Q&As on Social Protection

Social Protection

Question: A supplier deducts the legally mandated worker contributions for legally mandated worker insurance. However the supplier employs many migrant workers who will not be able receive the social benefits based on what they pay. From an ILO perspective, what is the appropriate course of action of the supplier in this case?

Answer: The company should obey the law, including laws requiring them to collect and forward the workers’ social security contributions. This should be done in a transparent manner and workers should be aware of their rights within the social security system.

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) stresses the importance of all the parties concerned to respect the sovereign rights of States, obey the national laws and regulations, give due consideration to local practices and respect relevant international standards. This includes legal obligations concerning social security.

Deducting workers’ legally mandated contributions to social security schemes from their wages is also consistent with the provisions of international labour standards, provided that the workers are informed of the amounts deducted.

If the social security scheme is comprehensive, the migrant worker will benefit directly from many of the provisions, such as medical care, sickness benefit, unemployment benefit and maternity benefit. Concerning pension benefits, a mechanism may exist for the migrant worker returning to his or her country of emigration to receive back his or her pension contribution or to have the pension benefit paid abroad. Similar schemes may exist for internal migrants returning to their home province. This is an issue of government administration of the social security scheme, beyond the ability of a particular company to address. See, Equality of Treatment (Social Security) Convention, 1962 (No. 118). See also Protection of Wages Convention, 1949 (No. 95).

Question: We run into some cases where a person is retired and gets his retirement pay. After retirement, the person continues to work in a factory. The management of the factory has not put the individual on the payroll because if they had done it a percentage of his/her pension will be taken away. The worker can get treatment at the hospital for free like all retirees. Is working after retirement allowed? Is it allowed to work without being put on payroll? In the event of an accident at work, is it sufficient that the retiree can go to the hospital for free?”

Answer: There are no restrictions of principle to work after retirement under ILO standards. However, national laws or regulations may provide restrictions.

As far as the pension is concerned, the ILO Social Security Convention 1952 (No. 102) provides that the benefit of a person otherwise entitled to it may be suspended if such person is engaged in any prescribed gainful activity or the benefit may be reduced where the earnings of the beneficiary exceed a prescribed amount.

Companies should maintain adequate payroll records in an approved form and manner according to national laws and regulations. See, Protection of Wages Convention, 1949 (No. 95). Giving work to a retiree without putting him or her on the payroll could be illegal for an enterprise if there are no legal ways provided in the law of doing so. Several countries have adopted laws punishing the failure of companies to declare workers and illegal employment, particularly in relation to social security and tax fraud. In some cases, workers who are willingly in violation of these laws risk both civil and penal sanctions. A benefit to which a person protected would otherwise be entitled may be suspended where the person concerned has made a fraudulent claim.

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) stresses the importance of all the parties concerned to obey the national laws and regulations, give due consideration to local practices and respect relevant international standards. This includes legal obligations concerning social security.

Concerning the question of medical coverage, the fact that the worker can access free treatment at the hospital for retirees may not necessarily be sufficient in terms of protection as it may not cover work accidents or it may not cover long term care as a result of a work accident.