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Zambia: Laws expand employee benefits and health insurance

Health and Benefits|Inclusion and Diversity|Total Rewards|Integrated Wellbeing
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July 5, 2019

The new Employment Code Act imposes a variety of new benefits and entitlements that employers will need to review in detail.

Employer action code: Act

The new Employment Code Act (ECA) expands on a number of existing benefits, such as housing, health and maternity leave benefits, and eligibility for overtime pay. It also creates new entitlements such as mandatory end-of-service gratuities for workers on fixed-term contracts, severance for permanent employees and unpaid paternity leave. The ECA, effective April 19, 2019, repeals and replaces the Employment Act and related legislation. It is also worth noting that the government is in the process of creating a national insurance system under the National Health Insurance Act (NHIA) passed in April 2018. The commencement orders for the NHIA are still pending, but the regulatory bodies to manage the system are currently being established.

Key details

New entitlements, benefits and employment provisions under the ECA include:

  • Severance entitlements must be provided for individual and collective dismissals of workers employed under indefinite-term contracts. The lump sum benefit for collective dismissals and individual termination for reasons of death or disability is two months’ pay times years of service. The Ministry of Labor is expected to decree the formula for individual dismissals due to other causes by regulatory instrument.
  • Severance is not payable to employees working under a fixed-term contract or so-called long-term contract (defined as a contract for service exceeding 12 months, renewable for a further term or for a specific task/project with a predefined end date). Instead, they are entitled to an end-of-service lump sum gratuity equal to 25% of the employee’s base pay over the term of the agreement.
  • Employers are required to prepare a written employment contract for all employees subject to certain minimum contract terms such as working time, pay and benefits. Furthermore, the written consent of the employee is required to transfer employment. Employees who decline the transfer are entitled to severance.
  • Provisions were created for probationary employment of up to three months, which may be extended one time.
  • Employees are entitled to 12 days of paid compassionate leave for the death of a spouse, child, parent or dependent.
  • Male employees with at least 12 months of service are entitled to five consecutive working days of paternity leave (unpaid).
  • Employees with at least six months of service are entitled to seven working days of paid leave (“family responsibility leave”) to care for a sick child, spouse or dependent. In addition, all employees are entitled to three days’ paid leave for reasons related to ensuring the welfare, health or education of the employee’s child, spouse or dependent. Both leaves are non-accumulative.

Changes to existing benefits and employment provisions (or where eligibility has been extended from some to all employees) include:

  • All employees who work in excess of the normal 48-hour workweek are entitled to overtime pay equal to 150% of normal pay per hour of overtime work. Formerly only workers covered by the Minimum Wage Act (“protected employees”) were eligible for overtime.
  • All employees are now entitled to some form of housing assistance, which may take the form of direct provision of housing, home loans, loan guarantees or a housing allowance. Previously the mandate applied only to protected employees.
  • All employees are now entitled to medical care, medicine and transportation (previously mandatory only for protected employees).

  • All employees are now entitled to medical care, medicine and transportation (previously mandatory only for protected employees).
  • The minimum service requirement for entitlement to annual leave increased from six to 12 months. At the end of the following 12-month leave year, the employee is entitled to cash in lieu of any of the unused leave (24 working days per year). Employees can also agree to accept pay in lieu of leave at any time. Compensation for unused leave is payable on termination.
  • All employees working under contracts of 12 months or more are entitled to employer-paid sick leave for up to six months, with the first three months at 100% of pay and the last three at 50%. Individuals engaged under shorter-term contracts are entitled to 52 days of leave at 100% of pay for the first 26 days and then 50% for the next 26 days. The ECA also prohibits termination of employment for workers on sick leave except with the individual’s consent. Employment may be terminated on medical grounds after six months if the employee has not recovered, in which case a lump sum indemnity of three months’ pay per year of service is payable by the employer.
  • Maternity leave increased from 12 to 14 weeks for employees with at least one year of service (formerly two years) but is employer-paid only for claimants with at least two years of service. In the event of premature or multiple births, leave is extended by four weeks. In the event of miscarriage in the third trimester or stillbirth, six weeks’ leave is payable.

Key aspects of the National Health Insurance (NHI) system will include:

  • All citizens and residents age 18 and older will be required to register with the NHI.
  • The National Health Insurance Management Authority (NHIMA) has announced the planned imposition of a basic health insurance contribution of 1.0% of pay for employees and employers, which will be collected by a central NHI fund.
  • NHIMA is developing an essential benefit package and will be responsible for contracting for delivery of services with public and private service providers. Patients will not be subject to cost-sharing requirements for essential services.

Employer implications

In addition to newly mandating the provision of severance, health care benefits and new forms of paid family leave, the Employment Code Act is also significantly more prescriptive and detailed in its provisions and protections for employees compared with the prior Employment Act and will increase labor costs. Employers with operations in Zambia should review the Act and its implementing regulations (“statutory instruments”) when they are released.

While Zambia has a universal health care system, the availability and quality of services is neither uniform nor well funded. Nationally, health care spending equals about 5% of GDP, but only half of that is government spending. The government estimates that only about 4% of the population has health insurance coverage. The development of a national insurance fund should boost the development of the market for health insurance.

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