The minimum wage in the British Virgin Islands (the BVI) will increase by over 40 per cent from $6.00 per hour to $8.50 per hour, effective November 30, 2024, heralding the BVI’s first increase since 2016 and its second in approximately 25 years.
Background
Since hurricanes Irma and Maria ravaged the BVI in September 2017, there has been a growing disparity between wages and escalating living costs. The aftermath triggered local inflation due to heightened demand for goods and services and heavy reliance on imports. The subsequent recovery and rebuilding period also brought rising costs, including insurance, which further compounded sectors like housing, rent, and consumer goods.
Global economic shocks brought on by the Covid-19 pandemic, the Russia-Ukraine war, and other global inflation triggers further exacerbated the BVI’s accelerating living costs. By 2022, the Social Policy Research Institute (SPRI Global) found that the BVI’s minimum wage was insufficient to meet the basic needs of its residents.
Government Approach
While mindful of the need to bring relief to those experiencing the brunt of the financial pressures, the BVI Government (the Government) aimed to strike a balanced approach between worker welfare and business continuity. After consultations with key stakeholders, an analysis of the BVI’s employment trends, and a regional comparative review of similar economies, the Minimum Wage Advisory Committee (the Advisory Committee) recommended a minimum wage increase from $6.00 to $9.00 per hour. Although the Government acknowledged that an increase was necessary to bridge the gap between wages and living expenses in the BVI, it decided the best approach would be to increase the minimum wage to $8.50 to cultivate a robust economy, balance worker welfare with business sustainability, and remain an attractive destination for skilled professionals.
Business Implications – Operational Considerations
The minimum wage is the statutory minimum an employer is legally obligated to pay its employee(s). As such, employers must comply with the minimum wage increase to avoid resulting fines for contravention of the Virgin Islands Labour Code 2010 (the Act).
The November 30, 2024, minimum wage increase will undoubtedly increase operational costs for employers currently paying their employees less than $8.50 per hour. For such an employer, its operational costs will increase due to the amount it pays to its employee(s) as well as the amount payable on behalf of its employee(s) in National Health Insurance, Social Security and pension contributions. Nevertheless, whilst such an increase in operational costs could incite anxiety in some employers’ minds, there is reason for hope.
The increase provides an opportunity for employers to assess aspects of their current operations to identify areas where they could be more efficient and creative in minimising overall costs. For instance, employers may consider introducing, revitalising, or expanding technology to enhance business efficiency and agility and to increase their competitive advantage. This is not to say that technology should or could replace human resources. However, technology has proved to strengthen operational effectiveness.
Artificial intelligence (AI), for example, can be used by employers to save time, improve competence, and reduce operational costs by implementing AI in areas such as supply chain operations, inventory management, marketing and public relations, accounting, and customer relations management, amongst others. When strategically implemented by employers, technology can bring benefits like increased scalability and flexibility in addition to enhanced data management, risk management, customer service, and cost savings amongst other advantages.
Employers, particularly those whose operational costs stand to be directly affected by the minimum wage increase, should, therefore, utilise this time between the Government’s announcement and the November 30, 2024 effective date to review opportunities to fortify operational proficiency. As part of its assessment, employers should also capitalise on the opportunity to review its current retailers and suppliers, determine whether there is any merit in sourcing new vendors or renegotiating current service contracts, and consider other ways to optimise outgoings.
The Advisory Committee and the Government considered the potential impacts of the minimum wage increase on small and medium-sized enterprises (SMEs). The knock-on effects of the minimum wage increase could elevate SMEs’ operational costs and have the potential for further inflationary pressures if employers raise the cost of their goods and services to accommodate the hourly wage increase. As such, the Government announced in its briefing, further to the recommendation by the Advisory Committee, that it intends to provide strategic support for SMEs. SME employers should, therefore, keep abreast of future Government announcements regarding available support for SMEs.
Nonetheless, the reality for some employers, although hopefully a less frequent occurrence, is the possibility that employers may have to reduce their workforce, temporarily delay additional hiring, or even consider winding up. However, given the legal frameworks that must be followed concerning severance pay, redundancy[1], and winding up a company,[2] employers are advised to obtain legal advice to avoid any negative repercussions and penalties for breach of the Act or other relevant laws.
Conversely, an anticipated benefit of the increase in minimum wage is the propensity for heightened economic activity. Workers earning the new $8.50 per hour minimum wage may experience an upsurge in purchasing power, which could stimulate the economy and create opportunities for businesses to grow and expand their revenue despite the payroll and operational increases the minimum wage uplift may bring.
Conclusion
The 2024 minimum wage increase has the potential to bring about varying trends throughout the BVI. It presents a serendipitous opportunity for employers to review and optimise their operational adeptness, leverage enhanced market stimulation, and promote employee well-being.
If you have further questions about the new minimum wage or need answers to other legal-related business matters, please get in touch with the author, Akita Alexander-Mercer at aalexander@onealwebster.com or +1 284-393-5800.
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[1] See our article, What BVI Employers Need to Know and Do in the Present COVID-19 Business Environment, which discusses the do’s and don’ts for BVI employers considering layoff; which has relevance despite being the ‘post-COVID’ era.
[2] See one of our more recent articles, How to Save Your BVI Company From Insolvency, for more information on the subject.