Since the severance pay law was modified in 1997, companies and employers have been obligated to regularly deposit the money in trust at local banking institutions for their safekeeping. Banks manage the money, generate interest and provide daily statements online to the workers. Of course, the Government did not participate in this, it paid severance out of the regular budget, always underestimating how much it needs, which means that if you quit a Government job, it can take months, if not years to get your payment.
In contrast, when a private worker quits, he calls his bank, signs a form and the money,which is well-managed, goes directly to the workers account.
But in its ever changing need for money and control, Chavez just announced that in the new Labor Bill, this will be done by the Government itself. Another day, another new bureaucracy, another rip-off.
Just think, the same Government that can’t produce a balance sheet for Fonden when it is required, will now manage, invest and handle billions of Bolivars and millions of daily transactions and will attempt to give the workers daily balances online. Dream on!
And then you tremble when Foreign Minister Maduro says that this will create a “giant fund” of “national savings” and…”also for investment”. Which simply means that the Government has set its eyes on this money for its “investments”. I imagine that they will fund housing projects, electric power stations in Venezuela (Or Cuba?) and the private workers will start having the same problems Government workers have. Some will never collect, or will be paid with Cocoabonds, the day even PDVSA will not be able to pay for things anymore.
The infinite predatory ability of Chavez and his Government now sets its sights on the workers money. As Chavez pleaded with Christ, he needs time to do “more”, sure, he wants to scrape the bottom of the barrel, before he sells the barrel itself.
The Devil's Excrement 
April 16, 2012 at 12:37 pm
[…] Chavez Predatory Appetite Sets Its Sight On Ripping Off The Workers […]
April 11, 2012 at 2:07 pm
The new law goes back to the retroactive system that was scrapped in 1998, which said you have to pay a month’s salary for each year workes at the last salary of the worker. Additionally, this will be paid over “salario integral” , that is, it will include overtime and other benefits such as bonuses.Today, the employer deposits the amount in the fund at the end of the year, but there is no retroactivity.
In a country with essentially 50% unemployment (50% only work in the formal economy) this makes little sense, as employers are weary of hiring someone new, as well as keeping someone a long time, it just adds up and adds up.
Labor laws here are very restrictive, you can not have temporary workers, after 3 months they become full time and get all these benefits, you can not fire anyone who makes less than I dont know how many minimum salaries, the Government decrees salary increases every year. You have to pay part in food like stamps. It is all so regulated that I personally think it does not aid in creating employment. Essentially, when you hire someone, you can’t know how much it will cost you.
When the old system was scrapped, it was an agreement then between the Government, workers and companies who together came up with a system that was supposed to be better. Today they just go back to the old one, no study, no numbers. Ironically, it has always been the Government that does not comply with the payments.
The origin of severance is when in Venezuela there was no form of pension, the idea was the severance was like a sort of pension package you left with. Then they started pensions and they left the severance. Really screwed up. I think between the yearly increases decreed by the Government and the severance, salaries are kept low. People also get mandatory bonuses and mandatory “vacation” bonuses.
April 11, 2012 at 2:49 pm
That is what I thought. Too many controls that are supposed to protect the employes, are actually harming them.
The one that gets me the most is the “utilidades” in chritsmas, and people complaining that they can’t get gifts becuase they have not received them for any reason.
No such thing here! Christmas gifts are not the employers’ responsibility!!
Bonuses are not mandatory either. You get them depending on the employers, on your performance or on the contract.
And two weeks a year for vacation is also normal. I’m a senior and I get three. Lucky me.
April 11, 2012 at 6:47 pm
Carolina:
“Utilidades” are not some sort of bonus, theoretically they represent profit sharing which is built in to the labor law.
A business must either determine x% of yearly profit to be paid to the workers or fix x number of days per year to be paid at or around the end of the calendar year.
Workers that are working under a collective bargaining agreement usually choose to set x number of days instead of a percentage of profits, because profits come and go and they prefer a sure thing. Businesses also prefer x number of days because it is a relatively fixed number you can plan for.
I usually multiply by 3 to get an approximate cost for a new hire, given the collective bargaining agreement we have in place in our business. Going back to the calculus we had before, plus using salario integral makes me think in terms of a multiplier of at least 4.
One reason that this system of what used to be called antiguedad, prestaciones y utilidades put into play was in a way a system of forced savings, assuming that the majority of blue collar workers would not save and would instead piss away their pay, plus forcing business to “share profits” and also to try to provide some sort of pension.
All of this thanks to Rafael Caldera for the most part (though he ceratinly had help from the leftist/labor movement of the time), something for which many businessmen at the time wanted to crucify him for.
Going back now to that older system, that took into account for ALL the time you worked in a given company and calculated based on your LATEST pay, PLUS doing so with the INTEGRAL salary that includes Sundays, Overtime, regular pay, bonuses etc.etc. is simply going to raise the cost of hiring someone practically prohibitive and will seriously hinder pay raises.
The current system now considers that if you worked 15 months getting paid 5 bsF per day, then work the following 12 months for 7 BsF per day then that is how your “P, A,U” are calculated (15 months @ 5, 12 @ 7 etc.). What they want to do now, is return to a system that would pay you 27 months @ 7, plus include all the items that make up your pay.
April 11, 2012 at 8:49 pm
Thanks guys.
I didn’t know that “utilidades” were profit sharing. Here, the profit sharing is something that some business give as a benefit to attract potential employees, but is not in any way mandatory by law.
April 11, 2012 at 8:58 pm
They are supposed to be that, but my company has paid them even in years with no profits, workers expect them. Four months, paid twice a year.
April 11, 2012 at 10:37 pm
Most of state owned companies like CADAFE, ALCASA, VENALUM, etc never made a profit and kept paying 3 to 4 months utilidades..
April 12, 2012 at 5:31 am
Four months total, or 8 months total?
If it’s 8 months, where do I get a planilla? 🙂
April 12, 2012 at 5:30 am
Very few companies actually engage in true profit sharing in Venezuela, preferring to negotiate a set number of days for Utilidades. Public entities and non profit organizations obviously do not show profit so they use the formula of X days per year.
April 12, 2012 at 8:32 am
So what is your take: shall profit sharing and/or utilidades be mandatory by law? Or just an internal decision/ agreement/ benefit given by companies?
What are the chances that salaries and job stability increase if these are completely gone?
I’m having issues thinking that non-profit organizations have to pay them. It might be a reason why there are not so many in Venezuela?
April 12, 2012 at 2:18 pm
Well, it is an interesting question because you could argue that if you eliminate the utilidades then you could justifying paying more in salaries and have that money enter the economy every week as opposed to in a large lump at the end of the year. On the other hand, Christmas would probably be less enjoyable for many at the lower end of the pay scale.
Eliminating Prestaciones is a different matter because theoretically these are are sort of forced savings/pension instrument, therefore it is probably good social policy to keep this for most workers.
As a business owner I would favor profit sharing to get more productivity out of my employees and get them to take ownership of the processes they handle, but in every collective convention we have discussed over the years, going back to 1964, our employees have never gone for it. Even when you offer a minimum number of days if there are no profits in a given year, they prefer the security of counting on X days every year because that’s what they spend at Christmas.
There was one guy we had, a driver, who had 23, 24 kids spread out all over the country, fathered with different women. (We jokingly called him “El Padre de la Patria”) It was kind of heartbreaking (and kinda funny too, in a dark humor way) to see every year how the moms would know when to show up and collect his Utilidades for the kids. Talk about Salomonic! Guillermo was one of the few who wanted to go the strictly profit sharing route, figuring he might end up with something for himself, but alas for him ’twas not to be.
April 11, 2012 at 1:48 pm
Miguel:
I would like to have your opinion regarding the severance pay law. I have heard for many years that is a bad thing, since employers are reluctant to pay high salaries, specially small companies.
There is not such thing here. If my employer lets me go, he’ll have to pay a severance that’s calculated depending of the number of years of employment. take a look at this page:
http://www.albertajobcentre.ca/re/hr-resources/human-resource-advice/salary-negotiation/-severance-packages–what-s-fair
BTW, all this aside of your post, which is about the government taking over money that is not theirs, not generated by them, and their intention to use the profit generated by that money to benefit them, instead of benefiting the employee. Pure theft.
April 11, 2012 at 10:33 pm
The OLD labor law, in vigency till 1998, was a black hole for corporate finances. It required employer to pay a severance package estimated at 1 full month of last salary per eachworking year. Furthermore, you need to make yearly adjustements and pay interest for the whole lump sum. And finally an extra full lump sum ( 2 months per working year) if employee was fired and not resigned. Crazy but true.
Law changed in 1998 to a more reasonable figure of 2 salaries per year, prorrated as 5 days per month, in what we used to call the add and hold rule. ie, you do not use the last salary to compute back the severance.
Now the government plans to merge both plans: pay 5 days per month and then, when you quit or are fired , recompute thenlump sum according to 2 last salaries per workd year and get the highest one. Kinda socialist golden parachute..:)
April 11, 2012 at 10:07 am
Absolutely worth reading: http://american.com/archive/2012/april/searching-for-gorbachev-in-caracas (Miguel, sorry for the hijacking, but it’s worthy of spreading.)
April 11, 2012 at 11:22 am
Yes. There are many things to learn from this article.
I particularly like the last 2 sentences.
“Whether it ends in the ballot box, by violent revolution, or by Chavez’s succumbing to the cancer he has suffered over the last year, the Bolivarian Revolution will crumble. Chavez has wrought astonishing devastation on his country, in the name of a futile ideology that history condemned in 1991. The Soviet experiment ended bloodlessly, only because it had a ruler who could see past his own ambitions. If only the Venezuelan people can be so lucky.”
My opinion: Since Venezuela DOES NOT have a ruler that can/will see past his own ambitions…then, there will be trouble.
April 11, 2012 at 8:38 am
The funds go straight into Chavez wallet. Last year, Cuban doctors convinced Chavez that his wallet was an abdominal cancer and they promptly removed it. The doctors have checked back several times in case more intervention was needed to prevent the wallet from growing big again.
April 11, 2012 at 2:56 am
Such a rip-off! And the regime will have billions to sped freely…por ahora.
April 10, 2012 at 8:15 pm
This severance contribution is computed as a 16.66 percent of the salary . The full salary, including commissions, bonuses, etc. I fear this will become a new kind of tax, ie money that will go to a fund and there will be complex procedures to have it back in the workers pocket. Furthermore, there are near 10 billions US$ in registered bank trusts (fideicomisos) and an unknown
amount accounted as severance liabilities mostly in small companies. Add some 1or 2 billions more. It is very likely the new fund will receive all the trusts balances and then require or enforce small companies to deposit oustsnding severance compensation in cash.
In the other hand, the government will issue new petrobonds to back publick employers funds, near 5 billions. Take it or leave it, this will be a 18 billions US$ megafund.
What a rip off, this is the mother of all the ripoffs. The Pdvsa fund fraud will look like spare money.
BTW… some of my employees are so concerned that they asked today to get paid 75 % of the severance balance , we will probably grant it.
Can other employees do the same with their money in bank trusts?
April 11, 2012 at 9:56 pm
I was going to suggest that all employees quit now or ask to be laid off to receive whatever they can get because it’s all going. Chav may start to pay some of his laid off rojos with it but it will all be gone soon.
April 10, 2012 at 5:57 pm
El Mundo, Caracas´s newspaper…….
http://www.elmundo.com.ve/noticias/economia/banca/prestaciones-sociales-depositadas-en-la-banca-suma.aspx
06:01 p.m. | Carjuan Cruz .- Las prestaciones sociales depositadas en los bancos del país suman Bs. 41.925 millones, según indican cifra de la Superintendencia de Bancos (Sudeban).
El monto representa casi la mitad de todo el dinero que hay en la banca nacional en cuentas de ahorro (unos Bs. 99.229 millones). Otro punto de comparación es que la cifra es equivalente a 50% del endeudamiento previsto en el presupuesto de la Nación para este año, estimado en Bs. Bs. 81.700 millones.
April 10, 2012 at 1:54 pm
Is there an option to decline the “favor”?
Is there an option to op out the prestaciones as a benefit and maybe just arrange something privately with your employer, like a raise?
…..
April 10, 2012 at 1:57 pm
No, it is oblogatory to pay a certain number of days depending on your seniority.
April 10, 2012 at 3:18 pm
Even if one is hired by contract and not as an employee?
April 10, 2012 at 3:20 pm
If you are hired individually, it does not matter.
April 10, 2012 at 11:33 am
I propose Francisco “Pancho” Illaramendi to manage and direct the investments made with the money deposited of all the venezuelan workers. He already got a lot of experience managing the PDVSA´s pension fund.
April 10, 2012 at 9:36 am
This post remember me that I’m still waiting for my labor compensation since 1996 for an adventure that I had working for a public agency that supposed to be an example and model to be followed by the rest of the agencies: Isn’t that slavery? Although, they can still call me.
April 9, 2012 at 9:36 pm
In DomRep, the Leonel administration wants to do same to build housing for the poor. So far unsuccessfully.
April 9, 2012 at 4:51 pm
There’s something about timing maybe.
Chavez is at an end, the revolution ‘stops’ and I suppose the Cuban experiment consequently draws to a conclusion too.
Castro needs to fill up the spondula reserve in order to tie him over until the mythical Cuban petro dollars start filling the coffers of the revolutionary ruling classes.
So times are desperate, or will be unless extreme action is taken.
Chavez arrives in Havana for his world class healthcare on a weekly basis. Whilst r greets c at the front of the aircraft you can almost sense the gold bars being unloaded from the tourist class.
So that’s done, let’s offload the punters’ prestaciones. And what about the debt stuff ? Yep let’s manage that one too. Easy peasy.
The labour bill is just another ‘rat leaving the sinking ship’ acceptance that the revolution is understood to be no longer viable, by the rats that is.
April 9, 2012 at 4:08 pm
And then you tremble when Foreign Minister Maduro says that this will create a “giant fund” of “national savings” and…”also for investment”. –
What the hell? Why is Maduro opening his mouth about this?
As usual, he does not know what he is talking about-freakin’zombie!!
April 9, 2012 at 1:06 pm
It is theft. Pure theft. Chavez sees it and takes it. Maybe he pays pennies back to poor Chavistas.
Chavez is a government employee. Maybe Chavez should put all his money into the fund.
April 9, 2012 at 12:56 pm
I would think this would be a great boon to Capriles, no? Can he capitalize on it?
April 9, 2012 at 1:06 pm
Doubtful, he represents the “big capitalist banks” trying to get the hands on the people’s money. He would be painted as defending the banks.
April 9, 2012 at 12:06 pm
The first thing that came to mind when I heard this was Seguros Sociales.
One of our employees went on maternity leave in 2009 and made her claim to SS for her lost pay as required by law.
She’s still waiting. They can’t handle money. This will turn into a huge theft.
We can only hope that he moves on before he can do too much more damage.
April 9, 2012 at 11:47 am
Socialists loooove money. I guess they will sell it claiming it is to protect the money from greedy capitalists. People will buy it, there are a lot of suckers around here.