The Jamaican Social Security Tax (JSSST) is a tax on both employees and employers. Employers contribute at a rate of 3%, while employees contribute at 2%. Self-employed persons pay 2% of their earnings. Employer contributions are deductible, while employee contributions are not. Employees are entitled to two weeks’ paid leave per year. This amount is considered maternity leave and includes any time the employee is away from work for reasons related to pregnancy or confinement.
Impact of higher employer contributions on the Jamaican Social Security Tax
Higher employer contributions for Jamaican Social Security Insurance (NIS) benefits will have a negative impact on the Government of Jamaica. The government is the largest employer in the country and will be impacted by the reforms. The Government of Jamaica deducts an employee’s NIS contribution before assessing income taxes. This means that a larger percentage of employee income will go to the NIF and a smaller portion to personal income tax. The reforms will cost the GOJ $5 billion annually by 2022. However, even though the cost of the changes is relatively low, they do not guarantee long-term sustainability.
The government must ensure that these increases are affordable and sustainable, so they can be financed. It should also phase in the increases to give employers and employees ample time to plan. This is particularly important in Jamaica, as most employers and employees do not have the same amount of income.
While employee and employer contributions are complex, their impact is relatively similar. While there are differences in coverage and terms, the overall intent of these agreements is to eliminate dual social security contributions, which occur when an employee works in two countries. In some countries, such as the United States, employees working abroad are not covered by totalization agreements. The country’s form is sent to the employee, but the employee continues to make contributions to his or her home social security system.
Some countries consider social security contributions to be a tax. In those cases, they are imposed by legislation that addresses the same issues as other forms of tax. Moreover, they interact with the individual income tax law. Consequently, they should be drafted in parallel, similar fashion to other tax legislation.
In Jamaica, individuals are taxable on their worldwide income and Jamaica-sourced income. The tax rate is 25% for individuals in Jamaica, while non-residents are taxed only on their Jamaican-sourced income. Non-domiciled individuals, however, pay the tax on compensation for services rendered in Jamaica.
Historically, social security schemes have been made compulsory for only a limited group of workers in the formal economy. However, legislators have always envisaged that coverage would be expanded later. This initial restriction was justified largely by practical constraints. For example, the administrative infrastructure was not adequate to collect contributions from self-employed people and small firms. The country also did not have sufficient health care facilities in rural areas. While these practical limitations are often valid, it would be better to eliminate these restrictions if possible.
Impact of higher employee contributions on the Jamaican Social Security Tax
The Social Security Tax in Jamaica is based on the contribution rates of employees and employers. An employee contributes 2.75% of his or her gross remuneration up to JMD 1.5 million per year, while a self-employed person contributes 6% of his or her earnings. The threshold for the employer and employee contributions is going up from JMD 1.5 million to JMD 3 million from 1 April 2021. Employer contributions are tax deductible and employee contributions are refundable after seven years.
The distribution of money wages is also an important factor in determining the tax rate. The proportion of money wages subject to Social Security taxes rises with rising income inequality. In 1983, 90 percent of all workers’ reported wages were below the taxable limit, but this proportion fell to 83 percent in 2006. The increase in inequality is partly due to the fact that employer contributions for health insurance are fully reflected in lower money wages.
Higher contributions by employees increase the tax burden on employers. However, employers are required to deduct and remit the following contributions. However, they can only deduct the contributions if their employees are insured under a state-run social security scheme. While a Jamaican resident cannot deduct more than JMD 6 million per year from his or her income, people aged 65 and over can benefit from a JMD 80,000 tax exemption.
The cost of social security and employee contributions vary from country to country. Charts show the contribution rates by the percentage of income. The European countries have the highest contribution rates, while Asian countries have the lowest. For a better understanding of the impact of employee contributions on the Jamaican Social Security Tax, consider using the sample rates.
Impact of higher employee contributions on the Jamaican Social Security Tax on non-residents
The ippr/GDN national survey shows that more than two percent of households in Jamaica are made up of migrants. Of these, at least 15 percent are returning migrants. Another twenty percent are migrants who are returning to Jamaica after spending some time overseas. The figures for both categories have gone down in the last five years, but the percentage of migrants is still relatively high. However, the data do not fully reflect all types of migration, including illegal migrants.
Despite this increase in migration, there have been some negative impacts of migration. For example, receiving remittances can discourage a person from working. One of the most serious migration impacts in Jamaica is the brain drain, which has an adverse effect on the health and educational systems. Foreign workers are part of the solution to this problem, but the country does not have enough skilled immigrants.
During the past year, the number of deportees from Jamaica has decreased slightly, but the problem isn’t going away. The recent violence in Kingston has highlighted this issue. Many of these deported criminals are part of mafia groups in Jamaica and tackling them requires a sustained focus on rehabilitation policies.
The percentage of people with higher education is higher among Jamaican immigrants in Canada. In 2006, 12.5 percent of adults of Jamaican origin completed an undergraduate degree or higher. This is higher than the rate for the native-born population. A significant portion of Jamaican-born adults in Canada are employed in health-related occupations.
During the year 1983, tighter restrictions were placed on the payment of benefits to alien dependents. These restrictions were implemented because many workers returned to their countries after leaving the country. This resulted in a high number of dependents on the benefit rolls.
Nevertheless, these policies are not without their downsides. These policies often require employers to meet the costs of social security for their expat employees. Not only do expats have to contribute to social security twice, but they may also have to deal with a host of other problems, including lost benefits.
The social security system in many countries is complex. While some countries require only nationals or permanent residents to make contributions, other countries require employees to pay their social security contributions to one country only. This is called localization. If an employee works for more than one country, he or she will have to pay a higher amount for both.
