By Elvin Bailey
Social Security recently participated in a technical seminar for Directors of Social Security Organisations in the English Speaking Caribbean that was held in Bermuda. It was held under the auspices of the International Social Security Association, ISSA. The Director, Mrs. Lawrence, presented a paper sharing our experience over the eleven years of offering social insurance coverage to the self-employed sector.
The brief for the meeting stated that few CARICOM governments have addressed the coverage of self-employed persons with commitment. Legislation is on the books, but resource allocations to ensure its enforcement are inadequate and result in a low percentage of self-employed persons contributing to existing social security programmes. While globalisation has generated a lot of self-employment, it has eroded our collections base. Approximately 25% of SE persons are registered in Barbados, 15% in St Kitts-Nevis and the Bahamas and less than 10% in the rest of the Caribbean. Unless this matter is corrected, Caribbean societies, in time, are likely to have large numbers of elderly without an adequate level of retirement income. This is a dire prediction for all of us.
This prediction caused me to think – who are these self-employed people, what they do, how do they manage and how covered are they? So this article presents a summary of our experience in providing coverage for the self-employed amongst us.
Self-employed persons, by law, are those persons whose work is NOT subject to the control of another person. Self employed persons come and go as they like and work at their own pace. Do not confuse the self-employed person with an uncontrollable worker who the boss is afraid to manage.
By December 2007, eleven years after its introduction, a total of 2114 self-employed persons had registered with Social Security. Of this, our records showed that only 662 of them had contributed to the Fund in 2007. There are 46 self-employed age pensioners, 13 of whom may not have qualified were it not for the availability of SE coverage. Further, benefits have been derived under 10 of the benefit types offered. Approximately EC$6 million has been collected from the sector and over EC$2 million has been paid out in benefits.
When SE registrants are distributed amongst the ILO standardized employment categories over the period 2002 – 2006, we see a distribution in favour of construction, wholesale/retail, transportation, social and personal services and manufacturing. When we examine the age distribution, we observe a clustering of persons in the range 30 – 44 years old. Again, of all the self-employed registrants for the period, seven (7) persons or 1% were under 19 years old and another 1% was older than 60 years. By comparison, in the employed sector, while more men than women find employment, persons aged up to 19 years represented more than 57% of all registration while those over 62 represent approximately 1%.
For each year under review, more men (61%) than women (39%) have registered as Self-employed. Men tend to register more within the construction industry (38%) while most women (32%) find self-employment in the Wholesale/retail sector.
The Self Employed have many challenges. Many of them earn income in spurts that must be spread out until the next job comes along. It is a fickle sector and the next job/customer is uncertain. Hence there is a money management issue for self employed persons to deal with: Do I pay now for myself or do I re-invest the proceeds into development of the business? Do I settle my immediate bills – non-payment of which can potentially shut me down, or do I pay into a plan whose future is uncertain? If I remain current and compliant, how can I convert this into making my business better?
Perhaps, though, the greatest impediment to the growth of Self employed coverage is the difficulty the Self Employed experience in collecting monies owed to them. Customers commission jobs but neither do they want to pay the deposit nor to settle in full afterwards. Hence the self-employed person (to stay in business) must give interest free credit to his customers and still meet his commitments on a regular basis. The net result of the cash flow factor is that the self-employed person prioritises on what bills to honour per given time. Social Security payment becomes low priority. If you don’t pay them, they cannot pay social security.
Self-employed reporting is not easily verifiable because it is based on trust. Many SE persons are sole corporations: he or she is the actual business. In an economy where there is no income tax, there is little incentive for i) reporting and ii) for reporting accurate information.
In the 1990s when I managed a small store, I was on the cusp of SE. I experienced all of what I write about and more. I saw peaks in income that were exhilarating. I saw troughs in income that were downright frightening. So we at Social Security understand the struggle.
When we conducted a survey of SE in 2003, we found that the system was not well suited to your needs. We encourage you now during this time of reform to come in and talk to us. Pay when you experience the peaks to cover as much of the troughs as possible. Set aside something for your rainy day.
The law allows us to sue in the courts non-payment of contributions. No self-employed person has ever been sued. We prefer to encourage. We take notes of your refusal, however, and reserve the right not to respond to your request for help later in life.
We recognize that there is self-employment and there are self-employed people. We offer coverage either way. There is no discrimination.
Notwithstanding these issues, there are some very satisfied self-employed persons out there. Just two weeks ago, a taxi driver – who I encouraged – reported, quite enthusiastically, that he collected $400.00 in sick benefits when he was sick with severe back pains and could not drive. We have many such testimonies; some of them are recorded in our 30th anniversary magazine. Talk to Oliver Bourne, Walter Simmonds, Janet Grell-Hull, Ralph Hutton and Lonya Small.
The organizers of the workshop asked us to find out what are the priorities of the self employed and the most effective means of encouraging this type of worker to participate in our social protection system.
We are encouraging you to get on board. Change Social Security from the inside!