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News Report: "What’s the big secret on NIB rate increase?"

Published by Fay Simmons and Neil Hartnell, Tribune Business News, February 2nd, 2024


BAHAMIAN businesses are urging the Government to reveal the magnitude of July’s impending National Insurance Board (NIB) rate increase, with one asking: “What’s the big secret?”


Peter Goudie, the Bahamas Chamber of Commerce and Employer’s Confederation’s (BCCEC) labour division head, told Tribune Business that the July 1 contribution rate rise is now less than six months away and much closer than what he believes should be reasonable notice to allow companies to budget and plan properly.


“They should be giving notice at a minimum of six months,” he argued. “People have got to plan on this stuff. How can you budget? That’s a very difficult situation. They need to tell people. I don’t know what the secret is. I don’t know why they’re making it a secret and why they’re not telling people.


“I don’t know why they wouldn’t. They have all the actuarial figures. They know what the problem is and how much they’re going to raise it. I don’t know why they’re making it a secret. That’s all I can say. I just don’t know why. I really don’t.


“If you don’t know how much it is you can only speculate,” Mr Goudie added. “I just wish they [the Government] would tell us and get on with it so everybody knows and we can move along with our lives. You don’t know how to budget for something you don’t know. It makes it very difficult.


“I don’t think it’s going to be that huge that it’s really going to hurt everybody, but it would certainly be nice to know what it is.... You would have thought there could at least be six months’ notice. That would be nice. And we don’t know what else is coming. We know there’s a deficit, but nobody knows what it it is. It’s all kind of scary. I just wish they would do something about it.”


Prime Minister Philip Davis KC last June confirmed that a National Insurance Board (NIB) contribution rate increase will be implemented on July 1, 2024, provided no further details in his statement other than the date while asserting that the further year’s delay will not make the magnitude of the hike any greater.


“We hope that a full year’s advance notice will allow all impacted the time to plan to accommodate the increase,” Mr Davis said. However, the Government has yet to reveal the magnitude of the increase, and how it is to be split between employer and employee - possibly because Cabinet has yet to meet, agree on and approve it.


Mark A Turnquest, the 242 Small Business Association and Resource Centre’s (SBARC) founder, said that his members are preparing for the impending NIB rate increase but have also been awaiting confirmation on exactly how much it will be so that they can factor that into their budgets.


“They are preparing themselves because they know it is inevitable, but all they want to know is the exact rake hike. All of my clients and members are ready for it but they want to know exactly how much it will be so that they can be prepared,” he added.


“What they wanted to know from last year is to find out exactly what it was so they could put that in their planning budget for 2024. They are aware that it’s going up but since they don’t know exactly much they’re making estimates.”


Mr Turnquest said his members have confirmed they will not be laying off any staff members due to the NIB increase, and will be focusing their efforts on ensuring workers have adequate training and tools to be more productive.


He added: “They have indicated to me that they won’t do any lay- offs so that’s not a problem, but what they will do is try to increase their employee productivity levels by ensuring that employees have the right equipment, technology, environment and will be well- trained so that they can keep their most productive workers.”


Mr Turnquest said the private sector is aware that NIB is in financial difficulties and are pre- pared for a minimal increase of a “dollar or two”; not an “horrendous” one.


“None of them expect to lay-off anyone. They are planning for it and they expect it, and they know it’s inevitable as NIB is running out of money,” he added.


“Everybody is prepared for a minimum increase to the contribution margin that we have to pay as small business owners, but we aren’t prepared for an horrendous increase...We haven’t planned for a huge increase but we prepared for an increase.. a dollar or two increase...”


NIB’s present reality was predicted more than two decades by its seventh actuarial review, completed in 2001, which forecast that “reserves are projected to become exhausted” by 2029 if comprehensive reforms are not implemented to address the fundamental problem of benefit payouts exceeding contribution income. The recipient of that review, which was only one year out, on September 11, 2002, was then-NIB chairman and now-Prime Minister, Philip Davis QC.


Now, with just four years left to the NIB Fund’s total depletion in 2028, the magnitude of the correction threatens to be that much more severe for businesses and workers already grappling with surging inflation, COVID recovery, rising gas prices and other cost increases. Contributions are presently split 5.9 percent/3.9 percent between employer and employee, making for a combined 9.8 percent, but there has been no indication on what the actual increase will be.


NIB’s 11th actuarial report called for a two percentage point increase in contribution rates to be implemented by July 1, 2022, with subsequent further hikes enacted every two years until 2036 to secure the social security system’s long-term financial sustainability. The date given by the Prime Minister means that the Government will ultimately end up pushing this back two years.


Other NIB reform options include raising the “official” retirement age, increasing the contributions required to become eligible for benefits, and further insurable wage ceiling increases.





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