Increase in NIS deductions takes effect

Thursday, April 11, 2019

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JAMAICANS currently contributing to the National Insurance Scheme (NIS) will see an increase in the amount deducted from their salaries this month.

The 0.5 per cent increase announced by Minister of Finance and the Public Service Dr Nigel Clarke in December took effect two Mondays ago, moving NIS deductions from five per cent to 5.5 per cent.

Additionally, Dr Clarke told Parliament that the contributions will further increase to six per cent by April 1, 2020.

The increase is to be shared equally between employer and employee, with each absorbing 0.25 per cent.

NIS is a compulsory contributory-funded social security scheme covering all employed individuals in Jamaica. It is administered under the National Insurance Act and offers some financial protection to the worker and his or her family, against the loss of income arising from injury on the job, sickness, retirement and/or death of the breadwinner.

Clarke had cited an actuarial study in 2016, which revealed that the National Insurance Fund would have a negative cash flow by 2029 if the contributions were not increased, and by 2037, would be completely depleted.

He explained that this was due to the fund paying out more than the amount being generated.

In 2016, the fund paid out pensions to 100,000 individuals, resulting in outflows of $14.87 billion, while inflows only amounted to $12.8 billion, the minister revealed.

According to the latest Statistical Institute of Jamaica Labour Force Survey, at October 2018, the country's employed labour force stood at 1,219,700. Only 470,000 people are actively contributing to the insurance scheme.

Part II subsections I and II of the National Insurance Act outline that a person who, on or after the appointed day, being over the age of 18 and under retirement age, and having fulfilled residence in Jamaica, is gainfully occupied in Jamaica, or is in such employment outside Jamaica as is specified in (certain instances) shall become insured under the Act and remain insured until he reaches retirement age. It said insured persons are divided into two classes, employed and self-employed.

Employed persons are defined as those who work in a business, not their own. This category includes factory workers; private household workers such as butlers, chauffeurs, cooks, gardeners, general helpers, housekeepers, and nurse-maids; and all other employed persons including civil servants, teachers, nurses, and members of the security forces.

Self-employed are those who work independently in their own business. Included in this category are doctors, lawyers, accountants, consultants, vendors, informal commercial importers, dressmakers, tailors, hairdressers, barbers, fisherfolk, farmers, and Jamaican nationals employed in foreign embassies in Jamaica.

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