BASSETERRE, St. Kitts – FOLLOWING the Prime Minister’s Labour Day announcement regarding benefits for private sector workers, the St. Kitts-Nevis Chamber of Industry and Commerce (CIC) has insisted that the government should reconsider the details of the gratuity scheme as it would have negative spinoffs within the private sector.
In his May 4 address, PM Douglas deemed it unfair for employees to work for 10 years or more and receive no gratuity and informed the masses that his government had already proposed a plan for a gratuity scheme to cover such workers.
“This legislation will ensure that workers are entitled upon retirement to a gratuity after serving a minimum of 10 years of service. We have done it for workers on the government payroll and we are determined that all employees in our Federation should enjoy similar benefits,” Douglas said.
The Prime Minister’s announcement was celebrated by the hundreds of prospective beneficiaries but has fallen under much scrutiny by members of the private sector. During the CIC’s Second Quarterly Luncheon, the organisation’s legal attorney Charles Wilkin argued that, if passed, the legislation would have serious short and long term negative implications.
“The immediate effect of the proposed amendment will be to create a contingent liability chargeable against Capital Reserves on the balance sheet of every employer with any employee of more than 10 years. Older and larger employers will be affected the most. Such liability will immediately reduce the net value of the business,” Wilkin said.
The CIC representative stated that the decision could result in a default in borrowing arrangements with the employer’s bankers and investors, and may affect the ability of the employer to borrow or raise additional capital to sustain or expand the business.
In some cases, businesses may fall into bankruptcy and where the company is able to stay afloat, such a gratuity would reduce the ability of the employer to pay bonuses and other non-statutory obligations to employees, Wilkin noted. He added that introducing such a gratuity scheme may affect the ability of employers to expand or increase staff or hours of work for existing staff.
“It could affect the ability of the employer to make sponsorships and donations and other non-essential payments which benefit the community. It will have a seriously adverse effect on the investment climate and will be a disincentive to investment in labour-incentive industries.
“It will create an incentive for employees to do 10-year stints and for employers to let go employees under 10 years. It will create a revolving door which will adversely affect productivity and employer/employee relations and increase training costs,” Wilkin said.
Wilkin explained that the gratuity would be “unfairly punitive” on employers who already contribute to the Social Security scheme to provide retirement benefits for employees, and more so on those who also operate pension plans to which they contribute. The attorney stressed that such employers would be paying three times for the same benefit, and noted that the discontinuance of pension plans could be expected.
The Labour Day announcement did not state whether or not the scheme would be retroactive, neither did it include the input made by the private sector in the decision. However, in his May 5 “Ask the PM” programme, Douglas said it is his intention to ensure that individuals who have served 10 years and are still working in the private sector should be able to benefit from the gratuity scheme.
According to PM Douglas, the legislation has already been placed before the National Assembly for its first reading. But the CIC remains hopeful that the details would be refined in order to ensure that all relevant stakeholders benefit from the decision.
