January 30, 2013 at 5:54 p.m.
You'll start earning less tomorrow - and it's no April Fool's joke
The Payroll Tax increase is from 4.75 per cent to 5.75 per cent (a 21 per cent increase) for the employee portion and from 9.25 per cent to 10.25 per cent (a 10.8 per cent increase) for the employer.
H.I.P. goes from $241.15 to $298.93, a 24 per cent overall increase. This H.I.P. premium is shared equally between employee and employer. So the employee will pay $149.47 and the employer will pay $149.47.
In detail, in the chart below, this is what happens with a typical employee and employer. The assumption is that the employee is insured with H.I.P.
As of April 1, the employee will start taking home $14.01 LESS per week but will cost the employer $14.01 MORE per week.
In August when Social Insurance Contributions rise, the Employee will take home about $2 less and will cost the Employer $2 more. The September situation will show take-home pay about $589 and Employer cost about $913.
In order for the Employer to keep the same number of dollars going into the Employees pay packet, the Employer has to award a total 2.4 per cent pay INCREASE by September.
If that 2.4 per cent pay increase happens, the Employee will take home $604.41 (as today); but the employer will be paying out $932.75 which is $35.62 more per week than now.
This $35.62 is a 4 per cent increase in overall Payroll costs borne by the Employer. About 62 per cent of this cost drive-up comes from the Payroll Tax increase, the rest from the H.I.P. premium increase.
Throughout Bermuda, businesses and employers are grappling with this four per cent factor and are making decisions.
How workers - and bosses - will feel the pinch
BEFORE: Taxes, insurance, pension contributions as of March 26, 2010
Agreed hourly rate: The employee = $18.36; The employer = $18.36
Agreed pay (40-hour week): The employee = $734.25; The employer = $734.25
Payroll tax at 4.75%: The employee = - 34.88; Payroll Tax at 9.25%: The employer = (+ 67.92)
H.I.P. Insurance per week: The employee = - 27.85; The employer = (+ 27.85)
5% Pension contribution: The employee = - 36.71; The employer = (+ 36.71)
Social Insurance Contribution: The employee = - 30.40; The employer = (+ 30.40)
Takehome Pay on Mar. 26 : The employee = $604.41; Employer's cost = $897.13
AFTER: Increased Payroll Tax, increased H.I.P health insurance, but no change in pension or Social Insurance contributions. These new rates will apply for the week ending 8 April 2010.
Agreed pay: The employee = $734.25; The employer = $734.25
Payroll tax at 5.75%: The employee = - 42.22 (up); Payroll Tax at 10.25%: The employer = (+ 75.26)
H.I.P. Insurance per week: The employee = - 34.52 (up); The employer = (+ 34.52)
5% Pension contribution: The employee = - 36.71 (nc); The employer = 36.71 (nc)
Social Insurance Contribution: The employee = - 30.40(nc); The employer = 30.40 (nc)
Takehome pay on Apr. 8: The employee = $590.40; Employer's cost = $911.14[[In-content Ad]]
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