Chairman of the Cayman Islands Monetary Authority George McCarthy told Cayman Financial Review in 2009 that a big part of the reason the country flourished as an offshore financial services centre is its people.
“It’s not the buildings and the laws, it’s the expertise,” he said. “If you took the same expertise we have and put it in the Sahara Desert, we can replicate the success.”
Indeed, Cayman over the years has been able to attract and produce locally bright, qualified and innovative professionals that have taken the country from obscurity to an offshore giant.
Tim Ridley, a former senior partner of the law firm Maples and Calder, came to Cayman in 1973 as a young graduate from Cambridge University and Harvard Law School.
“I looked for a place that had no or low taxation and where it was easy to get to work – on a bicycle if necessary.
I very nearly went to work in the Channel Islands, but Cayman looked more intriguing and with better career opportunities; and the weather and beaches were far superior.”
Ridley said part of the appeal of Cayman for professionals from abroad in those early days was the chance to play a part in influencing the growth of Cayman’s financial services industry, as well as “the opportunity to earn tax-free income in a great place to live and bring up children”.
Although some lawyers came, stayed a while and left, others like Ridley remained.
“I stayed in Cayman because the work became increasingly sophisticated and complex. The demand for legal services exploded in the decades following my arrival. It was exciting and exhilarating to be part of that experience.”
UBS Cayman Managing Director Darren Stainrod said there are still many things that attract professionals from abroad.
“Cayman has the almost unique blend of being both a major financial centre and a top tourist destination, but in a relatively intimate small-town environment. So while the work can be as challenging and rewarding as in a big city, the climate and lifestyle attracts professionals from all over the world that have had enough of long cold winters, lengthy commutes, rising crime and, of course, ever-increasing taxation.”
Stainrod said a good indication of how attractive Cayman was as a jurisdiction to live and work was the large percentage of people who leave the island, only to return again a year or so later.
Steve McIntosh, CEO of CML Financial Services & Legal Recruitment, said Cayman has been able to continually attract top professionals for three reasons.
“First and foremost, employers have continually offered competitive remuneration packages,” he said, noting that gross salaries in Cayman compare well with gross salaries in key overseas employment markets, which makes this jurisdiction’s income- tax-free net salaries very attractive.
“Second, the Cayman Islands continues to offer an unbeatable standard of living that appeals to many. As a place to live and work, Cayman is very hard to beat. Third, if I do say so myself, those charged with attracting the talent, the islands’ recruitment and HR professionals, have done a good job.”
McIntosh said it’s not other offshore jurisdictions that are Cayman’s chief competitors for talent.
“Truth be told, there is very little competition for talent from other offshore financial centres. The main competition is with onshore jurisdictions such as Ireland, Canada, London and Hong Kong.”
One thing McIntosh would like to see to help recruit professionals from overseas is Cayman embracing the latest online innovations such as social media and video.
“Believe it or not, the biggest obstacle to attracting talent is convincing people that what is on offer is not too good to be true. That is very difficult to do with words alone.”
Cayman Islands Society of Human Resources Professionals’ Immediate Past President Phil Jackson, who has been working in the HR field for 15 years, said he has not encountered a lack of qualified candidates wanting to experience life in Cayman.
“Compared with other offshore jurisdictions, the Cayman brand has not diminished and we are still able to attract top-notch talent due to the infrastructure, lifestyle and work experience that Cayman has to offer. As long as we remain business friendly and continue to provide a high quality of life for expatriate workers, we will continue to keep attracting top talent.”
Long-time Cayman human resources professional Graham Wood of Trans4m said Cayman’s private sector will likely face stiff recruiting competition in the future, and not just from overseas competitors.
“With the developments of the Cayman Enterprise City and the Narayana Cayman University Medical Centre in particular adding to demands from the financial services sector in Cayman as well as globally, very significant challenges are presented to acquire… the skills required for future success.
To cope with [this] employers in Cayman need to be thinking not just about their immediate needs, but 10-15 years ahead to ensure that the talent pipeline provides a continuous supply of specialists and technically skilled personnel… in the future. There is no doubt that shortages of specialist and technical skills will run the risk of creating a drag on the competitiveness of the Cayman Islands.”
Attracting talent is one thing; retaining it is another.
“Our problem is not attracting talent, but keeping it,” McIntosh said.
“[The seven-year term limit on expatriate workers] has not helped, but is not the biggest issue facing the financial sector. I would guess that more irreplaceable jobs have been lost in the last five years than irreplaceable people, particularly in the ailing fund administration sector, which has been in slow decline for years even as it boomed in Toronto, Halifax and Dublin. Provincial governments heaped subsidies and concessions on financial firms while ours heaped nothing but costs and regulations, not least who they may and may not hire. “
Ridley thinks Cayman should eliminate term limits and embrace and implement the concept of ‘talent without borders’ by encouraging and welcoming foreigners with the right expertise to come here.
“And let them stay as long as they wish. These people will create jobs for the local community. It is simply not enough for the political leadership to say this from time to time; there has to be delivery at the coalface by those officials whose job it is to implement the policy.”
Mario Ebanks, a founder of the Cayman Islands Society of Human Resources Professionals and principal of Premier Solutions Group, noted that Cayman does have some limitations as a place to work for some professionals.
“What I perceive is lacking… is that due to these islands being offshore and not in close proximity to the business or financial hub of major centres, professionals locating here may feel deprived of the regular contact and networking with a broader base of professionals, business referral sources, clients and their representatives, and other colleagues and acquaintances. To overcome this I feel that Cayman has to aggressively pursue the conference and conventions option, which will include the provision of both infrastructural and institutional systems.”
Ebanks said Cayman’s becoming a regional centre for conferences and conventions would create a richer base for professional interactions and networking and allow offshore professionals to remain in regular contact with those onshore.
Ridley says there are “extremely talented people” living and working in Cayman, but he’s not sure the country is maximising that fact.
“I think that as Cayman has grown in success and size, government and the private sector have become more bureaucratic and complacent,” he said, adding that this has increased the difficulty in getting the right things done in a timely and effective way.
“A classic example is the two decades it took Cayman to enact a new insolvency law for companies. Cayman is not alone with this problem, but that is no excuse. It makes Cayman a less exciting place to come and work. Talented people want to be involved and to make a difference.”
McIntosh said that in the end, talent gravitates to opportunity.
“Cayman can continue to attract top executives by removing their shackles and facilitating expansion rather than frustrating it. That is not difficult, but it begins with an open and frank discussion about what companies need to be able to grow. To coax key information from knowledgeable but wary executives, government officials need to make the first move, demonstrate that they can handle the truth, and act upon it. Otherwise, executives will retreat back beneath the parapet and government will languish in the dark.”
The spectre of tax
Since the financial crisis that began in 2008, Cayman has struggled to balance its budget while still providing the expected levels of government service and infrastructure improvements. The United Kingdom has recommended Cayman institute some kind of direct taxation, something the government has resisted for good reason.
“Imposing an income tax in the Cayman Islands is something that could make Cayman much less attractive to overseas talent and to businesses operating here,” Stainrod said.
“Given the high cost of living and that effectively people pay taxes already in the form of high duty charges on imports or the consumption of goods, the imposition of income taxes could be devastating. Any such tax would need to be compensated by equivalent pay increases which would further raise the cost of labour – on top of recently increased work permit fees – forcing yet more businesses to reconsider its presence here.”
Ebanks said Cayman already might have an effective tax rate of 30-40 per cent when considering import duties, mandatory pension contributions and health insurance premiums, work permit fees, and the higher costs of retail and entertainment.
“If we were to add say another 5 per cent to that for payroll/income tax, we would be near to or equal the effective tax rate of Western and European democracies, where most of our financial sector or higher-level talent would be recruited from. This would therefore create a huge disadvantage to recruiting and retaining talent in Cayman, as most professionals are loathe to relocate at a financial loss. “
McIntosh said income tax was a non-starter in Cayman.
“First, it would be impossibly complex and prohibitively expensive to legislate, police and pursue. Second, it would drive away a lot of well-heeled entrepreneurs, professionals and retirees that have settled and set up businesses here precisely because of the lack of it.“
McIntosh noted that Cayman already has a quasi payroll tax in place, at least with respect to expatriate workers, in the form of work permit fees. Adamantly against any new tax measure that would increase costs to employers, he has advocated for an alternative system that is “simpler, fairer and progressive, potentially even one that shares a modest slice of the burden with the employee, akin to the Bermuda system”.
“Not only is the cost of employing people in Cayman too high”, says McIntosh, “it’s also arbitrary and inconsistent, without any concessions for new, small or struggling companies. Permit fees are essentially a tax on job titles, which is absurd. Why should a small company pay twice as much for a GM earning US$80,000 a year as a large company pays for an accountant earning US$150,000?”
McIntosh says there’s much debate about whether a low level of payroll tax borne by employees would discourage applications from top professionals overseas.
“Advocates point to the unlikelihood that anyone considering the jurisdiction would balk at a tax of less than 5 per cent when moving from a country with between 30 and 40 per cent. Opponents believe the word ‘tax’ frightens people.
All I can say is that in my experience few professional candidates outside of Cayman or Bermuda cite the tax rate as a reason not to consider Jersey – which has 20 per cent income tax – or Hong Kong – which has 17 per cent income tax. The fact their financial sectors are growing, while ours – with zero tax – is stagnant at best, suggest other factors matter more in attracting and retaining business.”
Besides recruiting from overseas, Cayman has tried to develop financial industry professionals from the local population. “I believe Cayman has done pretty well with its home-grown professionals,” Ridley said. “Of course, we could have done better.“
However, Ridley is cognisant that Cayman has a very small population base and that it shouldn’t be expected to supply all the needs of the financial service industry.
“I attended school in a town in the South of England that had a catchment area of around 30,000. I know how few doctors, lawyers and accountants the school produced each year – I was the only lawyer. So it is naïve to think that Cayman can produce a large number of professionals each year. Force-feeding does not work and produces unrealistic expectations and resentments.“
“A society can only produce so many people with the desire and ability to become lawyers and accountants, and by any yardstick Cayman has done exceptionally well on those fronts. In fact I think the government has tried too hard to persuade young Caymanians to pursue financial careers, which has led to both a sense of entitlement among the elite and a sense of disenfranchisement among those not cut out for so-called ‘necktie jobs’.
Young people should be handed opportunities, not aspirations. Smart, hard-working people will do well and rise to the top in whatever line of work they choose.”
Although Stainrod noted that a lot of the local talent has gravitated toward the legal profession in the past, he is beginning to see a change.
“I think that the schools and colleges are starting to shift the programmes from more traditional subjects to focus more on the subjects relevant to the financial industry,” he said.
However, Stainrod said the local population alone could never meet the recruitment needs of Cayman’s financial services industry.
“The sheer size of the industry relative to the size of the population means that it is essential that Cayman continues to attract new talent to the island, whilst developing its own, at least for the foreseeable future.”
Although Ebanks recognises Cayman’s businesses and professional associations have invested millions of dollars on scholarships over the years, he doesn’t believe Cayman has done enough to develop home-grown talent.
“There is only a smattering of examples in the financial services industry today and these are mainly in the professional services disciplines such as accounting/audit and attorneys firms. If we look at the banks and trust companies/wealth management organisations, there were more Caymanians in senior positions in the 1980s than in 2011.“
What Ebanks thinks is lacking is a monitored development plan for Caymanians of talent who have been identified to move up within their organisations. He has long advocated for the establishment of a Human Resources Authority that could work with the various industry professional bodies to develop, fund, monitor and administer such a plan.
Ebanks also thinks Caymanians need to feel more part of the companies for which they work, something that will lead to more employee ‘buy-in’ and engagement.
“This type of partnership will ensure that there is a strong element of home-grown talent being developed, assuming senior positions, and working side-by-side in a dynamic partnership with their non-Caymanian counterparts.”
Although some talented Caymanians have risen to the top through education opportunities, there are plenty of lower and middle echelon jobs in the financial services industry that could be filled by Caymanians.
However, Ridley says the basic education provided in Cayman is a real problem.
“Too many of the students being turned out just do not have the skill sets needed in today’s world,” he said.
“I used to tell local politicians and civil servants that it was not the job of the legal profession to run the schools. They should send us students with the right attitude and right basic skill sets so we could train them to be lawyers, but we would not accept responsibility for teaching the three basic ‘Rs’.”
Those Caymanians with a good basic education and willingness to attend tertiary education get all the support they need from Cayman’s financial services businesses.
McIntosh noted that the generous scholarship and training schemes offered by private sector companies in Cayman are virtually unheard of in onshore financial centres. “In fact, this is often overlooked as a significant cost of doing business in Cayman,” he said.
McIntosh said employers should be asked to spend more on development of Caymanian staff and less on work permits.
“More pressure should be put on the private sector to hire and train Caymanians at the entry level in return for less pressure to promote and hire people at more senior levels, where hiring decisions directly impact the success of the company.
Thus the benefit of government interference would go to those young and unemployed people who need a leg up rather than those that should be perfectly able to manage their own career progression, as well as being less costly to the private sector.”
Jackson said Cayman’s local universities have done a good job in partnering with the business community to ensure that they are developing relevant programmes and offerings that will give Caymanians a good foundation.
“Our community realises education is key, but we also need to step out of our comfort zone and take any opportunity to work abroad and gain as much exposure as possible,” he said, noting that success is not only a matter of education.
“If you were to ask the Caymanians who are at the top of their field what made them successful, they would probably say it comes down to hard work, determination and sacrifice,” he said.