By NEIL HARTNELL
Tribune Business Editor
The Government was yesterday accused of seeking to transform Bahamian businesses into “social safety nets” by eliminating the Employment Act’s current ‘12-year cap’ on redundancy pay.
Peter Goudie, one of the private sector’s representatives on the National Tripartite Council, told Tribune Business that the business community was “totally opposed” to efforts by the Christie administration to alter severance pay laws.
Describing the Government’s proposal as “ridiculous”, Mr Goudie, the former City Markets human resources head, warned that if implemented it would only drive investment away from the Bahamas.
He added that the Government’s plan would also make it “cheaper for companies to go bankrupt” and cease business, rather than engage in downsizing essential to their survival and the preservation of at least some jobs.
And Mr Goudie also pointed out that this latest ‘social’ initiative ran counter to what the Bahamas needed most - getting its stalled economy moving and creating jobs to bite into an unemployment rate likely approaching 15 per cent once again.
“We’re totally opposed,” Mr Goudie told Tribune Business, confirming that the Government’s proposal to amend the ‘severance pay’ clauses of the Employment Act were now before the Tripartite Council.
“They’re effectively looking for companies to provide a social safety net. Companies are not social safety nets.”
The Employment Act currently allows line staff two weeks’ severance pay for every year worked up to 12 years, ‘capping’ the maximum payment they are entitled to at the equivalent of six weeks’ salary plus two weeks’ pay with, or in lieu, of notice.
Managerial staff are entitled to one month’s severance pay for every year worked, ‘capping’ the maximum sum they are entitled to at the equivalent of 12 months or one year’s salary, plus a month’s pay with, or in lieu, of notice.
Mr Goudie described these sums as “generous compared to a lot of other countries”, but revealed that the Government now wanted to remove the ‘caps’ or upper limits on statutory severance pay due to Bahamian workers under the Employment Act.
“The severance would be determined, but there would be no limit on it,” was how Mr Goudie described the Christie administration’s current proposal.
“The problem is that they want to eliminate that ceiling of 12 years, and they’re going to drive business away from this country with these kinds of ridiculous payments.”
He added that the Government’s proposal implied that an employee who had worked for the same company for 30 years would now have to be provided with the equivalent of 30 months’ pay, determined whether they were line staff or managerial employees.
The Bahamian judicial system has previously ruled that the Employment Act was intended by Parliament to provide a statutory minimum, or floor, for severance payments made to Bahamian workers.
This has resulted in several successful court actions where long-serving employees, who were with their employer for more than 12 years, used common law to obtain greater redundancy benefits than those due to them under the Employment Act.
These cases, coupled with large-scale redundancies at major employers, such as the recent 2,000-plus terminations at Baha Mar, seem to have prompted the Christie administration to move on the proposed amendments.
But Mr Goudie said yesterday that redundancy payments were only intended to enable laid-off employees to “get by” until they found another job. And there were also the unemployment benefits they could obtain via the National Insurance Board (NIB).
Suggesting that the Christie administration was largely targeting foreign-owned companies with its proposal, Mr Goudie said: “We’ve talked to the International Labour Organisation (ILO), and they’ve told us it’s not normal for any country in the world to require companies to provide social safety nets.
“We know they’re targeting expatriates, foreign companies if you want, but effectively you’re going to penalise every Bahamian employer.
“You’re effectively going to put companies under extreme financial burdens if they do any downsizing, which a company is allowed to do. Companies are not in the business of providing social safety nets; they are in the business of making money,” he added.
“If you do this, people coming here to do business will say: ‘You must be kidding me. It’s too expensive to do business here’.”
Mr Goudie said the ‘severance pay’ proposal also ran counter to the need to reverse the Bahamas’ slide in the World Bank’s ‘ease of doing business’ rankings, suggesting this initiative would help ensure that trend continues.
Based on Mr Goudie’s comments, the Christie administration is effectively talking out of both sides of its mouth - promoting the Bahamas to foreign investors as an attractive destination for doing business, while simultaneously ramping up the social programmes that inhibit ‘business ease’.
Following swiftly behind Value-Added Tax (VAT) and the minimum wage increase, the Bahamian private sector is being asked to absorb both a new National Health Insurance (NHI) tax and increased severance pay.
That is likely to be a burden too heavy for some, and Mr Goudie told Tribune Business on the latter initiative: “This is scary.
“If you’re a local businessman, and have got people who have worked for you for years, and if the economy gets worse and you have to downsize, you’ve got to pay enormous sums. It’s cheaper to go into bankruptcy.”