On July 30, 2019, Bermuda’s Parliament passed new legislation that will eventually require employers to pay their employees, for the very first time, (i) a minimum hourly wage (adjustable for inflation every three years) and (ii) a distinct living wage, representing the minimum hourly pay affording workers and their households a “socially acceptable standard of living.” Both private and public law employers will be affected, and parties will not be allowed to contract out of the new legal requirements.

As a first step, the Employment (Wage Commission) Act 2019 has established a Wage Commission, which will be tasked with recommending what the new wage legislation should look like.

The Employment Act 2000 defines “wages” to mean all sums payable to an employee under his contract of employment (by way of weekly wage, annual salary, or otherwise) or otherwise directly in connection with his employment, including any commission, but excluding tips, bonuses, expenses, and the monetary value of any benefits in kind.

The new law has been greeted with a flurry of mixed reactions given that its future impact on the job sector is largely unknown. Nor is it entirely clear whether the concepts of a minimum and living wage are distinctive and/or competing, or whether they can be used interchangeably as meaning essentially the same thing.

Opponents argue that the lion’s share of risks associated with the new wage burdens will be borne by local businesses (as opposed to employers in international business), which will be forced to adopt cost-saving measures such as reducing working hours, eliminating jobs, raising prices, or even closing down. It is further suggested that a living wage may make it impractical to bring foreign workers to Bermuda for unskilled and low-skilled jobs that Bermudians have so far been unwilling to do.

Of particular concern is that a living wage will be determined by the island’s cost of living, which is notorious for being the highest in the world—such that that the suggested hourly rate of $18.23 will never meet the standard of a “socially acceptable standard of living.” How to define this standard remains unspecified, as are the expenses that will count for the purposes of the calculation.

In contrast, proponents of the living wage assert that a higher wage will have a ripple effect in improving worker morale, raising productivity, and increasing purchasing power and consumer spending, thus expanding the economy and creating jobs. These proponents refer to high rents and the cost of private health insurance. They also point out that many of the predictions of job losses and other negative consequences that accompanied the introduction of a minimum wage in other countries proved to be largely unfounded.

In setting legally guaranteed rates, lawmakers will need to strike the right balance between protecting workers and allowing businesses to be competitive; i.e., to find a model that produces the desired equitable result while being sustainable so it doesn’t shoot itself in the foot.  Employers may want to start preparing now by assessing the expected cost of doing business in light of the impending legislation and assessing the variations that are permitted, both with respect to their employees’ individual contracts of employment and the makeup of their workforce in general.

Written by Juliana M. Snelling and Olga Rankin of Canterbury Law Limited and Roger James of Ogletree Deakins

© 2019 Canterbury Law Limited and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.