How to pay international contractors in Jamaica
While Jamaica’s population is less than 3 million, the lush Caribbean island boasts a growing GDP (up 4.4% according to the World Bank) and a roster of skilled independent contractors who could be a huge asset to any global company keen on expanding its footprint.
But before onboarding your first contractor in Jamaica, you need to figure out how to pay them, which is no easy task when navigating all the niche compliance and tax considerations. Looking for the details you need to pay a self-employed Jamaican worker as quickly as possible? We’ve got you covered with this step-by-step guide.
Step #1: Classify your workers in Jamaica
Jamaican authorities distinguish full-time employees from independent contractors. If you mislabel an employee as a self-employed worker, you run the risk of paying anywhere between JMD 5,000 and JMD 1,000,000 in fines from the Tax Administration of Jamaica (TAJ). You also may have to retroactively administer the benefits all Jamaican employees are entitled to.
So how do you differentiate employees from independent contractors? A written agreement should set the terms for the working relationship, but Jamaican authorities will look at the criteria in the table below when gauging classification.
Contractors
Employees
High level of worker control.
Contractors can complete work on their own terms, without close external supervision.
More direction from the employer. Employees get more direction and detailed instructions about when, where, and how they work, including working during regular business hours on company property.
Equipment and tools are owned by the worker.
Equipment and tools are typically provided by the company.
Less integrated. Contractors are mostly independent, more likely to work remotely, and use their own tools and equipment. Company training isn’t required.
Highly integrated. Employees are typically more integrated into the organization and undergo company training.
No entitlement to benefits. Contractors aren’t entitled to benefits and protections, and they are responsible for paying their own taxes. Jamaican contractors can deduct the cost of professional equipment from their taxes.
Entitled to benefits. Employees are entitled to employment benefits and protections including social security (through the National Insurance Scheme), severance pay, and paid time off. Employers withhold taxes on the employee’s behalf.
Time-bound agreement. Contractors are typically bound by a project or period of time. Their services are not indefinite.
Indefinite engagement. Employment relationships are usually not bound by time or project.
Higher risk of loss. Contractors generally assume more risk and liability for their work.
No risk of loss. Employees are usually sheltered from liability for work-related concerns.
Subcontracting. Contractors can assign work to be performed by another company or individual.
No subcontracting. Employees are expected to complete their work themselves. They can’t transfer responsibilities without company approval.
Step #2: Determine the best way to pay your contractors in Jamaica
Before working with contractors, companies need to figure out how to pay them. Here are the most common options:
- Bank wires. You can open a bank account in Jamaica and deposit funds. You could also use your native bank account to send a global wire transfer through the SWIFT network. The latter option comes with banking fees and sometimes other service charges.
- International money orders. Similar to writing a paper check, this method involves sending a physical payment in the mail to a contractor living abroad. Companies usually have to commute to a Western Union, bank, or post office to purchase the money order. Then, contractors have to commute to their bank for a deposit once it’s received. In addition to being slow, money orders come with wire fees and unfavorable exchange rates.
- Digital wallets or payment platforms. These services, like Wise, allow funds to be sent and received online. In Jamaica, Paymaster recently launched a new digital wallet called MyCash for electronic purchases. But while some online platforms can process transfers instantaneously, other digital payment platforms are unavailable in Jamaica (e.g., Venmo only works within the US, and PayPal doesn’t allow Jamaican users to connect their bank accounts). You also need to be aware of vendor fees and volatile exchange rates.
- Global payroll services. Since employers don’t withhold taxes on an independent contractor’s behalf, these freelancers generally aren’t in the same payroll system as employees. Rippling allows you to pay Jamaican contractors alongside the rest of your global workforce.
Step #3: Use global payroll software to process payments for Jamaican contractors
Instead of worrying about service fees, fluctuating exchange rates, and slow processing times, you can pay Jamaican contractors through global payroll software.
With Rippling, you can pay contractors around the world in one system. You can also send locally compliant consulting agreements out for e-signature with a secure, easy-to-use platform to store all of your documents.
Here’s a glimpse of Rippling in action:
Step #4: Ensure your Jamaican contractors have the right tax information
Jamaican contractors are required to file their own income taxes. First, they need to register as sole traders, which is done by registering with the Companies Office of Jamaica. They’ll need to confirm an address with ID documents, have a Justice of the Peace sign three passport photos, and pay a fee of JMD 2,500.
Once registered as a contractor, the worker can register for taxes. They typically need the following documents (more information about statutory forms for Jamaican freelancers is available on the TAJ website):
- A valid Tax Registration Number (TRN)
- An Electronic Filing Account Registration form (EF02)
- An IT01 income tax return form
- An S04 form for self-employed workers
- A notarized copy of a passport or driver’s license
- National Insurance Scheme card
Jamaica also levies a general consumption tax (GST) on imported goods and services. The rate is generally 16.5%.
Effortlessly manage contractors around the world
Managing a global workforce has never been easier. Rippling allows you to pay international contractors in Jamaica and across the globe in a single system.
Frequently asked questions about running payroll for contractors in Jamaica
Do you need to withhold employer taxes when paying contractors in Jamaica?
No. In Jamaica, independent contractors are responsible for filing their own taxes. When you hire employees, on the other hand, you need to withhold contributions for:
- NIS scheme
- National Housing Trust
- Education Tax
- Human Employment & Resources Training (HEART)
After registering with the TAJ, Jamaican contractors have to pay income taxes and a value-added tax on goods and services.
What is the minimum wage in Jamaica?
As of June 2023, Jamaica’s minimum wage is JMD 13,000 per week, up from JMD 9,000. Minimum wages are often pegged to inflation and subject to change. However, independent contractors aren't covered by minimum wage regulations.
Do Jamaican contractors get benefits?
Independent contractors in Jamaica aren’t entitled to the same statutory benefits (including public holidays, redundancy pay, sick leave, maternity leave, and probation periods) as full-time employees. Jamaica does, however, have a national health insurance system available to all citizens.
What expenses are Jamaican contractors allowed to deduct from their taxes?
According to the TAJ, contractors can deduct:
- Staff wages and salaries
- Rent from office space
- Interest paid from loans
- Insurance
- Transportation expenses
Can you manually pay contractors in Jamaica?
Yes. While it can be common for small businesses to manually process contractor payments in an effort to cut costs, the process can get complicated when you work with multiple Jamaican contractors, or with global contractors scattered in other countries.
Please note that manually processing payments comes with some risks:
- Compliance. Running payroll manually leaves companies vulnerable to errors and omissions. It can also result in failure to follow the labor laws of different countries. Rippling enforces compliance with any applicable local tax and labor laws—no matter where your contractors live.
- Security. Manual payroll processing— whether through spreadsheets, paper records, or other DIY ledgers—can lead to sensitive contractor data being lost, stolen, or misused.
- Contractor experience. Manual payments are often slow and lack transparency around payment timelines and what exactly contractors are being paid for. This makes it frustrating for contractors trying to understand their earnings.
Instead, you can make payroll automatic by using Rippling, which syncs all your business's HR data with payroll, eliminating the need for manual data entry.
How do you turn a contractor into an employee in Jamaica?
After working with a Jamaican contractor for a while, you may want to give them more responsibility and hire them as a full-time employee. Onboarding that freelancer, however, can be a logistical and compliance nightmare. You'll need to ensure you comply with all the legal requirements in Jamaica. And if you don't already have one, you must establish a legal entity or use an employer of record (EOR) service.
Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
