Minister of Labour Ken Kandodo has admitted that rising workers’ compensation claims are increasingly becoming a burden on some employers, a development that has compelled government to set up Workers Compensation Fund (WCF).
In an interview last week in Blantyre, the minister said to help cushion workers from the rising financial burden, government will allocate money in the forthcoming 2020/21 National Budget for the fund.
He said: “Workers Compensation Fund will be like insurance for employers to use and they will be able to control the costs.
“Some money will be set aside to kick-start the fund and employers will be required to pay levy for employees.”
The pronouncement by Kandodo follows concerns from some companies over rising claims of workers’ compensation.
The issue was also raised during the minister’s meeting with representatives of Tea Association of Malawi and Rab Group of Companies in Blantyre last week where he was meeting firms as part of government’s one million job creation agenda.
Rab Group chief executive officer Ahmed Sunka said firms are being served with default judgments for cases “we don’t know about”.
He said this has forced companies to spend an average of K2 million per lawsuit.
“At the moment, the law is abused. Setting up a Workers Compensation Fund will encourage investors to thrive in the country,” said Sunka.
On his part, Employers Consultative Association of Malawi (Ecam) executive director George Khaki said once the review of Workers Compensation Act, 2000 is finalised and the fund is in place, employers’ cost of production, which has gone up due to fraudulent claims, will be reduced.
Ecam figures indicate that in 2019, claims amounted to K848 million.
Industy expert, Donbell Mandala, who is also Nico General Insurance Company chief executive officer, observed that with claims averaging K1 billion annually, setting up the fund will require billions of kwacha to be self-sustainable.
On his part, Insurance Association of Malawi president Bywell Chiwoni said setting up the fund is good to the insurance industry considering the current wave of claims both genuine and fake.
He said: “In most cases, the genuine injuries are exaggerated when claiming while fake claims include bogus claimants and employees and what has made it worse is the rush to use lawyers before allowing the normal processes of claiming.
“In turn, most insurance companies have resorted to either refuse cover or charge higher rates while clients have been asking for higher limits considering the unprecedented compensations given by the courts.”
Representing the workers, Denis Kalekeni, secretary general of Malawi Congress of Trade Unions said in an interview on Monday that the current compensation framework leaves a lot to be desired as workers have to have claims settled through the Ministry of Labour and not the workplace.
He said because of this, a claim is settled on a first come first serve basis, leaving other claimants to tap from funds that have been settled by a different employer.