There is no doubt that in recent weeks the issue of social security has attracted more interest than usual due to the proposal of the Citizens’ Commission for Pension Reform Ecuadorian Institute for Social Security (IESS).

One of them is yes severance fund become mandatory retirement savings for IESS branches. And these resources, which can currently be seen on the individual account of each contributor in IESS, cannot be withdrawn until the contributor withdraws.

IESS: These are the effects on pensions if the retirement age is increased to 35 years, as proposed by the Commission formed by the Government

This is to improve the idea unemployment insurance make it more expedient and use it in a better way. But what do they mean and how do these two terms differ?

What is a severance fund?

It consists of delivering a sum of money to a member or associate who is unemployed. It is financed with 2% of the workers’ monthly contribution and is placed in the individual accounts of the unemployed.

To access, you must have accumulated 24 non-concurrent contributions in an individual unemployment account; the affiliate must wait two months from the termination date; maintain an active bank account in the national financial system, registered and authorized in IESS; that the unemployed and pensioners who wish to claim unemployment benefits must first obtain their personal password; have no current unsecured loans; and that you have no employer obligations until payment.

What is unemployment insurance?

It is an economic benefit that is realized to a worker in a support relationship who has been fired, and it is financed by employer contributions in the amount of 1% of the worker’s salary.

This covers 70% of the single basic salary and is paid fixed for five months. To access, you must adhere to accreditation for at least 24 accumulated and non-concurrent dependency contributions, at least six of which must be continuous and immediately preceding the contingency. In addition, be unemployed for a period of at least 60 days; submit a request for the payment of monetary compensation from the 61st day of unemployment up to a maximum of 45 days after the established period and non-retirement.

What is the difference between them?

According to economic analyst Héctor Delgado, unemployment insurance and severance pay are activated when a person is unemployed, but they differ in the form of financing and the timing of activation.

Unemployment is with a 2% monthly employee contribution and unemployment insurance with employer contributions of 1% of salary. And they cannot be charged at the same time.

“Unemployment insurance lasts a maximum of five months, but what if I don’t get a job? I can claim the rest of what I have left in unemployment, in case I activate unemployment insurance. Or they can go straight to give me whatever has accumulated in the unemployment fund. Each of the two is fed or accumulated in the contributions made by the person and the employer,” notes Delgado.

Now with the proposal of the Commission is that the unemployment fund goes to savings and is collected when the member retires. According to economist Jorge Calderón, ideally it should be voluntary and not until retirement.