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employment injury schemes is placed uniquely on the employer. As regards family allowances, these have either the character of a social element or wages or that cf a general demographic measure in the industrialised countries in which they originated and insured persons have traditionally been exempted from participation.
A special situation arises with regard to national provident funds cr provident funds limited to individual industries or groups of employees (e.g. public employees), as opposed to other social security schemes. Provident funds are based on the principle of compulsory saving, where contributions by or in respect of each contributor are accumulated in an individual account usually with interest and the benefit payable to the person concerned or his dependants on the occurrence of specified contingencies is normally equivalent to the amount standing to his credit. This should be contrasted with a scheme where there is a pooling of risks and resources, and the benefits are normally related, not only to the period of affiliation of the member concerned, but also to the social need of the beneficiary. National provident funds are invariably financed on a bipartite basis by employers and insured persons, except in the case of public employees in respect of whom the State would contribute in its capacity as employer.
ILO Convention No. 102, concerning minimu¤ standards of social security, provides that the cost of benefits and of administration shall be borne collectively by way of insurance contributions or taxation or both in a manner which avoids hardship to persons of small means and takes into account the economic situation of the country and the categories of persons for which the scheme is established. The Convention provides, furthermore, that the total insurance contributions borne ty the employees protected shall not exceed 50 per cent of the total of the financial resources allocated to the protection of employees and their wives and children in respect of all benefits except family benefits and, if provided by a special branch, employment injury benefit.
Methods of 11!
of fixing contribution rates
Contributions to be paid by insured persons and employers are usually fixed either at a flat rate or in function of the actual earnings of the insured persons.1
The system of flat-rate contributions is generally applied when the benefits are also payable at flat rates. This system of fixing contributions is easy to understand and administer. However, this system involves a regressive element, since as a proportion of earnings the contribution would represent а higher percentage for lower-paid workers and vice versa. This system may be appropriate in the case of schemes which aim to provide for a certain minimum level of benefit but it would not be suitable for schemes under which the protection is to bear a relation to the standard of living of the insured persons.
AS regards wage or income-related contributions, they may be fixed either as a straight percentage of actual wages or income, or they may be fixed on the basis of wage-classes or income-classes for each of which а specific flat-rate contribution would apply. In either case, it is the usual practice not to take into account, either for determining contributions or benefits, wages or income above a certain ceiling. The ceiling should obviously not be too low - in which case a significant part of the earnings of the covered population may be excluded nor too high, sc as to defeat the very purpose for which a ceiling is adopted. Wages or income-related contributions may be considered more equitable than flat-rate contributions; the wage-class method permits the introduction of an element of progressiveness into contribution rates by making contribution a somewhat larger percentage of earnings in the higher earnings-classes than in the lower classes.
In the case of national provident funds, the flat-rate method of fixing contributions would lead to the situation where persons with higher earnings would be prevented from saving commensurate with their capacity to do so. It is therefore the practice to fix the contribution rates in function of the wages, at a uniform percentage for all covered persons.
1 There are other methods of assessment applying when agricultural labour, is covered, e.g. in function of area cultivated, taxes on agricultural produce etc. Problems also arise when other groups such as artisans Or domestic workers are covered.
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