Hotel group denies resistance to tourism pension scheme
The proposed Tourism Workers Pension Scheme will be seeded by the Tourism Enhancement Fund, TEF, over five years, but its long-term survival will rest on buy-in from hotels, which are the largest employers of hospitality workers.
Tourism ministry officials and their advisers have been assuring tourism workers that the pension scheme will have the weight of law behind it.
Those assurances have been consistent, because the legislation is being written to make contributions mandatory, but the position will be tested as the bill is debated.
Still, the Jamaica Hotel and Tourist Association is pushing back on suggestions that they are resistant to the plan, saying industry concerns relate only to the additional expense it creates for some operators.
Speaking with the Financial Gleaner on the margins of the final round of consultations on the scheme, held in Kingston midweek, one planning committee member said there was passive resistance to the scheme by sector employers. The person spoke on condition of anonymity because of the sensitive nature of the issue.
"The plan has to happen. It's not voluntary," said the representative. "We have had employers come to us and we know they are not going to join the scheme. [But] first of all, you try suasion. After that, it's not suasion," the person added, while noting that discussions with tourism employers have been ongoing for five years.
"It's a law; they have to obey."
However, JHTA President Omar Robinson categorically denies low buy-in among employers in the sector, saying the mandatory element was agreed during consultations on the pension plan, "so it's really not a concern," he noted.
"Their concern, though, was how it would impact their expenses ... because it is going to be a direct expense," he said, while asserting that the sector supports the tourism pension programme.
As to the claim that most owners would prefer not to join the plan: "That's not what I am getting," the JHTA president responded. The issue for tourism operators, he said, is that they are facing a new expense and need advance notice in order to properly budget for it.
Minister of Tourism Edmund Bartlett said at the meeting that the draft legislation had passed two stages of review and was expected to be tabled in Parliament for public debate in September.
The proposed pension plan will operate as a defined-benefit scheme, with mandatory contributions for the first two years set at three per cent of wages or salary, matched by three per cent from the employer.
From three years onwards, the contributions will be five per cent from employees, matched by five per cent from employers. Self-employed tourism workers will pay at the same level. The pension requirement is applicable to all workers, regardless of contract classification.
Robinson said the gradual phasing of the contributions was agreed by tourism employers so as to assist with budgeting of the pension expense.
"After the consultation period is over, regulations is in place, and everything sorted out with the FSC, it's for the date to be set ... as long as they get advance notice so they can incorporate it into their budgeting processes," the JHTA president said.
Employers in the industry who already have an approved plan covering all workers will be exempted from joining the new tourism scheme.
The pension fund to be created for the management and investment of contributions will be overseen by a board of trustees who will appoint - after public tender - an investment manager and an administrator to manage the investments and operations of the scheme.
Elements of the fund will be put in place concurrent with the passage of the legislation to allow for the immediate operation of the scheme, according to actuarial adviser Daisy Coke. She adds that tenders and due diligence on potential managers and administrators are expected to get under way soon.
Jamaica's resort sector is largely a seasonal employer, and is characterised by job uncertainty, even in times of growth. Jobs are also not guaranteed from one season to the next, but more fundamentally, many are denied benefits, including those that derive from statutory contributions.
The pension plan, intended as assurance of income for contributing workers in the resort sector in their retirement years, involves a mandatory contribution on the part of both employee and employer, regardless of the contractual status of the worker. Contributions will flow to a Tourism Workers Pension Fund, which is to be established under the legislation.
Vesting, which refers to an employee's entitlement to their employer's portion of the contribution, is also immediate under the tourism pension scheme, unlike most local plans which only vest after five years. On retirement, an annuity will be purchased for the retired worker, according to Ministry of Tourism briefing notes.
The TEF will seed $1 billion to the fund over five years.
Details of the scheme
The scheme will cover workers aged 18 to 59 years. However, anyone aged under 65 will be allowed membership in the initial stage of the fund's launch.
Contributors are expected to earn a pension of $200,000, annually. They become eligible for a pension at age 65, but may continue working and contributing to their pension scheme up to age 70.
The scheme is projected to provide benefits for some 117,000 workers employed in the industry - including hotels, craft and transport.
Cabinet approved the proposal for the scheme to enter drafting stage in the final quarter of 2016. The plan is lagging earlier projections of promulgation into law by September 2017, but Bartlett said many challenges were encountered, including legislative drafting around the structure of the industry.
"Based on our sensitisation sessions with the workers, 86 per cent have indicated their willingness to join the scheme, six per cent undecided, and eight per cent are not interested," Bartlett told the Financial Gleaner.
Previous consultations were held across the island in Montego Bay, Port Antonio, Treasure Beach, Falmouth, and Ocho Rios to engage workers.
As to buy-in from employers, Bartlett said the tourism ministry does not have a number on the amount of property owners who have agreed to participate in the Tourism Workers Pension Fund.
He affirmed, however, that the scheme would be mandatory for employer and employees.
Workers must be rewarded
"Our tourism workers, like all workers, ought to be rewarded for their dedication and should feel as if they are truly benefiting from the sector. Arrangements for the introduction of the Tourism Workers Pension Scheme have made tremendous progress and the second draft of the Pension Act is now ready and being reviewed by my technical team," he said, having described the pension programme as a socio-economic imperative.
Another official said many of the workers have been employed in the sector for years, with nothing to show for it.
"They don't pay NHT, they have nothing, and they have been working for a long time," she said. "Something has to happen," she added, in relation to improving the living standards of such workers.
The definition of a 'tourism worker' is still to be finalised within the draft bill, said the tourism ministry on Thursday.
However, the plan is expected to cover workers employed
by attractions, including water sports; accommodations, including guest houses, villas and hotels nationwide; tour operators; as well as the self-employed, including ground transportation operators and craft vendors.
Whether restaurants, whose businesses mainly serve the tourism market, and entertain-ment companies should be included is the subject of ongoing discussion.