The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading Bahamian accountant has warned that the days of non-contributory pensions “are over”, as he called on this nation not to let total employment costs “get out of hand”.

John Bain, managing director of UHY, Bain & Associates, warned both the Government and private sector to pay careful attention to employee benefits, as these could equal a sum equivalent to anywhere between 10-30 per cent of their basic salaries (see article on Page 4B).

Pointing out that such high benefit payments, especially if they were mandatory, raised employers’ marginal costs and acted as a disincentive to hiring new staff, Mr Bain said this could act as “a significant barrier” to reducing a Bahamian unemployment rate currently pegged at 14 per cent.

He also called for better statistical data on true employment costs in the Bahamas, as this would aid businesses and investors - both local and foreign - with business modelling and planning.

“We need to pay attention to this; let’s not allow this to get out of hand,” Mr Bain told Tribune Business on total employment costs. “We’ve got to watch it, and make sure we don’t let it get away from us.”

The member of UHY International for the Bahamas, Mr Bain noted in a statement that the Government remains the largest employer in this nation.

“Government employees can enjoy benefits that may increase the payments made to employees anywhere from 18 per cent to as much as 27-30 per cent, depending on their levels in the Government, the amount of training and travel, and the associated benefits, including non-contributory pension costs,” Mr Bain said.

“Private sector employers may pay between 10-15 per cent above the normal wages for various reasons. Hotels commonly provide food and, at times, transportation.

“The private and governmental employers would also pay for paid vacation time, National Insurance contributions, pension contributions, medical insurance contributions and overtime, if needed.”

Explaining that all these costs had to be factored in to determine the total cost of employment in the Bahamas, Mr Bain said this nation had to be careful - particularly when it came to benefits - to not ‘price itself out’ of the market and make the economy uncompetitive.

Acknowledging that the demands made by trade unions, who were sometimes militant, had sometimes pushed employment costs close to breaking point, Mr Bain told Tribune Business that non-contributory pensions in public corporations were set to become history.

These pensions are 100 per funded by the company or corporation, with the employee (beneficiary) contributing nothing, but Mr Bain said emphatically: “Those days are past.

“Going forward, that’s not going to happen any more. The people in those plans now will stay. I’m on the Board of the Water & Sewerage Corporation, and we have decided that if you’re on the plan now, you will stay on it, but all new employees will have to join a contributory plan.

“You pay some, we pay some. Those days are over, the 1960s and 1970s. If you want a pension, you have to pay something towards it.”

The well-known accountant added that the absence of detailed statistics made this job harder, with both the Department of Statistics and Department of Labour unable to help him in this regard.

“Getting information, getting statistics is very difficulty,” Mr Bain added. “It’s a lot better today; better than 10 years ago, but we’re still behind.”

Without statistical information, it was more difficult for companies to “make the right decision”, with total employment costs “a question mark” for investors looking to come to the Bahamas.

“Note that these costs can increase even further by hiring expatriate workers for specialised areas that require additional skills,” Mr Bain added.

“In this case, the work permit may add as much as $9,000 to $20,000. If the company is also responsible for rent, then the total cost of an expatriate worker could top 50 per cent over the gross salary.”

And he added: “The total cost of employment can be a significant barrier to reducing unemployment in the Bahamas.

“While I don’t think that the Bahamas is the highest in the region, the total employee cost should be monitored carefully by the Government to ensure that we maintain our competitiveness for the attraction of foreign investment.

“We must find a way to encourage the hiring of Bahamians by making it easy to do, and reasonable in comparison to any additional employee cost. If not, we risk pricing ourselves so high that it may make us uncompetitive in terms of our cost.”