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What Every Caribbean CFO Should Know About Local Statutory Payroll Deductions.



A territory-by-territory guide to getting payroll compliance right 

Payroll compliance in the Caribbean can feel like navigating a maze, because each island has its own statutory deductions, filing deadlines, and unique rules. For CFOs, HR leaders, and payroll managers, staying compliant isn’t just about avoiding fines; it’s about protecting employee trust and safeguarding your company’s reputation. 

Yet many finance teams still rely on manual spreadsheets or outdated systems that can’t keep up with regulatory changes. That’s where trouble begins. 


In this guide, we’ll break down the essentials of Caribbean PAYE, NIS, and other statutory requirements so you can reduce compliance risk and lead with confidence. 

 

Why Statutory Deductions Matter More Than Ever:  

In business environments today, a single late or incorrect filing can trigger: 

  • Costly penalties from government agencies 

  • Unhappy employees due to incorrect deductions 

  • Stressful audits that eat into valuable time   

For CFOs, the stakes are high to ensure nothing goes wrong and that the business doesn't lose funds on avoidable mistakes. This makes payroll processing not just an HR function, but rather a financial compliance obligation. 


To avoid making this post longer, below is a breakdown of what matters most in each jurisdiction and an outline of a smarter way forward. 

 

Cayman Islands 

  • Income Tax: None (no PAYE). 

  • Statutory Obligations: Employers must contribute to employee pensions under the National Pensions Law and provide mandatory health insurance. 


Common pain point: Health surcharge miscalculations. Small mistakes add up and trigger audit issues. 


CFO Tip: Don’t let “no income tax” fool you; pension and healthcare compliance are strictly enforced and non-negotiable. 

 British Virgin Islands (BVI) 

  • Payroll Tax: Tiered (10–14%), applied after a ~$10,000 annual exemption and deducted from both employer and employee at roughly 8%. This detail varies by payroll class. RivermateWikipedia 

  • Social Security & NHI: Mandatory employee-employer shared contributions; NHI typically runs ~7.5%. Rivermate 

  • No personal income tax, but these contributions are non-negotiable. Wikipedia  


Common pitfall: Many small teams forget to update NHI deductions when rate changes are announced, leading to back-pay liabilities. 

Bahamas 

No Income Tax, but: 

  • NIB (National Insurance Board): Employer (5.9%) and employee (3.9%) contributions due monthly by the 15th. Neeyamonib-bahamas.com 

  • Health Insurance (NHI): Mandatory, separate from NIB. 

Reminder: With high turnover in tourism, record-keeping and timely NIB remittance are critical. 


Common pain point: Heavy reliance on seasonal staff in hospitality creates constant onboarding/offboarding, making NIB compliance time-consuming. 

Bermuda 

  • Payroll Tax: Employers must deduct and remit a tiered payroll tax based on employee earnings. Both employers and employees also contribute to social insurance, which funds pensions and social protection. Unlike some territories, Bermuda relies on payroll taxes instead of income tax to generate government revenue.🔗 Calculating Payroll Tax 2025 – Government of Bermuda 


Common pain point: Employers struggle to apply the right tiered payroll tax bands to total remuneration (wages, overtime, bonuses, allowances) and to split the employer vs. employee share correctly, especially when pay fluctuates with bonuses or variable hours. 

Payroll tax categories often confuse employers, especially those managing multi-department businesses. 


Pension & Health: 

 

 Turks and Caicos 

National Insurance: 

  • Employers contribute 6.5% of employee earnings. 

  • Employees contribute 5.5% of their own earnings. These payments go into the National Insurance Board (NIB) to cover pensions, sickness, maternity, injury, and retirement benefits. 

National Health Insurance (NHIP): 

  • Employers contribute 2.5% of employee earnings (up to a capped salary). 

  • Employees also contribute 2.5% of their earnings. These payments fund healthcare services across the islands. VisitTCI.com – Taxes in TCI 

 

Common pain point: Employers must calculate, deduct, and remit to two different agencies - the National Insurance Board (NIB) and the National Health Insurance Plan (NHIP), each with its own rates, ceilings, forms, and deadlines. This dual-track setup is the #1 driver of mistakes (wrong rate/ceiling, missed form, wrong account).  

Trinidad & Tobago 

  • PAYE: Mandatory monthly deduction; failure leads to steep penalties and even jail. ird.gov.tt 

  • NIS: Multi-tiered weekly system, employer and employee share contributions. Rivermate 

  • Health Surcharge: Based on employee income. Caribbean Tax 


Common pitfall: Incorrect health surcharge calculations, small errors add up over time and are flagged in audits. 

Babardos 

  • PAYE: Collected on employee income. 

  • NIS: Contributions fund pensions, unemployment, and sickness benefits. 

  • Health Levy (now integrated into NIS): Previously separate but now streamlined into the national insurance structure. 


Common pitfall: Businesses often misclassify contract workers, missing PAYE and NIS contributions entirely.  


 What CFOs Need to Do: 

Across these territories, three compliance priorities stand out: 

  1. Stay informed: Each island updates its requirements periodically. Missing even a minor rate change can trigger penalties. 

  2. Reduce manual work: Payroll software that can be adjusted to local laws cuts risk and saves time. 

  3. Train your teams: Many Caribbean businesses rely on one HR/payroll officer juggling multiple roles. Ongoing compliance training is non-negotiable. As a business, you can also join local chambers to stay informed about changing laws.


Key Takeaway:

Across Cayman, BVI, Bahamas, Bermuda, Trinidad, etc, statutory deductions may look different, but all processes demand accuracy, timeliness, and trust. For CFOs, the solution isn’t just vigilance: it’s smart, scalable systems, reducing human error, and saving time - not spreadsheets. 


"We all know that most Caribbean CFOs don’t have time for missed deadlines, outdated rates, or audit stress. This is why switching to a smarter tool is non-negotiable." 

 

Visit our LinkedIn page or Website to learn more.  


 
 
 

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