The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A Cabinet minister yesterday revealed the Government decided to push the National Insurance Board (NIB) contribution rate increase back to July 1, 2024, to minimise the increased burden that businesses especially will face.

Myles Laroda, minister of state in the Prime Minister’s who has responsibility for NIB, explained ahead of the weekly Cabinet meeting that the impact from any earlier NIB rate increase would be compounded by the rise in the wage ceiling due to take effect from January 1 next year.

While NIB will almost certainly lose $95m this year, representing the deficit caused by benefit payouts exceeding contribution payments, he said the Cabinet chose to avoid a situation where companies would be paying a higher contribution rate on a greater wage ceiling.

“The ceiling increase is next year, January, and so to move it (the contribution increase) earlier than that would have meant that employers would be paying on an increased salary in January, and then again in November within July,” he said.

“So we wanted to roll it out in in July, and that way the employers, in particular, would have enough time and so the public would also be aware of what the increase means, because it’s going to be more than one, and where their money is going.” The current NIB contribution rate is 9.8 percent, split 5.9/3.9 between the employer and employee, with the former paying the majority.

The wage ceiling increases, which take place every two years, started in 2014 – when the increase was $20 – from $600 to $620, translating to a contribution increase per week for affected employees of $0.78 or $40.56 per year;, and for the employer of $1.18 per week or $61.36 per year. The increases in 2016 by $30, and in 2018 by $20, have been similarly small.

All of this led up to the most recent wage ceiling increase in 2022 to $740 per week or $3,207 per month, meaning that employees in that category would go from paying $27.69 in weekly contributions ($120 per month) to now $28.86 per week ($125 per month). The employer portion of the contribution would increase from $41.89 per week to $43.66 per week, or from $181.55 per month to $189.29 per month.

Mr Laroda added: “There will be an education campaign as part of the NIB rate increase exercise to inform the public of the ‘goal of the Board’ moving forward in addition to what services are being offered by the NIB.”

With the nation’s social security system projected to lose $95m this year, and the increase coming into effect next year July, NIB is not expected to return to a surplus where contribution income exceeds benefit payouts until “within the next four to six years”.

In the meantime, there will be a focus on an increased compliance, in particular, with government agencies. While reports of NIB failing to collect millions of dollars in due contributions from employers is exaggerated, there is still an ongoing concern with small companies that fail to comply and are consistently being placed before the courts.

“The Government cannot be asking everybody else to be compliant when government agencies, some of them haven’t been paying consistently in the past, and some agencies it’s been a few years,” Mr Laroda added.

There are also concerns about management of NIB’s investment portfolio. Mr Laroda addressed this, saying: “The NIB has not turned a profit from 2016, and so what they were living off of was investments and cash that was on hand, and we know that’s not sustainable and,in particular, when you’re running deficits of close to $100m.

“As we talk about right-sizing there has been in the media reports of the administrative costs, and I remind the public again that we have some 15 or 16 islands of The Bahamas with decent population. I use that ‘tongue in cheek’ because some islands are relatively small. Yet that doesn’t mean that those islands with small populations should not have access to NIB.”

Because NIB has to provide the same services to all citizens regardless of which island they reside on, some islands may have up to five satellite offices due to their sheer size. Each one of those offices needs staff and equipment, and rent needs to be paid for them.

Meanwhile, the unemployment benefits list has been cleaned and revised since the COVID-19 pandemic. Dead persons and individuals who were still employed in the private sector were receiving unemployment benefits payments, while others were receiving double payments.

Mr Laroda said: “I think there may have been some duplications. There have been individuals who were receiving benefits while they were also working. We also know that in some cases, and I want to be very guarded, but there were situations where persons who were working in the private sector were collecting their salaries either in cash or with the understanding from the employer that NIB not be notified.”