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Insurance schemes for employees are meant to protect their interest in times of emergency or upon their retirement. The National Insurance Scheme (NIS) in Jamaica is also framed on those lines. The employee makes a small contribution every week out of his/her earnings and the employers deposit an equal amount as their contribution. The challenge for NIS, however, has been that the levels of premium collected through this scheme is not sufficient to sustain the fund (the National Insurance Fund) in the long run. The reforms to correct the situation have been set in motion.
Small but Gradual Increases in Contributions
Beginning January this calendar year, NIS fixed the weekly contribution at $150, up from $100 previously. It will then be increased to $200 per week, come January 2020. Simultaneously, the rate of contribution will also keep going up in stages. The previous 5% had being enhanced to 5.5% with effect from April 2019 and will go up to 6% effective April 2020. One more increase will occur in 2021 April, when the weekly contribution will be taken to $300 retaining the 6% rate as it is.
These changes mean the employer will bear 2.75% (out of 5.5%) or 3% (out of 6%) respectively. There is a wage ceiling for fixing the insurable amount as well. This too is being enhanced from 2021 onwards at $3 million.
All these are applicable to regular employees in any organisation. Those who are self-employed will have to bear the full amount of 5.5% or 6% as the case may be.
Employers Not Cooperative
While all these steps have been taken by the NIS in consultation with the stakeholders and approval from the Cabinet, there is an X factor in all this. The routing of these contributions is via employers. They deduct the amount the employee has to pay and then they are expected to add their component and deposit the full amount with the NIS. According to the Director of the NIS, Ministry of Labour and Social Security, Portia Magnus, many employers default on this payment, putting the NIS and the employees in deep trouble. At present, there is no automatic mechanism that can detect the defaulting employers on a monthly basis and take action, though the NIS imposes a penalty of 20% on the amounts due and not paid. There have even been cases of the employers vanishing from their address found in the records.
This situation needs to be corrected and employers should take the issue seriously since it involves the future of their employees.