Supermarkets plan to wait until the 2017 budget is presented so they can see whether any other increases follow the National Insurance Board’s (NIB) September 5, 2016 increase in national insurance contribution rates and the maximum insurable earnings as well as the business levy increase in the last budget.
The financial impact on companies varies based on the number of employees and the earnings classes of the employees, NIB said in an emailed response on Sunday. The contribution rate increased from 12 per cent to 13.2 per cent.
Employers are required to pay to the NIB two-thirds of the contributions of their employees, while the employees pay one-third. That ratio remains unchanged, the NIB said. Contributions are broken down into classes with Class 1 representing the lowest salary level of between $200 and $339.99 if you are a weekly employee or, earnings of between $867 and $1472.99 if you are a monthly employee in Class 1.
The board explained: “For an employee in Class 1, the employer’s weekly contribution increase would be $4.60. For an employee in Class 8, the employer’s weekly contribution increase would be $24.”
An executive at a local manufacturer said the company’s NIB contribution costs will increase by 24 per cent as a result of the increase in the national insurance rates and the maximum insurable earnings. This increase, however, is less than one per cent of the company’s total costs.
President of the Supermarket Association of T&T, Yunus Ibrahim, weighing in on NIB’s decision, predicted that food prices may increase but not immediately. He added if an increase is to happen it may occur in October. In a telephone interview, Ibrahim said businesses would have been signalled through the mid-year review and the last national budget that there would have been increases in national insurance contributions.
Addressing price increases, he said not only supermarkets are a labour-intensive type business, but so are hardware stores and gas stations.
Ibrahim said: “Price increases directly? Suppliers are very labour-intensive also in addition to the supermarkets. We may see some increases in the near future when it comes to food from suppliers. That’s one aspect, within our operations of our high output, high volume and low margin industry-it (price increases) should not be a tremendous amount. Most people (supermarket owners) will look to absorb it. It all depends on how labour-intensive you are.”
Substantiating his point, Ibrahim said, since September 2015, supermarkets like other members of the business community, have had to face increases in the Green Fund and the Business Levy and now the NIB contribution hike. Due to the nature of their business, supermarkets can have challenges with these increases.
“Within our industry of being a high turnover-low margin sector, you would have found those measures would have taken away about 25 per cent to 30 per cent of our profit margin. Levy went up $0.30 to the dollar; it went up cumulatively $0.90 on the dollar. Then the increase in NIB contributions as well. I personally don’t feel that anyone would get around to any personalised increases, until post-budget. We have to see what else would go up,” he said.
NIB said in its announcement that it was justified in making changes as a result of the economic downturn in T&T.
The T&T Manufacturers’ Association described the decision to increase contributions as a “prudent” move since the NIB would not be able to support “projected payments in the not-too-distant future, if contributions are not increased now. The TTMA considers this a prudent move in order to avoid further negative consequences for the workforce, and particularly those with relatively low incomes, upon retirement.”
Specifically, TTMA President Rolph Balgobin said it was unfortunate that the increased contribution comes at a time of recession and structural adjustment, however “this is unavoidable and, in our view, to delay will simply mean a larger increase later. Manufacturers remain fully supportive of retirement arrangements for the workforce through the NIB, and while the increased costs will be difficult to bear, they will certainly comply and seek greater operating efficiencies to compensate.”
Balgobin added that its members predicted that there would not be workforce reductions as a result of the increase in NIS contributions.
President of AmCham T&T, Ravi Suryadevara, said he did not believe that the increase would have a major impact. But he said there is need to be sensitive to small and medium-sized enterprises since the change in costs may be challenging for them, especially as T&T is in a recession.
Other than concern for the small and medium-sized enterprises, he welcomed the changes:
“We must also note that the increased NIS contributions result in increased benefits provided to employees such as benefits related to maternity leave and illness. This is an adjustment that we will have to bear as employers, as it is an adjustment that is a benefit for our employees.”
Even though the group has not met with the NIB, it continues to monitor the actuarial review reports.
AmCham said that it has not met with the NIB, but it has been monitoring the progress of the NIB’s actuarial reviews which are published on NIB’s Web site. The group added: “We also take note of T&T’s aging population, falling mortality rate, the volatility in investment that fuels the NIS in part with contributions, and the general trend of contributors to pensioners to remain at around a ratio of three to one in the near to medium term.”
The ninth actuarial review is for the period ended 2013 and AmCham said it wanted to wait on the tenth to ensure that there is a level of continuity from the previous report.
In emailed responses the group said the pending review is due within the next two years so, “we anticipate another review by or before 2018. Based on the results of this review, we will be able to determine a way forward taking into account the volatile investment climate. While the process of the actuarial review is bound by law, this is also part of the mosaic of measures that we at AmCham T&T have recognised as vital to the rebalancing of current market conditions.”
Overall, the group said it supported the NIS rate increase because, “this stance is aligned with the other conditions that we have adopted such as our stance on increased margins for petroleum dealers, peddlers and retailers. This situation shows that the economy has not been fluid and evolving over time in a variety of price structures as they relate to goods and services, and in part those delivered by the public sector such as NIS.”
The wave of change in NIB’s operations come under the leadership of 42-year-old Niala Persad-Poliah who was appointed executive director December 2014. She wants to deliver change to NIB and is charged with managing T&T’s $25 billion national insurance system. Armed with a strategic plan as well as an organisational plan, she is ready to be the wave of change in NIB.
An attorney for a total of 18 years, Persad-Poliah has been employed at the NIB for 13 years of those years, leading its legal department. She has been responsible for the Office of Corporate Secretary, corporate communications and held the position of deputy director.
NIB has a client base of more than 500,000 contributors and is an entity that has been in existence for 44 years. Its financial statements for 2014 and 2015 are yet to be laid in the Parliament, therefore, are not available to the public, according to NIB’s Web site.
But stakeholder engagement is crucial to NIB’s success as an organisation, Persad-Poliah said in emailed responses.
“Since January 2016, the NIB has engaged in consultations with government, labour and private sector organisations and their representatives to highlight the findings of the ninth actuarial review. These targeted workshops were conducted by NIB’s financial experts who were key players in the ninth actuarial review and supported by our public education team.”
What is clear, according to Persad-Poliah, is that during NIB’s existence there has been “incremental organisational change” and NIB is now ready to transform even further with its new strategic plan titled “From Strategy to Action, Working Together.
“This plan connects the dots and closes the gaps. What is exceptional about this strategic plan is that it is supported by a solid and sustainable organisational transformation plan which offers deep insight into root causes of dysfunctional systems and clarifies proactive solutions-driven steps.”
“Cross-wired, the strategic plan and organisational transformation plan offer a well-crafted vision for change and are destined to deliver significant performance-enhancing change at the NIB. The simultaneous execution of our strategic plan and organisational transformation plan will retool the NIB to effect lasting change.”
In a few days NIB is expected to embark on a nationwide employer sensitisation campaign that will engage employer associations, other industry players and members of the business community. This is expected to continue into October 2016. The NIB said it also intended to ensure that employers of domestics are also sensitised during the campaign.
