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BEC: Understanding NIS contributions and benefits

Sheena Mayers

BEC: Understanding NIS contributions and benefits

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Statutory deductions include both pay-as-you-earn and national insurance and often employees look at their weekly or monthly pay slips and think about what they could do with the money that was deducted.

National insurance is often regarded as one of the necessary evils of the working population. Today, let us take a closer look at national insurance; exploring the benefits as well as the contributions.

The National Insurance Scheme (NIS) was established in 1967 for the purpose of providing benefits as may be specified in the National Insurance and Social Security Act. As long as you are between the age of 16 and 66 and a half (current pensionable age), are self-employed, or employed under a contract of service, then you are covered under the act and should be making contributions.

Imagine that you were in a car accident and was unable to work for four months while you recovered. In the absence of an NIS scheme, how would you pay your rent or mortgage? How would you buy groceries or medication? But to eligible to access the benefits from the NIS, one must have contributed to NIS.

NIS sets out the limit on insurable earnings which currently stands at $91 to $4 360 per month or $21 to $1 006 per week. For each private sector employee, NIS receives the value of 21.35 per cent of your income – the employee pays 10.1 per cent while the employer pays 11.25 per cent.

Only employers contribute to the severance fund, which is understandable since only employers may benefit by way of the 25 per cent rebate which they may claim. Additionally, employers also only contributed to the employment injury fund.

Self-employed persons pay 16.1 per cent and the lesser percentage, compared to private sector employees, is partially due to the fact that they do not contribute to the unemployment or severance funds. However, under the scheme, self-employed persons may claim for employment injury.

The NIS pays short term benefits – maternity benefit, sickness benefit, employment injury, and unemployment benefit. Its long term benefits are pension and disability.

To determine eligibility for the payment of short term benefits, the NIS will analyse the number of contributions within a given quarter.

To qualify for maternity benefit, the individuals must have been insured for 26 contribution weeks and paid at least 16 contributions in the two quarters, but one before the contribution quarter in which the benefit could become payable.

To qualify for sickness benefit, the employee must have credited not less than seven contributions in the relevant quarter and must have been engaged in employment immediately before becoming ill.

To qualify for unemployment benefit, the employee must have been insured for 52 contribution weeks and have paid at least 20 contributions in the three quarters, but one before the contribution quarter in which the benefit could become payable. The benefit is paid for a maximum period of 26 weeks.

Injury benefits are payable from the first day of employment. To qualify for injury benefit, the employee must be incapable of work as a result of an accident arising out of and in the course of insured employment, or must be incapable of work as a result of a prescribed disease.

Of note is that NIS benefits are paid without taxes being deducted, therefore NIS reports benefits paid as income to the Barbados Revenue Authority for assessment as part of your total income.

The NIS is designed to provide employees with assistance when income earning is affected. To use the slogan from NIS – more than a contribution, it’s your lifeline.

Sheena Mayers is labour management advisor at the Barbados Employers’ Confederation.