Isle of Man: International Tax and Business Guide 1999 - Investment and Business Factors - 6.Employment Law and Practice

The labour force on the Island is approximately 37,500. This has grown substantially in the last decade with the development of the finance sector on the Island. Due to the very low level of unemployment on the Island, approximately 1.6% at March 1999, there are shortages of skilled and unskilled workers in certain sectors. The standard of education in the Island is high with a large proportion of Manx students completing their education at British Universities. Work permits for essential skilled workers are generally granted to new residents speedily.

There are no legally imposed minimum rates of pay except in some agricultural jobs. Local rates have been agreed in a few trades, including hotels and construction. Except in the case of the banking, financial, and professional sectors, employees are generally paid at a lower rate than their UK counterparts.

Working hours are not fixed by law, but a five-day working week of 35 to 40 hours is normal. Ten public holidays in a year including two specific to the Isle of Man are paid. In addition, most employees receive four weeks paid vacation each year.

Overtime and bonuses are open to negotiation and are not statutorily controlled. The UK rates of approximately 125% to 200% of basic rate pay, depending upon the nature of the overtime worked, apply in some cases although no general rule can be stated. Senior and professional employees often work unpaid overtime. Bonuses, where applicable, are usually paid at the discretion of the employer, and no general guidelines exist.

The Isle of Man operates a comprehensive social security system providing free medical care comparable to that in the UK. Through the National Insurance scheme, benefits for the unemployed, sick, and elderly is provided. Family allowances are also paid from Government funds.

National Insurance deductions are paid by both employer and employee at a percentage of the gross weekly wage. No contributions are payable where earnings are less than £64 per week. Employer contributions are payable on a scale from 3% to 10%. The latter rate applies to the entire earnings of any person receiving in excess of £485 per week, with no upper earnings limit. Employee contributions are payable on a scale from 2% to 10% on earnings up to £485 per week. No contributions are payable by employees on earnings in excess of £485 per week. These rates apply for the financial year ending 5 April 1999.

Employers are obliged to make monthly National Insurance returns to the Treasury in Douglas.

Fringe benefits, such as the provision of private health insurance schemes and company cars, are generally applicable only to employees in the financial and professional sectors. Social security contributions, paid vacations, and other benefits add some 30% to the basic cost of wages.

The relevant legislation in the Island is the Employment Act 1991 which reformed previous employment legislation.

The Act requires an employer to give each employee (with certain exceptions including part-time employees or employees working mainly off the Isle of Man) a written contract of employment.

The Act provides for minimum periods of notice on termination of employment according to length of service. Employers or employees are required to give notice as follows:

2 weeks

The contract of employment may stipulate longer periods of notice than those outlined above but may not provide for less. Payment in lieu of notice is possible. Either party may terminate the contract without notice if the behaviour of the other justifies it. However, such justification can be determined only by an employment tribunal or, in extreme circumstances, a Court of law.

Employees on fixed-term contracts and apprentices, who are usually employed on such terms, are excluded from the provisions of the act. However, if an apprentice remains with the same employer after completing his or her apprenticeship, the period as an apprentice counts for the purpose of qualifying for rights to notice.

The Trade Disputes Act 1985 provides for the appointment of an Industrial Relations Officer who will perform a conciliatory role in cases of termination of employment.

The rules for this are set out in the Redundancy Payments Act 1990. Broadly, if an employer has ceased to carry on business or has changed the place from which business is carried on or has reduced the need for employees of a particular kind, he must make a lump sum compensation scheme payment, called a redundancy payment. To qualify for redundancy an employee must have had at least 2 years continuous employment. An employer who has made a redundancy payment as required by the Act may be able to claim a rebate from the Manx National Insurance Fund ranging from 30% to 60% of the payments.

Labour relations in the Island are generally good, strikes and other industrial action being rare. Membership of trade unions tends to be restricted to larger employers, who often agree to conditions and pay rates for similar occupations in the United Kingdom. Every employee has the freedom to join and take part in the activities of a registered trade union without recrimination from the employer.

There is no statutory or non-statutory influence exerted by employees on management in the Isle of Man.

The Employment Act provides for a pregnant employee to have time off to attend ante-natal care irrespective of the length of service with the employer. Such time off after the first appointment is required to be paid by the employer at normal rates of pay of the employee.

Employees have the right to return to work to their own or a similar job after having their baby so long as they have met certain conditions.

A work permit is required for anyone intending to work in the Island who has not lived there for at least five continuous years. Such a permit will usually have to be renewed each year.

Non-UK residents require residence approval in addition to a work permit. Manx immigration rules closely follow those of the United Kingdom. Special provisions apply to citizens of EU member countries who wish to take up residence, employment, or both in the Island. Full details of work permit and immigration requirements may be obtained from the Work Permit Department and the Immigration Office respectively (see "Useful Addresses" in the Appendix).

Key personnel and individuals engaged in the establishment or operation of new enterprises should not experience any difficulty in obtaining work permits.

An enterprise operating in the Isle of Man is not required to employ a minimum number of locals, nor is there a limit to the number of foreigners who may be employed. However, applications for work permits may be more favourably received by the authorities if the enterprise indicates an intention of employing some Isle of Man nationals.

The information given is not exhaustive and is based on conditions existing at 5 May 1999. Readers are advised to consult with professionals, such as independent accountants, legal counsel, and investment bankers, before taking any formal action. Deloitte & Touche would be pleased to discuss specific problems.