Local businesses continue to face a cash shortage and an increase in national pension contribution rates this month is expected to add further pressure on cash flow.
It’s been a month and a half of travel without a quarantine, but businesses in the Cook Islands continue to feel the effects of the Covid-19 pandemic and the nearly 15-month shutdown of the tourism sector.
Businesses have faced cash flow issues throughout the downturn, and this month’s increase in pension contribution rates to pre-pandemic levels will continue to keep pressure on the private sector.
The announcement is just one aspect of recent changes employers are considering right now, Chamber of Commerce CEO Eve Hayden said.
“The end of the wage subsidy, staff shortages and problems with the process of transferring migrant workers are other aspects,” she said.
“Many employers have told us how difficult it would be without the wage subsidy and some are worried about it. “
From July 1, mandatory contribution rates to the Cook Islands National Pension Fund (CINSF) will increase to 5 percent for employers and 5 percent for employees.
The contributions remain payable on the 20th of the month while the deductions made from July 1st will be payable on August 20th.
The percentage rate was reduced in 2020 due to CINSF’s support for the Cook Islands government’s economic response plan.
“From a cash flow perspective, yes, this change will put pressure on businesses,” Hayden said.
“Keeping in mind that some companies have yet to see a lot of business since the bubble opened.”
Hayden said now is the time to look at the structure of some companies.
What worked before Covid-19 may need adjustment to allow for a gradual return to cash flow, she said.
Superannuation payments were a necessary cost to be an employer, so wherever possible, employers should try not to fall behind in payments, Hayden said.
“Talk to your banker if cash is still tight, it’s best to have a conversation with them to agree on how you can resolve any issues,” she said.
“The chamber has helped with this in the past, so if you are not sure whether you are having this conversation with your bank, please do not hesitate to contact us for assistance.
“The chamber continues to assist, support and advise employers, while ensuring that we maintain regular communications with relevant government agencies.”
For fiscal year 2021/22, the government has set aside $ 33.5 million as part of its Economic Recovery Roadmap (ERR).
The plan, developed by the Ministry of Finance and Economic Management, focuses on eight areas that the government says will boost the recovery.
First, managing public debt levels and reducing the cost of borrowing for the public and private sectors.
Money has also been set aside to support businesses if the border is closed again.
The government is also looking to continue large investments in infrastructure, which it hopes will replace the continued fall in private sector investment.