In St Kitts-Nevis, most employers dutifully pay their dues on time, giving Social Security a compliance rate that hovers around the 90% mark.” Compliance can be viewed in two ways: whether everybody who is registered with the institution has properly reported on their activity, or whether all the contributions due during the reporting period have been collected. The former is more prevalent in our system.” Sometimes, however things go wrong and employers fail to pay.” It is this non-compliance that often gives rise to prosecution in courts and the application of penalties. When we examine our data, we see a situation in which some newly registered businesses immediately become delinquent (non-compliant) and fall in arrears.” For 2007, 236 new employers came into business and 58 of them (25%) did not meet their obligations at all, and almost all of them fell short of meeting their full obligations.” For us at Social Security, this is too much.” This article is dedicated to these employers: it sets out our expectations, analyses the phenomenon of delinquency and makes suggestions as to how to avoid this pitfall. Social Security requires two major things of all its registered employers: a) information on the number of workers in the establishment and their wages, and b) payment of the requisite portion of the workers wages, matched by the employers” portion.”” There is a built in grace period for the provision of these items. The employer who generates activity a particular month is only required to provide data and payment by the end of the successive month. That is to say, the deadline for reporting information for January does is the end of February and so on.” The information must be supplied within the period; and although not encouraged, the money may be paid later.” If it goes too late, it becomes subject to a 5% per month penalty.” This penalty has been described as usury, and serves to coerce payment. Some employers have bad habits; they do not pay unless they are sued, despite the fact that they religiously deduct the workers money.” You see these names being repeated time and time again in our press releases.” Some employers are forced to delay activity while they await funding approval.” Some employers never bother to report NIL returns when they are temporarily inactive.” If they do not, we will always assume that they are active and list them as delinquent. (I addressed this issue in an earlier article). Other employers have cash flow problems and are forced to prioritise commitments. An Inspector related a story where an employer, acknowledged his debt, but when asked why he did not pay in the allotted time, weighed up his mortgage and his Social Security obligations.” Mortgage won.” Some employers mismanage their money, especially where large payments are periodically made.” Sometimes, employers underbid for jobs, under-estimate time and material requirements, and other employers ignore that there is a cost to using [their own] money.” Such situations are quite common in the construction industry.” The temptation to spree is great when the cheque has plenty zeroes before the decimal point!” Indeed, of the 58 business referred to earlier, almost 26% were in construction and this industry was the single largest category.” “Furthermore, of the 178 businesses that paid something, 15% of them were from the field of Construction.” We are not fully convinced that these Construction companies only received these short stints of work, averaging 4 ” 6 weeks, but lasting no more than 14 weeks.” The second largest rate of delinquency was seen in the industry referred to as Wholesale & Retail Trade, Repair of Motor Vehicles, Motorcycles, Personal & Household Goods, at 17% of its members totally non-compliant and only 19% partially compliant. So what can be done to avoid the delinquency trap?”” Understand employment.” Right size your business.” Avoid the temptation of employing persons suited to a level of peak busyness.” It is better to reward staff for extra effort than to pay people to ‘sit down”.” Besides when you overstaff and then have to right-size, you become the fall guy.” It is painful to lay off people when their expectation is for long term employment.” Of course, this is not to suggest that certain periods do not require ramping up, but do so sensibly and with clear understanding that such increased employment is temporary.” The movement within the economy towards outsourcing ” i.e. job work – may well be the answer, but it must be properly done and there should be full disclosure to Social Security. Report to Social Security, even when you have nothing to report! We, like nature, abhor a vacuum.” We will always assume that you are at work and dodging if we do not hear from you.” It bears repeating that you should be truthful in your reporting too; do not report NIL when there is something going on.” Remember you can report the information and bring the money later. Ask for a payment plan.” We are not ogres ” we understand that sometimes things happen.” When they do, come in and talk with us.” We prefer to err on the side of caution, so we will always seek to register the debt with the Court of Law but we will not prosecute once you adhere to your end of the bargain.” The law allows the Director the discretion to waive all or a portion of the fines accrued, which, at 5% per month have been described as draconian by a friend of mine.” But our Director (and our Board) live here and understand the economy; you convince her (and them) that you deserve a break from the fines and you may get it.” Understand, however, that if you receive a break and renege, the penalties will be re-applied. Learn your business.” Know what it will take to fully get it to the point you want to achieve and have a business plan to get it there.” Know the ins and outs of the business and be prepared to make business decisions and not emotional decisions.” Develop good relationships with professionals in the industry, people who can offer advice and credit when both are required. Become a member of an appropriate association ” there is safety and unity in numbers.
