Minister of Human Resources and Social Security Yin Weimin said recently that the central government would spend 100 billion yuan ($15.3 billion) in the next two years to help resettle 1.8 million laid-off workers in coal, steel and other sectors that suffer from overcapacity. This shows the central authorities' determination to reduce overcapacity as well as resettle laid-off workers.

But the resettlement of laid-off workers should not depend only on the central government's 100 billion yuan allocation. Enterprises have to play the principal role in the resettlement, and local governments should plan and coordinate the entire process.

Four essential arrangements have to be made for the resettlement of laid-off workers in industries with overcapacity: internal arrangements in enterprises, job transfer and start-ups, early retirement schemes, and creation of public welfare posts. The parties involved in the process should shoulder their responsibilities according to the demands of the arrangement plans, and the resettlement fund should be channeled to the laid-off workers no matter which plan they choose.

Internal arrangement in enterprises means enterprises should create new posts depending on their existing facilities and the technologies they use, in order to help laid-off workers get new jobs. In this process, the enterprises have to take the major responsibility and inject more funds to ensure laid-off workers are re-employed, and local authorities should offer preferential policies, funding support and subsidy to the enterprises.

The enterprises should also use more resources to start targeted job-transfer training programs for workers who are likely to be laid off. Local governments, on their part, should start re-employment support programs, and expand their special re-employment and unemployment insurance funds. And to make the entire process effective, the authorities should strengthen monitoring and supervision of the support programs.

For those workers who will retire within five years and could voluntarily seek early retirement, the enterprises could sign agreements with them to change the labor contracts according to the law. However, the enterprises still have to provide the basic living allowance to such workers and pay their basic pension insurance and medical insurance premiums.

In case of enterprises that are likely to close down, they should terminate the labor contracts according to the law with employees who are close to the retirement age and ensure the resettlement funds are directed to them. As far as the workers are concerned, they could choose to get one-time monetary compensation, or receive basic living allowance from government-appointed organizations till they reach the retirement age. During this period, their basic living allowance, and pension and medical insurance premiums have to be paid by the government-appointed organizations using the enterprises' funds earmarked for the purpose.

Since enterprises play a big role in reducing overcapacity, they should offer monetary compensation to laid-off workers, and pay their due salaries and social insurance premiums as well.

Moreover, local governments should improve their tax and financial policies to help enterprises reduce overcapacity according to the central government's guideline. The local authorities, for example, could offer rewards to industries that are under huge pressure to resettle laid-off workers, in a bid to encourage enterprises to accomplish the task. And local governments are responsible for the resettlement of laid-off workers in respect of social security. The authority should encourage employees to join social insurance project, make sure they enjoy the benefit of social insurance including unemployment insurance and re-employment supportive policies, and guarantee the basic living of laid-off workers with financial difficulties.

The central government, too, has responsibilities to fulfill. It should establish special funds, for instance, to guide, support and reward those enterprises that reduce overcapacity through mergers and acquisitions, debt restructuring and bankruptcy liquidation.

The resettlement funds for laid-off workers are aimed at protecting workers' vital interests, and helping expedite reform and industrial restructuring. Therefore, the responsibilities of enterprises, the central government and local governments should be clearly demarcated, in order to prevent one party from passing the buck to another, motivate all parties involved to deliver results and raise funds for the resettlement of laid-off workers.

The author is deputy director of Social Security Research Institute, Ministry of Human Resources and Social Security.