation of Jamaican retirees being left without a pension and heavily dependent on state welfare or savings, if they had any. There is no redundancy benefit to claim and no pension to fall back on after a series of short term contracts with possibly different employers that extend over long periods.

Many Jamaicans are now unable to accumulate years of service. What prompted this new age reality? Employers are cautious about having employees on permanent staff and risk the possibility of an unjustifiable dismissal claim, especially in light of the 2010 amendments to the Labour Relations and Industrial Disputes Act (LRIDA) that now allows non-unionised workers greater access to the Industrial Disputes Tribunal (IDT). The issue of these short term contracts has not been litigated in our Courts and might in certain circumstances be considered continuous employment by our Courts but this does not cure the ‘pension planning’ dilemma. Why have companies resorted to short term contracts?

Let’s say John is employed to Company X. Company X is a small business with 10 workers and John is caught stealing. Company X dismisses John. John claims his dismissal was unjustifiable and lodges a complaint at the Ministry of Labour & Social Security. It takes the IDT 18 months to have his matter heard and a decision made by the IDT in John’s favour on purely procedural grounds. If John earned, say $100,000 per month, the small company with small revenues may now have to pay out $1.8M to John for the period he should have been at work. Company X would not have had the benefit of John’s work and, if they hired someone new, they would have had to pay this new person. If by that time the Tribunal rules against Company X, the Company may still have to pay John. John could even be reinstated in his position by the IDT if the members are so minded, even though he was caught stealing.

To limit its exposure, Company X will now put all new employees on a 6 month contract. In the future, they will never be exposed to more than 6-months salary if an employee succeeds against them before the IDT. And, if the theft is discovered shortly before the contract is scheduled to expire, they simply will wait until it expires and not renew the contract rather than dismiss the employee for theft.

A consequence of these short term contracts is that the employees would not be permanent staff and therefore not be eligible to participate and benefit from the pension fund. The employee may not even attain retirement age within the organization. The short term contract employee may not even be able to satisfy the minimum requirements of an average of 39 weeks of contribution per annum and no less than 156 contributions prior to reaching retirement age in order to claim the pension benefits under the National Insurance Scheme.

This may not seem like a colossal problem now but to be forewarned is to be forearmed. The workforce is on a trajectory where workers, upon reaching retirement age, may still have to work, become dependent on the state for their welfare or suffer because they were not entitled to a pension benefit. The pendulum has swung too far and the idea of having court rooms in corporations must be tamed. It has eroded summary dismissals in its entirety and has led to the rise of short term contracts.

In the long term the biggest losers will be the people of Jamaica.

Jahmar Clarke is an Associate at Myers, Fletcher & Gordon and is a member of the firm’s Litigation Department. Jahmar may be contacted via jahmar.clarke@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.