THE NIS NEEDS HELP

Oct 03, 2012 Features / Columnists, Peeping Tom

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The loss of its investment in CLICO was bound to hurt the viability of the National Insurance Scheme (NIS). But even long before that debacle, the NIS was facing problems or to use the more convenient euphemism, challenges.
The number of businesses that are submitting contributions is only a small fraction of those registered for such purposes; the same goes for self-employed persons. In short, many of those who are supposed to be paying or remitting the NIS contributions are not doing so, that is perhaps the greatest problem that the scheme faces.
To add to this problem, is the high level of informality of the Guyanese economy. We have thousands of persons working in this country but their contributions to the NIS are non-existent. They are working; they are employing persons; but they are not paying in or remitting contributions to the scheme.
High amongst the defaulters are vendors and others who are part of the informal economy. High also are many who work in the goldfields away from the reach of the NIS. High too are thousands who work in the construction sector and who do not pay either taxes or NIS.
Many of these persons when their limbs can no longer support the hard work that they are now undertaking, will seek pension benefits from the state. And they will complain that the old age pension offered by the government is too small. That old age pension was, however, never intended to be available to everyone who has reached the age of sixty-five. It was supposed to be paid to persons based on a means test, something that was abolished by the PPP regime and which has unfortunately led to a situation where persons actually feel that the government is legally obligated to provide for them in their old age.
If those persons who will cry foul when they reach pensionable age had however been contributing to the NIS, they would receive a healthy social security pension at age 60, rather than having to wait until 65 for the government old age pension.
The third problem faced by the NIS and which is likely to also impact on its viability, is high administration costs. The NIS is a large employer with hundreds of workers. The process of filing, processing and paying claims is a costly exercise requiring a great deal of paperwork. The cost to companies of transmitting contributions to the NIS is also costly.
It would be to everyone’s interest if the entire system was computerized and the NIS was integrated electronically with employers and self- employed contributors. In this way, all the contributions and records about contributions can be sent electronically to the NIS by employers.
In this way, all the paper work would be avoided and there would be a trace of the transactions between employers and the NIS and between self-employed contributors and the scheme. This would result in substantial savings to the scheme which can then be ploughed back into benefits.
But some of the benefits offered by the NIS are also part of the problem. The NIS benefits particularly for dental work and eyeglasses serves the interest of the professional classes that provide these services. These benefits have healthy reimbursements.
The NIS should give serious consideration towards ensuring that the cost of these services is reduced nationwide. In this way, the overall cost of benefits will be reduced.  The government should ask the Chinese and the Cubans to establish a facility that provide cheap spectacles and free dental work, and the NIS should pay for these services, thereby removing the need to have to reimburse private sector service providers in these fields. This will ensure that both eye care and dental service are more competitive and therefore reduce the cost of the service and by extension the reimbursements provided to contributors by the NIS.
The NIS also faces a problem because of the early age of retirement in the government service, the largest employer in the country. If the age of retirement is extended to sixty and later sixty five, it will make a big difference to the fortunes of the scheme.
But no matter what the NIS does, the fundamental problem is the need to ensure that all workers pay NIS. There are many persons who are working with employers who do not pay NIS.
These workers are the ones who will lose in the long run. But many of them are afraid that if they press their employers to pay NIS on their behalf, the employers would dismiss them.
The NIS has to adopt a different strategy to get to these persons. It is no use trying to wield the big stick. That has not worked. What the NIS should be doing is trying suasion.
They should launch a special public relations programme aimed to educating informal workers and those not registered about the benefits of being an NIS contributor. When workers appreciate that it pays to be part of the scheme, then three quarters of the work of the NIS would be undertaken by these workers who will stand up to their employers and demand to be registered for NIS purposes.

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