Over more than 20 years of practice in Bermuda, anecdotal stories filtered through from employees short-changed by their employers had almost always the same sad outcome — little to no recourse for recovering a 15 to 20 per cent reduction of their gross wages.
Negligent, noncompliant employers range across the Bermuda business and organisations spectrum, as do the means used to avoid responsibilities for employee financial benefits, such as:
• paying workers in cash right from an ATM machine, no wages to report, so no benefits or taxes to be paid;
• lengthy periods of no contributions in to social insurance (Old Age Contributory Fund), why no red flags are raised in these instances is incomprehensible;
• pay stubs with no breakout of the amounts due to Government, health insurance and pension firms, creating confusion among employees;
• no employer statements to employees listing the cumulative balances paid by employer and employee in to the Bermuda National Pension Scheme, health insurance and social insurance;
• deducting full payroll tax from employees, instead of a split ratio;
• employees who complain may face redundancy.
It may be that now administers of insurance and pension benefits in the private sector are reporting delinquencies and discrepancies of employers to Government and its agencies.
However, employees affected do not appear to receive a timely basis notification, automatically, of employer deficiencies from administrators. It is up to the employee to verify whether the benefits have been paid, while responses to these queries have been mixed or not provided.
Further, Bermuda Government revenue agencies do not appear to have any mechanism in place to:
• correlate the non-payment of wages reported, payroll taxes, trust fund pensions and insurance to ascertain missing payments;
• or to notify employees on an immediate basis that their deductions and contributions have not been made.
The responsibility is left entirely up to the employee, who may not be able to find out until it is too late.
This situation can be catastrophic. No health insurance for emergencies and chronic illnesses, depletion of the employee’s Social Insurance Pension and even more drastic, no opportunity for capital market appreciation for those lost contributions under the Bermuda National Pension Scheme.
What do revenue departments other countries do?
Quick research on the UK, US, and Canada, revealed the following.
Non-payment of employee liabilities held in public trust are breaches of fiduciary duty and serious criminal offences.
Public trust benefits for employees are:
• payroll taxes
• employment insurance
Their revenue agencies move rapidly to enforce collection, swiftly and relentlessly. In the US, the IRS does not even allow one quarter of missed payroll tax deposits before collection action is taken.
The penalties and interest levied by all three of these governments are punitive. The civil non-compliance enforcements exercised against recalcitrant employers are authoritative and absolutely mean business, for instance:
• garnishment of wages, other income, then freeze on business and individual accounts;
• sanctions, seizures and forced sale of assets;
• prosecution and jail time for tax evasion;
• and if a US green card-holder — mandatory deportation under US tax evasion felony laws.
Trust fund collection procedures are quite different between our three G7 neighbours and the Bermuda environment.
The governments of the US, UK and Canada cover the missing pension payments amounts to the employees’ accounts, so that when an employee retires, they are not left destitute. It is unclear if the same process is applied to employee insurance benefits.
The Bermuda Government currently does not practice this same fiduciary action for private sector workers, who just have to hope that their employer fulfils their payment plan. It goes without saying that Bermuda civil servants are protected, since Government can’t short-shrift itself.
The end game here is the vulnerable stolen-from employees facing a future without full pensions and healthcare benefits are forced to take action — independently on their own. What worker, who has been so wronged, can afford to finance, let alone wend the legal maze through the local courts?
If and when there is a judgment, the resolution is simply too late. And more often than is realised, the employer offender has wound up the company, the money is gone, and in more than one case, the owner has slipped the country never to return.
Legitimate, ethical employers have to be outraged. The conscientious business owners are carrying their own payroll trust responsibilities for their employees, while picking up the slack, in increased taxes, for those recalcitrant employers who have flipped government the bird. Why should they pay to carry those delinquent employers? This is unfair and unethical, to say the least.
The Bermuda Contributory Pensions Act 1970 cites the following.
Liability for Contributions:
4 (7) Every employer liable to pay any contribution on behalf of an employed person under subsection (2) shall for every contribution week for which he is liable to pay a contribution in respect of an employed person, pay the contribution not later than the last working day of the following month.
32 (1) All sums due to the fund shall be recoverable as debts due to the Crown, and without prejudice to any other remedy, may be recovered summarily as a civil debt by the director.
(2) Without prejudice to any other remedy for recovery of sums due to the fund, the directors and officers of a company or other body corporate that owes sums to the fund are liable jointly and severally for sums that became due while they were directors or officers, and proceedings may be taken under this section against all or any of them for recovery of those sums.
(3) For greater certainty, proceedings may be taken under this section against persons who were directors or officers after they cease to be directors or officers, including persons who ceased to be directors or officers before the coming into force of this section.
Isn’t this enough to compel action on the laws to protect the most vulnerable employees of our community — enforced judiciously and with immediate effect?
Why is it so hard for ordinary law-abiding citizens to obtain justice?
• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: email@example.com