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The coverage in respect of severance payment has not been revised since 1991. Statistics in 1993/94 indicate that it is inadequate as only 16.5% of applicants were able to obtain their full severance payment entitlements and only 47.4% could obtain over 75% of their entitlements. This coverage will further diminish as the overall wage levels continue to rise. There is, therefore, a need to amend the Protection of Wages on Insolvency Ordinance so as to expand the coverage of the Fund relating to severance payment.
We now propose that the maximum coverage in respect of severance payment be increased from $8,000 plus 50% of any excess entitlements to $24,000 plus 50% of any excess entitlements. This proposed improvement will enable low income employees, particularly those with a shorter length of service, to obtain a relatively higher percentage of severance payment from the Fund. We estimate that under the proposed coverage, 80% of applicants in 1995/96 and 1996/97 will be able to receive from the Fund for not less than 75% of their severance payment entitlements.
We do not, however, propose to make any changes to the payment ceilings in respect of arrears of wages and wages in lieu of notice for the time being because both of them were substantially increased in 1993. We will review the situation later this
year.
The Fund is currently financed by a levy of $250 on each business registration certificate. The proposal will unlikely have any additional cost impact on employers because the existing levy rate would be enough to cover the increased payments from the Fund.
Both the Labour Advisory Board and the Protection of Wages on Insolvency Fund Board have been consulted on this proposal and given their support to it.
Mr President, I beg to move.
End/Wednesday, July 19, 1995