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Temporary 2% employee contributions reduction

About the proposal

In July 2020, it was announced that the Government of Jersey would introduce a £150m fiscal stimulus package in order to help the Jersey economy in the wake of the COVID-19 pandemic.

Following this, the proposal to cut Social Security contributions was proposed that would temporarily reduce employee contributions by 2%, from 6% down to 4%. Self-employed people would also be entitled to the 2% reduction. The reduced rate will be eligible on incomes of up to £4,558 per month. Employer contributions will remain unchanged.

The change is in effect from 1 October 2020 and will last until 30 June 2021.

The 2% reduction will help boost the local economy by increasing the take-home pay of approximately 55,000 workers and self-employed Islanders.

The proposal can be seen on the States Assembly website.

Why this has been proposed

The 2% cut in employee contributions is just one part of the Fiscal Stimulus package that has been proposed to enable Islanders to actively spend more money locally, in Jersey’s economy. Spending the money locally will put us all in a better position and will help Jersey’s economy recover. It’s part of the Spend Local campaign.

Where you can spend the money

It's intended for you to spend the money in a Jersey shop, hospitality venue or on a locally provided service. You're strongly encouraged to spend the money locally to help our economy recover.

We appreciate it's tempting to keep the money safe for a future purchase, however to help stimulate our economy we need everyone to do their bit by spending the money now and spending it locally.

Employees

  • you will pay 2% less contributions for October
  • you don't need to do anything for your contribution to change
  • you'll not need to pay back any money you save due to the temporary reduction 
  • your ITIS rate will not be affected

If you earn over the threshold

You'll be entitled to the reduced 4% rate on a salary up to the Standard Earnings Limit (SEL), which is currently £4,558 per month. Contributions payable on any portion of salaries above the SEL will remain unchanged.

Employers

What you need to do

You'll need to temporarily change your payroll systems and processes and deduct 2% less contributions from your employees from 1 October 2020 up to 30 June 2021. If you can't make this deadline, call Customer and Local Services on +44 (0) 1534 444444.

Tell your payroll provider about the proposal, if you use one.

You'll also need to plan to change it ‘back’ to the original system after the temporary reduction ends in June 2021.

Employee contributions

The temporary 2% reduction only applies to employee contributions up to the Standard Earnings Limit (SEL) of £4,558 per month. Employee contributions above the SEL and all Employer contributions remain unchanged.

Who the change will affect

This change will only affect employees who have a “blue registration card”, or a card that has FR1 on the back of it.

If you employ people on “red registration cards” or cards that have XR1 on the back of them, you don't need to make any changes for these individuals because you don't deduct employee contributions from them.

Encourage your employees to spend locally

Speak with your staff about spending the money locally. We really do have the ability to provide much needed support for our local economy by making sure the money is spent on Island.

Self-employed and other non-employed (Class 2)

This change will affect everyone who pays class 2 contributions.

You don’t need to take any action. You'll receive a letter with your new rate to reflect the 2% reduction from 1 October 2020. If you pay by Direct Debit, we'll amend this.

2021 rates

You'll receive another letter early in 2021 with your new rate for 2021 that will still reflect the 2% reduction.

Later in the year, you'll receive a letter with your rate from July 2021 to December 2021 to revert to 12.5% of income.

Temporary 4% employee contributions calculator

Between 1 October 2020 and 30 June 2021 Social Security contributions will temporarily reduce employee contributions by 2%, from 6% down to 4%. 

  • self-employed people are entitled to the 2% reduction
  • the reduced rate will be eligible on incomes of up to £4,558 per month
  • employer contributions remain unchanged

Contributions calculator during the temporary reduction to 4%


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