Bermuda's social safety net gained a new layer yesterday as Finance Minister Eugene Cox announced that unemployment insurance is on the way for Bermuda's workers.

Labour unions cheered and local employers expressed concern at the announcement of the "historic addition to Bermuda's social policy framework".

At this stage, however, the shape the Unemployment Insurance Fund (UIF) will eventually take is unclear.

One million dollars will be funnelled from Government's consolidated fund this year as seed money for the fund while a study is undertaken over the next 12 months to determine the best method of protecting workers from short-term job losses.

"Government will engage in an extensive consultation process with labour unions and employers during the next 12 months to discuss and establish the operating principles of the proposed UIF," Mr. Cox said yesterday.

"Issues to be discussed include participation, benefits, conditions for benefit entitlement, financing and administration."

The move breaks with Bermuda's long tradition as a minimal taxation/minimal welfare provisions state, however in his Budget statement Mr. Cox said that a labour Government could no longer "fail to address such a glaring gap in Bermuda's social safety net".

"Government believes that in the same way sophisticated citizens make insurance arrangements to protect themselves against the everyday risks and hazards of illness, fire, vehicle accidents, theft, storm damage and so on, there should also be a provision against the risk of unemployment - that is insurance protection," Mr. Cox said.

No payments will be made from the fund this year but Mr. Cox said those who find themselves unemployed should seek assistance from the department of Financial Assistance in the interim.

Government has set a summer deadline for producing a discussion paper to catalyse feedback to the proposed UIF, he added.

"At the conclusion of the consultation and discussion process, Government will incorporate the broad principles agreed upon in a White paper," Mr. Cox said.

"It is hoped that this process can be included within the stated 12-month timeframe."

Although the Bermuda Industrial Union (BIU) has been calling for unemployment insurance for more than a decade, president Derrick Burgess said yesterday he had not known the Finance Minister was going to introduce the plan in this Budget.

"It's first class. I am very happy and sort of relieved," Mr. Burgess said.

"It's a good Budget, you could not do much better. He didn't increase taxes. I don't think anyone can complain about this Budget."

Social advocate Sheelagh Cooper also welcomed yesterday's announcement.

"I think it's a step forward for the working poor," Ms Cooper said.

"It doesn't help those that don't have jobs but it helps those that used to.

What Bermuda's actual unemployment rate is has always been unclear due to seasonal variations and a dynamic job market however, total jobs declined 1.5 percent this year according to yesterday's Budget.

President of the Bermuda Employers Council Eddie Saints told The Royal Gazette Government must get a fix on the actual need for unemployment benefits before charging ahead with a new, full-scale social programme.

"How big is the problem in Bermuda?" Mr. Saints asked.

"We don't see it as a major issue."

He said employers and others would also want assurances that the system will not be abused by those who do not want to work at all and that the administrative costs of the fund do not overwhelm the actual degree of need.

"Government has set aside $1 million this year and maybe that is all we will need going forward and it can be handled in the same way.

"We have to make sure we have the right model for this issue in Bermuda."

But Mr. Saints said employers had an idea unemployment insurance was in the cards and do recognise the need to protect workers from short-term hardships.

"We understand that there will be people in need who genuinely need support," Mr. Saints said.

"One concern of employers is whether this will add another layer of cost.

"We're going in with an open mind and hopefully we'll be able to find a solution (to unemployment) which will benefit all."

Charles Gosling, president of the Bermuda Chamber of Commerce said a buzz in the business community already surrounds the announcement as well as curiosity over how it would be introduced.

And he suggested it would be a "great idea" - especially if, on retirement, one could collect the unused contributions made.

But, he said it would not be popular if certain individuals and sectors paid in only to cover those getting laid off in other sectors.

He added: "If this is an election Budget, then this is a nice way of saying something will be done without having to do anything."