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Contributions rise for employers

07 June 2011

​The Ministers for Treasury & Resources and Social Security have announced revised Fiscal Strategy proposals for Social Security contributions, as part of the plan to meet the Island’s deficit.

It was agreed during the 2011 Budget debate that a 2% increase in Social Security contributions would be levied on earnings above the existing ceiling of £44,232, for employees and employers. This measure was in addition to saving £65million by 2013 and a 2% increase to GST.

In light of a slight improvement in the financial forecast, the Ministers are pleased to announce that a 2% increase for employees from 1 January 2012 is no longer proposed. A 2% increase will remain for employers, and the rate will reduce from 4% to 2% for the self employed, to an upper ceiling of £150,000.

Ageing population

The Social Security Minister, Deputy Ian Gorst, said "Employees will soon be paying increased contributions to fund a long term care insurance scheme and as we are all living longer it is likely we will all have to pay more to meet growing pension costs.  It is important that we only impose increases that are absolutely necessary to help us close the States deficit.
"I am pleased to be able to amend the plans and maintain employee contributions at the current rate. This means the only increase employees will face in the near future will be to insure against the costs of long term care."

The Treasury Minister, Senator Philip Ozouf, emphasised the need for caution: "We must take care to balance meeting the deficit with the need to encourage the emerging economic recovery. 

Emerging recovery

"While halving the proposed increase is an important boost to the economy, so too is the setting of an upper ceiling to contributions. This is an essential component in maintaining the Island’s international competitiveness and in ensuring we remain an attractive destination for business to locate."

The plans also include a change to the system, allowing the newly self-employed to base their contribution liability on the first two to three years of trading, using estimates of their current results, rather than on the previous years’ earnings. This will remove what is often described as a disincentive for entrepreneurs considering their first step.

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