Unemployment insurance under study in Peru

Tuesday, September 27, 2016

Peru's government is working on designing unemployment insurance, which was part of the electoral promises for the first 100 days in office of the new administration.

The latest version being discussed involves insurance to be bought by employers, which would guarantee employees 80% of their salary for up to six months after losing a job, according to local paper El Comercio.

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Those currently working will be allowed to remain in the existing compensation scheme, which provides for an additional monthly salary for each year in the job, or change to the new unemployment insurance. New entrants to the workforce will have no alternative to the insurance.

The proposal contemplates a monthly contribution in the range 2.2-3.5% of salaries which will go to a common fund.

Among the key aspects that the new unemployment insurance must take into account is how to be attractive for insurance companies, according to Diego Macera, CEO of the Peruvian economy institute (IPE), who added that the insurance could be too risky for insurers due to economic cycles. During recession unemployment could make the accumulated funds insufficient to cover compensation, he said.

Taxes on state subsidies for the common fund must be avoided, added Macera, according to El Comercio.

Finance minister Alfredo Thorne (photo) announced that a reform to the pension system, including the private pension fund managers known as AFPs, will be studied by two commissions: a technical one and a political commission.