Inside NSITF workers compensation scheme

The Nigeria Social Insurance Trust Fund (NSITF) has begun the process of expanding the factors that constitute payroll in its bid to improve the efficiency of the Employees Compensation Scheme (ECS).  It is no doubt that employers kicked against the one percent of workers’ salary to be paid into the Employees Compensation Scheme (ECS), which […]

The Nigeria Social Insurance Trust Fund (NSITF) has begun the process of expanding the factors that constitute payroll in its bid to improve the efficiency of the Employees Compensation Scheme (ECS). 

It is no doubt that employers kicked against the one percent of workers’ salary to be paid into the Employees Compensation Scheme (ECS), which came into effect in 2010, but the latest step to expand what constitutes a payroll is causing disquiet among employers of labour in the country especially the private sector that constitutes membership of Nigeria Employers Consultative Association (NECA). 

Currently, the payroll constitutes one per cent of workers’ basic salary, transport and housing allowance. 

Employers have been paying only one per cent of workers’ basic salary, transport and housing allowances into the ECS operated by the NSITF since the commencement of the scheme in 2011. The fund is a pool of contributions that are meant for the rehabilitation, treatment and payment of death benefits of workers that sustain work-related injuries or die in the course of work.  

The new additions, which is expected to take effect from January next year, as contained in the Memorandum of Understanding signed by the NSITF and NECA involves one per cent of the total payroll with exception of pension and special allowances. 

Justifying the implementation of the full Act, the Acting Managing Director of NSITF, Ismail Agaka, explained that the Fund looked at the dynamics and reasoned that artificially lowering of the rate would affect the benefits that go to the employees.  

“Can we really do that in an economy that is in recession? Can we really cope with the low benefit? It would be because benefits are a function of the contributions. So, in adjusting, the system is boosting the morale of the employees. Who benefits in the end? We think that it is a win-win situation. It is a win for the government because this would stable industrial relations in the country. It is also a win-win for employers because employees would be more contended which would reflect in profitability and productivity. It is a win-win for employees because they know they have caring employers and a caring system and can therefore give their best,” he stated. 

The NSITF boss insisted that the rate has not been redefined but simply complying to the dictate of the law five years after the commencement of the implementation.    

Again, he explained: “We have not re-defined the compensation. What we are simply doing now is that we are implementing the provisions of the Act as it is. The Act says the remittances must be based on total emoluments of employees. Five years ago, we had a memorandum of understanding with NECA that payment would be on the basis of basic salary, housing and transport allowances. But every agreement is subject to periodic review in the light of reigning circumstances and that is exactly why this step has been taken.” 

Agaka submitted that the expansion in the contribution as contained in the Employees Compensation Act would increase the amount of benefits that the NSITF pays to workers that sustain injury in the workplace.  

Agaka lauded the Director General of NECA, Mr. Olusegun Oshinowo, for playing a supportive role since the commencement of the Employees Compensation Scheme and for leading the discussions that led to the new Memorandum of Understanding (MoU).   

Agaka noted that the adoption of law is might, which has been the attitude of law enforcers over the years in law enforcement has not achieved the desired result because it does not embed the spirit of social dialogue.  

He said, “Even if the law backs the action, the operators must be able to convince those that the law is meant for of the need for compliance, stressing the essence and benefits of such law to individuals as well as the society as a whole. At the NSITF, we recognize the fact that the law is there to be applied for the mutual benefit of the government and the governed. And in applying the law, logic and wisdom must be applied in equal measure so that it does not become a toothless law. In Nigeria, there are so many laws that are un-implementable because they could not be applied. This is so because there is no buy-in of those that the laws are targeted at. For a law to achieve its purpose, there must be a sense of ownership amongst all the stakeholders to take the law as theirs. This is what this agreement is intended to achieve.” 

Also speaking at the signing ceremony of the MoU, the Director General of NECA, Mr. Olusegun Oshinowo, lauded the management of the NSITF for believing in social dialogues and for always consulting with the employers’ body on the implementation of the ECS so far.  

The NECA scribe noted that the constitution of a joint committee that drew its membership from both NECA and NSITF was instrumental to arriving at figures that were acceptable to all the major stakeholders.  

While the definition of payroll may cause controversies, both NECA and NSITF decided to define payroll on the basis of exclusion and that the items that would be excluded are items that are irregular on the payroll such as bonus, overtime payments, items that employers bear the costs but do not translate into cash in the pocket of employees, which formed the basis for the exemption of pension contributions. 

The NECA boss hinted that the signed document would be sent to all employers in the country before the end of the year to enable them plan for 2017 expenditure. 

The NECA chief was quick to caution employers against flouting the newly agreed definition of payroll in the payment of the one percent required by the ECS. 

Again, the expansion of the ECS into the states has also gotten a major boost as the Governor of Rivers State, Nyesom Wike, has indicated the readiness of the state to join the scheme.

Also speaking, Minister of Labour and Employment  Chris Ngige said the Employees Compensation Act makes it mandatory for all employers of labour to care for its workforce when they sustain injury at the workplace. 

“The private sector has keyed into the programme and the state governments are beginning to understand why they need this law in the protection of their workers,” he said.