Lawmakers to cut limits on severance pay

A bill set to come before the
Legislative Assembly later this year would eliminate a cap on the amount of
severance pay employers are required to give workers who are made redundant or
who are wrongfully fired.

The proposal would also drop those
caps on payments to retirees who did not belong to any pension fund for the
years they worked at the company. Technically, this would only apply to the
years prior to the implementation of the National Pensions Law in the Cayman Islands
which was more than a decade ago.

The country’s Labour Law (2007
Revision) states that one week’s worth of severance at the employee’s current
pay rate should be given for each year of service. For instance, if a worker
has been with an employer five years and loses their job through no fault of
their own, they would be entitled to five weeks of severance pay.

However, that severance for each
year of service is capped in the law at 12 years. So, someone who worked for a
company for 14 years would still only receive 12 weeks of maximum severance if
they were laid off.

Under the Labour (Amendment) Bill,
2011, that 14-year employee would be entitled to 14 weeks of severance.

“If a person has put in 13, 14
years, they should be rewarded for the time they put in,” Employment Minister
Rolston Anglin said during a recent interview.

Mr. Anglin said he didn’t expect
much controversy over the change since many workers in the modern era don’t
tend to spend more than 12 years at one company anyway.

“If you look at the time people are
spending with one employer…it’s not like this will have any material impact
on the budget of the company,” he said.

What it might do, the minister
opined, is make businesses think twice about letting go of long-serving workers
during the economic downturn simply because those employees tend to earn more.
He also noted that the severance packages in the Labour Law are only envisioned
in the case of redundancies or if a case before the Labour Tribunal determines
the person was wrongfully dismissed from the job. An employee who gets fired
for cause would not be due severance in any case.

“There would actually be no benefit
for companies to terminate [the long-serving employee] under the new bill,” Mr.
Anglin said.

Retiring employees are a bit more
complicated a subject since the introduction of the National Pensions Law. The
current Labour Law allows for a retirement or resignation allowance for the
worker if they have a) been with the company for more than a year, b)
voluntarily resigned or retired, and c) is not entitled to a pension under
Cayman’s National Pensions Law.

The resignation allowance works the
same way as a severance package under the law; one week’s pay for every year
spent at the company. The new proposal now removes the cap of 12 weeks, similar
to what was done with the severance and wrongful termination provisions.

Minister Anglin said the pensions
law was intended to replace the retirement/resignation pay provisions of the
Labour Law. However, he noted there may be some employees who have been working
for local companies prior to 1998 when the pensions provisions took effect, but
he said it would be very few.

“The law says, once you have a
pension, that’s it, you get nothing,’ he said. 

Additional changes to the National
Pensions Law to strengthen enforcement and compliance with its provisions are
being drafted and are expected to come before the Legislative Assembly, Mr.
Anglin said. Cayman’s Complaints Commissioner Nicola Williams released a report
last year that indicated nearly 700 local businesses were not compliant with
legal requirements to pay pensions for workers.