not provide severance pay to any of their employees. Among informal enterprises the reverse holds, with only about 7 percent providing any severance pay. Given the emerging structure of informality among enterprises – both formal and informal – in terms of contract, size, location, sector, and other aspects, the high prevalence of formal sector severance pay needs further analysis and understanding. Given the low turnover in employment seen earlier, it would appear that few employers have to date been required to fulfill their stated obligations on severance pay. The results therefore can perhaps be interpreted more as an indication of awareness among formal sector employers of their obligations to pay severance in case of dismissal rather than evidence of consistent severance payments already made.

45. Another surprising aspect of both types of enterprises is the unexpectedly high proportion that claim to provide health benefits. More than half the formal and almost 30 percent of informal enterprises provide health benefits to employees. Whether the responses include publicly provided health benefits is unclear, though the prior would be that they may do. Less surprising is the high prevalence of sick/other paid leave that the enterprises give to workers. This fact is often not at variance with informality within the enterprises, as owners can give informal sick leave, and have employees “make up” later. Thus, almost three-fourths of formal and over one-fourth of informal enterprises report giving sick/other leave to some employees.

**Table** **<u>9: Urban Enterprises Reporting Non-Wage Benefits to Workers</u>**

||**Written**|**Contract**|**Severanc**|**e Pay**|**Health Be**|**nefits**|**Sick/Ot**<br>**Le**|**her Paid**<br>**ave**|
|---|---|---|---|---|---|---|---|---|
||Formal|Informal|Formal|Informal|Formal|Informal|Formal|Informal|
|To all workers|37.8|0.9|82.9|4.5|46.5|27.9|64.9|26.1|
|To some of the<br>workers|9.0|0.5|9.6|2.6|12.3|1.4|8.9|1.2|
|To none of the<br>workers|53.2|98.6|7.6|92.8|41.3|70.7|26.2|72.7|

Source: UES, 2004 46. For informal enterprises, payment in-kind represents a significant mode of compensation, as one might expect given the nature of the businesses, with over a third of establishments offering payment in-kind (see Table 12). Unfortunately, responses on payment in-kind questions were of questionable quality. Nonetheless, the broad ranking in order of importance of types of in-kind compensation appears to be food, clothing (both paid by the vast majority of establishments paying in-kind), education costs, and shelter.

**Table 10: Payment in Kind Offered by Urban Informal Enterprises**

||Offer Paymentin kind|
|---|---|
||N<br>Percent|
|Yes|180<br>35.4|
|No|329<br>64.6|
|Total|509<br>100|

Source: UES, 2004

# **_(iii)   Wages and Wage-Setting_**

47. Little is known about the main factors which are taken into account in setting wages in Timor-Leste. Unions are still in their infancy and do not play a large role in wage-setting, with a few exceptions such as Dili port workers. There is an informal MW of USD 85, but no statutory wage setting mechanism to date. Thus, with the primary exception of the public sector, wages are 22