Assume that the unemployment rate is 6%. If the unemployment benefit is 100% of wages, the premium rate has to be 6% of their wages. It is not advisable for the benefit to be 100% of wages, as it will create a moral hazard, i.e. some workers may voluntarily become unemployed. If the benefit is 50% of the wages, the premium rate can be reduced to 3%.

Additional measures may be introduced, as follows:

a) The benefit is payable only for retrenchment after at least two years in the job.

b) The benefit is paid only for a certain period, say 12 or 24 months.

c) The unemployed person must actively seek work and cannot reject a suitable job that has ...