Payroll in Jamaica: What Global Companies Need to Know About Jamaican Payroll
Think of Jamaica and you think of beautiful Caribbean weather, a relaxed lifestyle, the reggae of Bob Marley and world-class sprinters like Usain Bolt. But it’s also an exciting place to do international business, too.
Jamaica’s population of three million enjoys an increasingly modernizing service-based economy. In the past it relied heavily on the export of crops like bananas and sugar, but today more than 70% of its economy is based around services. Tourism is a major factor, and supports 25% of all the jobs in the country: it’s therefore no surprise that its overall GDP took a major hit in 2020 and 2021, as COVID-19 stopped most overseas tourists from taking a holiday in the Jamaican sun.
Jamaica represents a very different way of life compared to most of the rest of the world, and it also has its own unique characteristics from a payroll perspective. In this guide, we’ll outline all the basics you need to know about running payroll in Jamaica.
Companies operating in Jamaica can set up either as a limited-liability company (LLC), public liability company (PLC) or as a branch office. There is a minimum share capital requirement of US$4,400 for PLCs; for the other types, the minimum is a token US$1.
From an administrative perspective, there are numerous important processes to carry out when setting up a business in Jamaica:
- Check the availability of the desired company name
- Get company documents stamped
- File company deeds to the Registrar of Companies
- Obtain national insurance, taxpayer registration, and General Consumption Tax registration numbers
These processes should take no more than a couple of business days. Only the company deed filing requires anything more than a small fee - normally around J$24,000 (approximately £130, $160, €155).
Employment contracts in Jamaica can be written or oral, but a written contract is strongly recommended. Unions and collective bargaining are a feature of Jamaican business, and so some companies may find themselves negotiating terms en masse with unions.
Probation periods are not required by law, but collective agreements generally enforce periods of between three and six months.
Full-time employees in Jamaica generally work 40 hours per week, spread across five eight-hour shifts. However, the Flexi Work Week, which became law in 2014, means that employees and employers can agree to work those 40 hours across any combination of hours and days, including Saturdays and Sundays. Under this law, employees should not work more than 12 hours in any 24-hour period. Employees are generally paid once or twice every month.
Any work over and above the 40-hour mark, or any work on rest days or holidays, is considered overtime. This is normally paid at double the normal rate, although different rates can be agreed in employment contracts.
Compensation, Bonuses and Severance
The national minimum wage rate in Jamaica for full-time employees was increased substantially in February 2022, from J$7000 per week to J$9000 per week (approx. £50, $60, €60). This was the first time the rate had been raised since 2018, but further raises by the Ministry of Labour are possible in the years to come.
Bonuses are common among management and executive roles, whether through individual performance or the overall performance of the company. Some businesses also award bonuses at the end of the year as a token of appreciation.
Notice periods in Jamaica start at two weeks for employees with less than five years’ service. It increased to four weeks at the five-year mark, and then by a further two weeks after the 10 and 15-year marks are reached. Employees with 20 years’ service are entitled to 12 weeks’ notice.
Severance pay only applies in cases of redundancy, at two weeks’ salary per year for the first ten years of service, and three weeks’ pay per year for every year thereafter.
Tax and Social Security
A simple income tax system in Jamaica exempts the first J$1.5million earned each year (approx £8200; $9900; €9700). Earnings beyond that are taxed at 25%, and earnings beyond J$6million (approx. £33,000; $39,500; €39,000) are taxed at 30%.
Social security contributions are made in four areas:
- National insurance: 3% employer, 3% employee
- National Housing Trust: 3% employer, 2% employee
- Education Tax: 3.5% employer, 2.25% employee
- Human Employment and Resources Training: 3% employer
The corporation tax rate in Jamaica is 33%. The rate of General Consumption Tax (GCT), equivalent to a Value Added Tax, is 15%, although higher and lower rates apply to certain goods and services. For example, businesses in the tourism sector are generally charged around 10%. Businesses turning over more than J$10million per year (approx. £55,000; $66,000; €65,000) must register for GCT.
Holidays and Leave
Jamaica generally has between ten and 12 days of public holidays every year, many of which are aligned with Christian holidays such as Easter and Christmas.
Paid leave entitlement in Jamaica is two weeks per year, increasing to three weeks per year after ten years of service. Any sick leave taken is incorporated within this allocation.
Maternity leave is 12 weeks for mothers who have completed at least one year of service. Employers are obliged to pay mothers in full for the first eight weeks of maternity leave, although many voluntarily cover the final four weeks, too. There is no statutory allocation of paternity leave or parental leave in Jamaica at present.
Jamaica is an exciting option for global businesses, with strong trade and geographical links to the United States, a strong service-based economy, and relatively low wages. However, as this guide demonstrates, it’s not without its complications in getting set up, and meeting both regulatory and cultural expectations. This is where an expert payroll partner can make such a difference, giving you country-specific expertise so that your business adventure in Jamaica starts on the front foot.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.