No extension for pension ‘holiday’

 

Employment Minister Rolston Anglin
confirmed last week that the government would not seek to extend a year-long
pension suspension – or holiday, as it has been called – for Caymanian workers
in the
private sector.

The proposal, which was signed into law
by Governor Duncan Taylor on 26 April, 2010, will expire eight days from today,
Minister Anglin confirmed.

However, the pension suspension period
will still apply for at least another year to any non-Caymanian workers who
voluntarily signed up for the programme.

When the Legislative Assembly approved
the pension suspension, it set a time limit of 12 months on the ‘holiday’
period for Caymanians and 24 months for non-Caymanian workers. The suspension
period does not apply to public sector workers.

If an employee wanted to take part in
the pension ‘holiday’, both the worker and his employer had to agree to the
suspension period. Once enacted, the worker would get 5 per cent of his salary
usually paid into a retirement savings account in his paycheque. The employer
would then keep its 5 per cent matching contribution for the suspension period,
rather than pay that amount into the worker’s account.

Mr. Anglin said total participation for
the pension suspension period included 1,027 Caymanian workers and 1,607
non-Caymanian workers.

“I’m not surprised that a lot of
Caymanians did not take it up,” Mr. Anglin said. “They are making long-term
plans as opposed to expatriate workers who may only stay here for seven years.”

Minister Anglin said he could not be
certain whether the two-year suspension period for non-Caymanian workers would
come to a close next April. He said legislative action would be needed in any
case if lawmakers want to continue with it.

“It’s going to depend on the state of
the economy and the way things are at the time,” he said.

One of the arguments against the pension
suspension plan as proposed was that it would be applied unequally to various
sectors of society: longer for expatriate workers, not at all for civil
servants.

“If it is a good thing, it should be
mandatory for one year and it should affect everyone,” North Side MLA Ezzard
Miller said at the time.

Mr. Anglin said Thursday that he is
aware there will be some criticism from those who believe allowing the
suspension of pension payments for foreign workers while not allowing the same
for Caymanians will make Caymanian employees less attractive to companies than
their expatriate counterparts.

“That’s not the case,” he said, pointing
out that businesses hiring non-Caymanians are required to pay work permit fees,
in most instances a far more significant expense than the 5 per cent of the
individual’s salary paid into a retirement account.

For instance, a law firm that pays a
paralegal $60,000 per year would have to contribute $3,000 in salary for its
portion of the pension annually. A work permit fee for an expatriate worker
holding that position would be $8,000 per year, according to a fee schedule
approved by the government last year.

Mr. Anglin also argued that many
companies must pay additional compensation, such as moving reimbursements to
employ foreign labour.

“Overall, the cost of a Caymanian
employee is still less than an expatriate employee,” he said.

In any case, it is up to the employees
to decide whether to take a pension suspension. Mr. Anglin said employers
cannot legally force someone to take a pension ‘holiday’.

George Town MLA Alden McLaughlin has
argued that the voluntary nature of the pension suspension was open to abuse.

“I worry about the employees who are
most vulnerable, who have the least bargaining power,” he said. “[Their
employers could say] ‘Sorry guys, the government has told us we don’t have to
pay pension anymore. If you don’t agree, you can go find another job.’”

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1 COMMENT

  1. The last paragraph says it all….

    But still we have to ask; why it is that employers still chose to employ ‘more expensive’ expats?

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