Consultant’s deadline for NIS reforms passes

-private sector still to hear from gov’t

With the proposed deadline for the implementation of critical NIS reforms already gone, the private sector is still to hear from the government on its proposals to revamp the scheme but it continues to emphasise that enforcing compliance is key.

PSC Chairman Ron Webster said that although the body has had discussions with government on other unrelated issues, neither the National Insurance Scheme nor the  government has responded to the recommendations contained in a position paper it submitted. Webster pointed out that the PSC is in contact with Minister of Finance Dr. Ashni Singh and a meeting will be convened shortly to discuss the proposals put forward by his organisation.

In a lengthy paper released at a session with the media at the Georgetown Club, the PSC said that it was “very concerned” with the state of affairs at the NIS as laid out in the most recent actuarial report and wanted a national approach to fixing the problems. The organisation called on the NIS to get its house in order before imposing further burdens on employees and employers as it declared that it will not support the recent actuarial recommendations to hike the contribution rate and raise the pensionable age unless the NIS is more efficiently run.

Ron Webster
Ron Webster

The PSC’s  stance was a rebuff to the government and the NIS, which had been hoping to fast-track changes on the basis of the eighth actuarial report done by Actuarial and Financial Consultants Horizonow and submitted to the government in October last year. That report had said that the NIS was approaching a crisis stage and needed urgent action. The report then listed a series of immediate steps, the majority of which the PSC is not willing to endorse.

Some of the recommendations included that the contribution rate should be upped from 13% to 15% no later than January of this year, increase the wage ceiling to $200,000 per month, freeze pension increases for two years and raise the pension age from 60 to 65 on a phased basis. The PSC also nixed old age pension proposals, which would see pension accrual rates revised so that the maximum 60% benefit is reached after 40 years of contributions instead of 35 years and increasing the number of years over which insurable wages are averaged for old age pension calculation from three to five.

Webster, responding to questions from Stabroek News, said that he believed that the main issue at the NIS was ensuring compliance and collection of contributions.  He said that he did not feel that there should be special rates for high-risk workers, like those in the mining and construction sectors, since an increased rate for any group would worsen an already dire situation. “The problem has been the failure to ensure compliance and collect monies owed. Increasing rates could well result in a worsened collection situation. The Private Sector Commission is therefore of the opinion that the single-rate system is the most appropriate for purposes of simplicity and efficiency and does not believe that there should be special rates for perceived high-risk jobs,” he said.

“Were such a system to be implemented, there would have to be subjective judgments as to which jobs are inherently ‘high-risk’ and the administrative arrangements necessary for such a system would outweigh any potential benefits to the Scheme,” he added.

Further, Webster said that he did not believe that government-contracted jobs would have helped to deprive the NIS of much-needed cash. “Contract workers are classified as “self employed persons” and are hired not only by government but also by the private sector, health services, the media and others. The employer or employing organisation has the responsibility to report to the GRA annually, the names of contractors and the amounts paid to these contractors. Hence, the [PSC] suggestion that the GRA and NIS collaborate on collections… in order to reduce overhead costs and duplication of effort,” he explained.

He reiterated that compliance needed to be on NIS’s front burner. “Once sound compliance systems are in place the Scheme should not be denied of cash since all employees, including the self-employed/contractual workers are required to contribute to the Scheme,” he stated.

He said that PSC was advised that for government-contracted personnel, PAYE and NIS deductions are made at source so there should be no leakage. “Due to the skills shortage, a large percentage of contracted employees are retirees who have been rehired on roll-over contracts and the expansion of the Scheme by increased numbers of contributors does not necessarily translate to its improved financial health since the increased contributions would be accompanied by a concomitant increase in benefit outflows,” he further said.

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