CUTTING Social Security contributions for self-employed Islanders could encourage employers to replace staff with contractors – leaving workers without employment rights and job security, the minister has warned.
Senator Elaine Millar defended the requirement for self-employed people to pay both the employee and employer portions of contributions, arguing that reducing their payments would mean others having to make up the shortfall.
However, she said she had asked officers to examine aspects of the system, particularly support for new businesses, and would keep “an open mind to any potential adjustments”.
Responding to questions from the Health and Social Security Scrutiny Panel, Senator Millar said the contribution structure dated back to legislation enacted in 1975.
Employers were expected to contribute because they benefited financially from their employees’ work, she explained.
A self-employed person was “the sole beneficiary of their own work” and therefore paid both portions.
Lowering those payments would require either employees and employers to contribute more, or taxpayers to subsidise the difference, she added.
The minister argued that the system should remain neutral between employment and self-employment, with the same total contribution rate applying to both.
Reducing contributions for the self-employed could have “significant adverse unintended consequences”, she warned, with employers choosing to engage contractors instead of employing staff.
Asked whether the department had recently assessed the impact of contribution rates on entrepreneurship and Jersey’s attractiveness as a place to establish a business, Senator Millar said she was unaware of any such assessment.
“There is nothing to suggest that contributions are stopping people becoming self-employed,” she added.
She said she wanted to establish how well the Startup Plan – a government scheme which lowers self-employed Class 2 Social Security contributions during the first years of a new business – was working and whether it could be improved.
The minister also defended arrangements under which people moving to Jersey later in life may receive only part of the full State Pension because they cannot build up a complete contribution record.
Pension entitlements earned elsewhere could complement their Jersey pension, she said.
“It would be very unfair if people who came to Jersey later in life received the same pension as those who had worked here and contributed throughout their life,” the minister added.
Senator Millar stressed that the wider review remained at an early stage.
