Remitting statutory deductions and payments late hurts employees

Employers may cause harm to their employees when they do not remit at all or do not remit on time their statutory deductions to the National Housing Trust and the National Insurance Scheme, as well as the money they deduct from their salaries to send to their creditors and financial institutions like life insurance companies to meet their financial commitments.

Employed individuals are required to contribute 2.0 per cent of all taxable emoluments received from employment in Jamaica to the NHT in addition to the 3.0 per cent that their employers contribute. Employers are required to remit each employee’s contributions by the end of March each year for the preceding year. For example, they are required to submit returns for 2022 on or before March 31, 2023.

Contributors to the NHT stand to derive several benefits, but they must be current with their contributions to qualify. The main benefit is loans to assist in buying, building, or improving their homes.

They are also entitled to a regular refund, with interest, of contributions they have made to the NHT in the eighth year after making the contribution. At retirement, they are entitled to a refund, with interest, of all contributions for the last seven years and whatever is outstanding from previous years. The refund of contributions for the current year are payable after the employer makes the returns to the NHT by March 31 the following year.

It is important for employers to remit the contributions of their employees as the NHT can only refund the money paid over to it. Further, it does not give benefits to employees for whom contributions are outstanding.

It is a good idea for contributors to check periodically with NHT customer care, which will be able to confirm if contributions have been made for past years but not the current year. They should be prepared to provide their TRN or NIS number.

Contributors preparing to apply for a benefit may first check with the customer care department of the NHT if their contributions have been remitted. If there are outstanding contributions, they may get a verification letter from their employer or may produce their pay slips to show that the contributions have been deducted from their pay. Either action will be followed by an investigation by the compliance department.

In cases in which contributors are about to retire and will therefore apply for the refund of their contributions, it is prudent to call the NHT and provide their NIS or TRN number to verify their status. The NHT will confirm the years for which contributions have been remitted. If there are gaps, the NHT will advise the contributor to get a verification letter from the employer and the compliance department will do further investigations.

It is also important for NIS contributions to be remitted to the NIS office on time to ensure that contributors receive their full entitlement of NIS pension when they retire. Where there are gaps, the individual will receive a pension that reflects the contributions that have been accounted for.

In such cases, the contributor, now pensioner, only receives the arrears when the necessary checks confirm that there are missing remittances and after they have been made to the NHT.

It is good practice for employees to keep the evidence that the deductions have been made from their salaries in a safe place as this may help to resolve issues later.

Apart from statutory deductions, some employers offer the service of deducting money from the salary of their employees to pay their contractual financial commitments. In some cases, though, these payments are remitted late. The employees thus risk their insurance policies lapsing, risk their credit score being affected in a negative way and, worse, risk losing assets due to no fault of their own.

The damage to the employee’s reputation may make it more difficult to access credit in the future, or may cause credit to become more expensive because of the requirement to pay higher rates to compensate for the perceived higher risk.

A notation on the salary advice that money has been deducted from an individual’s salary is not always enough to give the employee comfort that all is well, so it is prudent to check with the creditor or whoever else is to receive money to ensure that payments are arriving on time.

The money taken from the salary of employees is not to be seen as an interest-free loan to employers to bolster their cash flow. Those who engage in this practice bring harm to the reputation and financial well-being of their employees. They may also damage their own reputation, contribute to lower staff loyalty and productivity, and compromise the financial strength of their business depending on the scale of the aforementioned.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel. finviser.jm@gmail.com