Cayman Islands

Registrations and Establishing a Payroll Entity

Establishing a payroll entity in the Cayman Island involves several steps and considerations. Here's a comprehensive guide to help you through the process:

Company Registration

To start, you'll need to register your company with the Cayman Islands General Registry. This involves:

• Reserving a Company Name: Ensure the name is unique and complies with local regulations
• Filing Incorporation Documents: Submit the Memorandum and Articles of Association to the Registrar of Companies
• Opening a Corporate Bank Account: This is necessary for financial transactions and payroll management
• Obtaining a Trade or Business License: Register with the Trade and Business Licensing Board
  
  

Payroll Setup

Once your company is registered, you can set up your payroll system:

• Payroll Tax Registration: Although there is no income tax, you must register for payroll tax with the Cayman Islands Tax Information Authority
• Payroll Cycle: Establish a consistent pay cycle, which is crucial for maintaining employee satisfaction and compliance
  
  

Compliance and Reporting

Ensure ongoing compliance with local labor laws and regulations:

• Employment Contracts: Draft compliant employment contracts that meet Cayman Islands labor laws
• Record Keeping: Maintain accurate payroll records and submit required returns on time
  
  

Additional Considerations

• Work Permits and Visas: If you plan to hire foreign employees, ensure they have the necessary work permits and visa
• Local Expertise: Consider partnering with a local expert or Employer of Record (EOR) to navigate the complexities of Cayman Islands employment laws and payroll management

Employment Law

Employment law in the Cayman Islands is primarily governed by the Labour Act (2021 Revision).

Basic Terms of Employment:

• Contracts: Employers must provide employees with a written contract outlining the terms and conditions of employment
• Probation Period: Typically, a probation period of up to 6 months is allowed
  
  

Working Hours and Leave:

• Standard Workweek: 40 hours per week, usually 8 hours per day over 5 days
• Vacation Leave: Employees are entitled to at least 2 weeks of paid vacation leave per year
• Public Holidays: Employees are entitled to paid leave on public holidays
• Sick Leave: Employees are entitled to paid sick leave, typically up to 10 days per year
• Maternity Leave: Female employees are entitled to 12 weeks of maternity leave, with at least 20 working days paid
  
  

Health and Safety:

• Employers are required to ensure a safe working environment and comply with health and safety regulations

Tax, Employee Provident Fund, Social Security & Human Resource Development

Individual Income Tax (Taxes on Employment Income)

• In the Cayman Islands, there are no individual income taxes or withholding taxes imposed on employment income. This means that individuals do not pay taxes on their wages, salaries, or other types of employment income.

Social Security Contributions

In the Cayman Islands, there is no social security system in place, so neither employers nor employees are required to make social security contributions. However, under the National Pensions Law, employers are required to contribute to a pension plan for their employees.

Pension

In the Cayman Islands, the pension system is governed by the National Pensions Law. Here are the key points:

Private Sector Pensions:

• Mandatory Contributions: Employers must contribute a total of 10% of the employee’s monthly earnings to an approved pension plan. This is split into a maximum of 5% from the employee and a minimum of 5% from the employer
• Pension Providers: There are various registered pension providers offering different plans to suit individual needs
  
  

Public Sector Pensions:

• Public Service Pensions Plan (PSPP): This plan is for civil servants and other public employees, administered by the Public Service Pensions Board (PSPB)
• Contribution Rates: Both employees and employers contribute to the fund, typically at a rate of 4% each

Payroll

There are no restrictions in the law or further procedures required to provide online payslips in Cayman Island.

Reports

Payroll records and other accounting records must be maintained for a minimum of five years from the date of the transaction.

Termination and Severance:

• Notice Period: Employers must provide notice of termination, which varies based on the length of employment
• Severance Pay: Employees are entitled to severance pay if terminated after a certain period of continuous employment

The local legislation does not offer any other specific benefits beyond the statutory ones.

All elements such as general expenses, car mileage and company cars will be incorporated based on the company policies and how companies normally choose to pay them.

Visas & Work Permits

Visas

• Visitor Visa: Most visitors do not require a visa for short stays (up to 6 months). Extensions are possible in rare circumstances
• Student Visa: Required for individuals studying in the Cayman Islands
  
  

Work Permits:

• Temporary Work Permit (TWP): Allows employment for up to 6 months
• Full Work Permit: Valid for 1 to 3 years, renewable
• Business Visitor’s Permit: For short-term business visits
  
  

Application Process:

• Job Offer: Secure a job offer from a Caymanian employer.
• Employer Application: The employer applies for the work permit on behalf of the employee.
• Required Documents: Include a completed application form, proof of job offer, police clearance, medical examination, and proof of qualifications
• Fees: Work permit fees vary based on the job position and duration
  
  

Additional Information:

• English Proficiency: Required for applicants from non-English speaking countries
• Dependents: Work permit holders can apply for dependents to join them

• Standard Banking Hours: Monday to Thursday: 9:00 AM to 3:00 PM; Friday: 9:00 AM to 5:00 PM
• Additional Services: ATMs available 24/7 for basic transactions; Online and Mobile Banking accessible anytime
• Working Week: Typically Monday to Friday
• Standard Working Hours: 40 hours/week, usually 8 hours/day

Basic Facts:

• Full Name: Cayman Islands

• Population: Approximately 87,866 (2024 estimate)

• Capital: George Town

• Major Languages: English (official), with some Spanish and Filipino spoken

• Monetary Unit: Cayman Islands Dollar (KYD)

• Main Exports: Ships and boats, aircraft, mineral fuels including oil, electrical machinery

• GNI per Capita: $68,790 (2022)

• Internet Domain: .ky

• International Dialling Code: +1-345
  
  

Further Information

For more information, or assistance with Cayman Island Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.