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The minimum wage balancing act

Employment 17 Feb, 2016 Follow News

The minimum wage balancing act

The way has been paved for the introduction of a national minimum wage in the Cayman Islands starting next month. This was done by way of an Order from Cabinet, while other legislative measures are being worked on to update the Labour Law.


“As a country and government, we have a responsibility to the members of our local workforce to help ensure that their minimum needs can be met in light of national, economic and social conditions,” said Employment Minister Tara Rivers.


She said based on the research compiled and the economic analysis conducted by the Minimum Wage Advisory Committee (MWAC), the guidance provided by an experienced labour economist acting as a technical advisor, and considering the input from all persons who participated during the process, the government has agreed that $6 per hour is appropriate at this time.


Last May, Premier Alden McLaughlin told the country by way of the Legislative Assembly that government was moving ahead with a view of introducing a minimum wage as of March this year.


According to the Order, starting 1 March, the minimum wage payable to all employees will be CI$6.00 per hour gross (before pension and health deductions). However, this does not apply to service workers of an employer who has a gratuities scheme in place that has been approved in writing by the Director of Labour and Pensions. Those service workers must be paid a minimum if CI$4.50 per hour directly from the employer.


The Order also specifies it affects live-in domestic employees, and how employers should compensate workers on a commission basis.


Any employer with a live-in household employee is allowed no more than 25 per cent or CI$1.50 per hour as “in kind” credit providing for accommodations and utilities for the employee, meaning the employee must be paid a minimum of $4.50 per hour in gross monetary compensation.


The Order also states that any employer with employees working on a commission basis may use no more than 25 per cent or CI$1.50 per hour to be allocated from the commission earned by the employee to be put towards making the National Minimum Basic Wage of that employees. “That is, the employees must be paid a minimum of CI$4.50 per hour gross directly from the employer. However, including commissions in the computation of the wages of an employee must not prevent that employee from receiving all commissions earned,” the Order states.


“No employee, including service employees, live in household domestics, and commission based employees, must receive less than their respective National Minimum Basic Wage when the employer calculates their sick vacations, maternity or any other applicable leave. For the avoidance of doubt, the employer of a live-in domestic employee may continue to calculate any allocated in kind benefits for accommodations and utilities during leave periods,” the Order explained.


“Determining the appropriate minimum wage was definitely a balancing act. The government had to consider the impact on both employers and employees,” Ms Rivers stated.


She explained that through the work of the MWAC, a Cayman Islands-Economic Vulnerability Threshold (CI-EVT) was established. “This threshold represents the minimum amount that a worker needs to earn in order not to slip below the poverty line, and this was determined to be $5.22 per hour per income earner,” the minister said.


“Keeping in mind that the goal of having a national minimum wage is to address exploitation and provide real relief to the lowest paid workers, we obviously did not want to set the wage below the CI-EVT figure; in fact, we did not want to introduce a minimum wage whereby people may end up living on or fall below the poverty line, in the event of any unforeseen changing economic conditions.


“However, at the same time, we did not want to put employers in some industries in a position where they could not afford to hire workers because the minimum wage is too high. Therefore, it was determined that $6 per hour is a reasonable minimum wage given those considerations,” Minister Rivers explained.


Government has promised to study and review the National Minimum Basic Wage on a “regular and intermittent” basis going forward. It is anticipated that the monitoring and evaluation procedure for the minimum wage will also be addressed in the revised Labour Relations Bill.


“The truth is that for many of the low wage employees in the Cayman Islands, the new minimum wage will actually mean an increase in salary, and this means they will be better equipped financially to provide for themselves and their families,” the Employment Minister said.


“As a country, we cannot continue to facilitate the importation or perpetuation of poverty in our society, and this is one way in which the government has chosen to address this issue.”


She explained that while the minimum wage is the “absolute wage floor” in which employers and employees can agree to; the parties have the ability to negotiate for wages and compensation that are reasonable given the economic conditions, the nature of the job, the industry standards and other factors.


The 12-member body advising government on the issue last year presented its findings to government after a nine-month period of public consultations. It noted the $6.00 per hour rate will directly benefit nearly 6,000 employed people or less than 16 per cent of the entire employed labour force. Around a quarter of those people it said would be Caymanians, with the majority being expatriate workers.


The committee, chaired by Lemuel Hurlston, also noted there would be as many as 600 jobs lost in the local economy as a result of the minimum wage taking effect. However, it said it was assumed these job losses exclusively affect work permit holders, rather than Caymanians and Permanent Residents.

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