Bonus Paid In The Month Of December
For this edition, we will take some time clarify for you how employers should deal with the matter of bonus paid in the month of December. Social Security has circulated some information to the media concerning bonus paid in the month of December, as a result of the tremendous interest expressed by employers and employees in this subject matter. Of course we recognize that this is the crucial time of year when all concerned should know want obtains in relation to such bonuses.
Here are the rules for dealing with bonuses paid in the month of December.
The first thing to note is that there are no Social Security contributions payable in respect of bonuses paid in the month of December. You may be aware that ordinarily, 5% Social Security contribution is deducted from wages of persons between 16 and 62 years of age. The employers of such persons would then add an employer’s contribution of 6% to make a total of 11% payable for SOCIAL SECURITY. In cases where persons are not yet 16 or over 62 years of age, only their employer pays 1% of their wage figure for Social Security. When it comes to bonuses paid in December, no Social Security contribution will be payable on such bonuses.
However, Housing and Social Development Levy and Severance Payment Contribution are payable in relation to bonuses paid. The following stipulations apply:
- Persons receiving bonus who earned an average of $1500 (or more) per month during the year will pay Levy from the bonus at the rate of 8%. The employer is entitled to deduct this from the amount of the bonus
- Persons receiving bonus who earned an average of less than $1500 per month during the year will be exempt from paying any levy from their bonus. This means that in such cases, the employer is not entitled to deduct Levy from the bonus payment
- The Employer’s portion of the levy is not exempt in respect of bonuses paid. Employers will pay the usual rate of 3% in respect of such bonuses
- The Employer will pay Severance Payment Contribution as normal at the rate of 1% in respect of any monies paid to employees including bonus
Employers in particular should note that the amount of the bonus must be shown on the Form C3 (that is the Statement of Wages and Contributions form) at the fifth column and it should be noted in the Remarks column that it refers to bonus.
Here is a special note: The regular levy exemption for (earnings paid throughout the year) remains the same for persons who earn less than $1000 per month. Hence there is no change to the monthly or weekly stipulation in respect of normal wages throughout the year.
You are encouraged to contact our offices in Basseterre or Charlestown for any clarification that you might need.