Finance Minister Ardwell Irion.
PHILIPSBURG--In an effort to avoid layoffs and prevent companies from going belly up during the current coronavirus COVID-19 crisis, government intends to provide a payroll subsidy to the “most affected” businesses to cover up to 80 per cent of the salaries of their workers for a three-month period.
Businesses can cover the remaining 20 per cent. The payroll subsidy forms part of the St. Maarten Support Relief Plan (SSRL), details of which Finance Minister Ardwell Irion outlined at a virtual press conference on Wednesday.
To qualify for the payroll subsidy, businesses have to “prove (that they have encountered) hardship” of at least 20 per cent turnover loss. Companies will have to apply for the payroll support. The subsidy to cover up to 80 per cent of the salaries of workers will not be given directly to workers, it will be given to companies, who will in turn pay it to their workers in an effort to keep more persons employed. Self-employed persons such as independent taxi drivers, vendors, tour operators, and artists etc. can also benefit from income support.
Persons who are already unemployed, can apply for the already established unemployment benefits from government.
Government is hoping that the Relief Plan goes into effect by the end of this month and hence the intention is for the subsidies to apply to the April salaries of workers. “This is our proposed plan to Netherlands, but in anticipation that it will be approved, we will start the process. The plan is to cover 80 per cent of the salary of the most affected companies. For example, if you have a hotel – once the business can prove that they have 20 per cent hardship then we as government proposes to pay 80 per cent of the payroll - so subsidized payroll support,” the minister explained.
He said the payroll support “does not mean that the employer cannot contribute” the remaining 20 per cent of the salary for their workers.
Another part of the plan is providing low interest loans to businesses which can be used for expenses such the purchasing of products, rental and utility payments and other expenses that the business may incur.
Government has requested NAf. 254 million to cover the cost of its Relief Plan for the first three months. Irion said the request was made for the funds to be provided as a grant and not as a loan. The Netherlands has asked government to submit a proposal for the second quarter of the year, hence the request for three months. However, the overall plan has a scenario for nine months. Government hasn’t yet received a “firm decision” on its request for a grant from the Netherlands. This is expected by next week. In the meantime, government is preparing to use the funds that it has available as well as expected liquidity support “to start the process… Our plan is to avoid layoffs and to avoid companies from going bankrupt,” Irion said.
Prime Minister Silveria Jacobs said the plan was presented to the Committee for Financial Supervision CFT on April 4 as well as to the Ministry of Interior and Kingdom Relations BZK on April 5. It is expected to be discussed in the upcoming meeting of the Kingdom Council of Ministers.
The SSRP will cover “direct relief,” which includes a payroll support programme, income support programme, a soft loan programme as well as an under-employed programme for an amount of NAf. 108.44 million. For the unemployed, the established unemployment benefits will continue. The SSRP also includes funds to compensate for the loss of government income for an amount of NAf. 89.2 million to enable government to carry out already existing but now expanded programmes, a food voucher programme and a food boxes programme for the most vulnerable groups, meals for the elderly and psycho-social care.
For the additional healthcare expenses, an amount of NAf. 56.28 million has been budgeted and is intended for additional healthcare expenses as well as support to Social and Health Insurances SZV and St. Maarten Medical Center (SMMC).
The request to the Netherlands has been prepared in close consultation with CFT and with guidance from the International Monetary Fund (IMF).
Irion said the COVID-19 pandemic has had a negative impact on St. Maarten’s healthcare system and economy, as it has done to countries worldwide. Being a tourist-based economy, closing borders and “locking the island down” has directly affected the economy. St. Maarten has not yet recovered from the financial repercussions of Hurricane Irma. This, in combination with the slow season and no timeline for the recovery of global tourism, makes the island more vulnerable than most.
Government acknowledged that it is imperative that adequate measures are taken to absorb the economic and social impact of this new shock and to achieve rapid recovery of the economy. It also acknowledges the importance of supporting businesses and persons who are at risk of losing their jobs.
“Having followed the guidelines of the CFT where possible, it quickly became evident that further assistance would be necessary in order to support the economy through this health crisis. The government has approached the Netherlands for their support, in the form of a request for a grant as opposed to a loan. A grant will provide for the recovery after this crisis and enable the country to borrow for the necessary investments aimed at growth, allowing for a future with less financial dependency. This will also allow citizens to focus on their health more so than their finances,” Irion said.
The full details of the plan are expected to be sent to the media as well as rolled out on government’s website and Irion’s personal Facebook page before the end of the week.
