From Friday, workers earning $1 182 per week and more were going home with a little less money in their pay packets as a result of an increase in the National Insurance Scheme (NIS) insurable earnings ceiling.
Monthly paid workers earning $5 120 and above will also see bigger NIS deductions on their pay stubs at the end of this month.
Since the recent reminder that the adjustment would take effect this month, several residents had been complaining about having to go home with less pay amid the rising cost of living.
However, Minister in the Ministry of Finance Ryan Straughn said the adjustment was necessary given increased demands on the NIS.
The ceiling has been adjusted upwards since 2004.
“The truth is that they are raised to be consistent with what was not just inflation, but also the salary scale that was being negotiated at the time,” Straughn explained.
“It is not the rate that has gone up, it is just the ceiling,” he added, though acknowledging that with the ceiling raised, individuals who fall within the identified salary scale would see their contributions increase by a few dollars.
Straughn explained that while this was a way of ensuring the NIS remained capitalised so benefits can be serviced “in a more seamless way”, it was not part of the wider pension reform scheduled to take place in the coming months.
“It means that the NIS cash flow would be improved in the context of being able to ensure that benefits continue to be paid. It is really intended to make sure that we are able to continue, as required, to make sure the National Insurance Scheme remains solvent, and this has nothing to do with the overall reform that is taking place at the moment in relation to the NIS,” Straughn explained.
“So persons need not worry about the ceiling. They are there to ensure that contributions can approximately match inflation . . . . Every day you have people making contributions but you also have people accessing benefits. If you were to keep the ceiling contributions as they were in 2004, then the benefit that anybody may receive today in real terms would be a lot less. You can’t just look at it as the fact that the ceiling has gone up and therefore your [NIS contribution] amount will go up by a couple dollars, depending on where you are.”
“So the level of unemployment, sickness or pension benefit that you may have received in 2004, if you were receiving that exact same money today given where the cost of living has gone between then and now, then obviously it would be much more burdensome to be able to cope with the cost of living,” he added.
The total NIS contribution deducted from private sector employees is 11.1 per cent, which is made up of National Insurance (6.75 per cent), non-contributory (2 per cent), unemployment (0.75 per cent), training levy (0.5 per cent), catastrophe fund (0.1 per cent) and a health service contribution (1 per cent).
With the latest increase in the earnings ceiling, someone who is working for $5 120 or more per month will see NIS deductions of $568.32 while someone who is working for $1 182 or more per week will now pay $131.20.
For the past two years, those same categories of individuals would have paid $541.68 and $124.99 in contributions monthly and weekly, respectively, which would be on the ceiling of $4 880 and $1 126.
Straughn said it was not that the Government simply wanted to “take more money from people”.
“We all accept that things cost more money over time and, therefore, the way to try to manage that is to take a little piece at a time rather than having to take all at one time,” he asserted.
The increase in the ceiling was announced by Prime Minister Mia Mottley in her Budget presentation in March last year.
A schedule of the continued increases was also presented, to take effect January 1 of each year, until 2035. (MM)
