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See if you manage your money as other crew do

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Queries from several crew members recently about paychecks got us wondering if there is an industry standard in how yacht crew are paid. These queries were focused on how to take their money, in what form it comes and whether they should be keeping it in some separate account offshore.

We’re not sure if there’s an industry standard, but there are a few common practices.

First, we asked How often are you paid?

Most crew — about 70 percent — are paid monthly. Most of the rest are paid every other week or so. Just eight of our 133 respondents are paid weekly. But it was interesting to note that six of them were captains on vessels as large as 160 feet.

Another of our basic queries was how yacht crew receive their salaries, so we asked <<BOLD>>How is your salary given to you?

More than three-quarters receive their pay through direct deposit or wire transfer with the bulk of the rest receiving an old-fashioned paper check.

“Look at salary as one part of total compensation package including vacation, travel stipend, medical insurance, opportunity for continuing education, etc,. as those are real costs and represent another $10,000-15,000 in additional benefits that many employers now pay,” said a chief stew on yacht 80-100 feet.

Just 3.8 percent of our respondents are paid in cash. They working in various positions onboard, but our cash-paid crew were all on yachts less than 100 feet.

“This, unfortunately, is a sign to the new crew in the industry who feel they actually have a right to choose,” said a captain of a yacht 120-140 feet. “You should take your pay anyway you get it and be happy. If you really think you have a choice, you’re living in dreamland. The way an owner pays you affects him. It’s about the owner, not the crew. Many are spending extra money on us and their yachts. For new crew coming in, they should be informed not to be demanding about how they get paid.”

The strongest common answer came in our next question: What currency are you paid in?

Eighty-two percent were paid in U.S. dollars, regardless of where they were in the world. Most of the rest — 12.8 percent — were paid in euros, regardless of where they were.

“Try to get paid in U.S. dollars or pound sterling (UK),” said the chief stew on a yacht 120-140 feet. “The euro crisis is proving this point once again.”

Just 3 percent were paid in the local currency, depending on where they were. And 1.5 percent said they were paid in a mix of euros and dollars, also presumably depending on where they were.

The main thing our curious crew had asked about was how yacht crew handle their money once they get it. Do you cash it in? Do they mix it with their normal accounts? Or do they keep it separate somehow, and maybe even offshore?

So we asked How do you manage your accounts?

Most captains and crew — 62.4 percent — include their yacht wages in with their regular bank accounts.

But 30 percent have separate accounts for their yacht income.

“I find it best to set up a separate account,” said a captain in the industry more than 15 years. “This allows for ease of any tax questions, out-of-pocket expenses and business deductions at the end of the year. Pay yourself through your business, within reason, and you build credit and banking references. If you just take your cash and put it in your personal account, then you run the risk of burning through it and never having a paper trail.”

“I keep it in an offshore account, Lloyds TSB, Isle of Man, and that seems to work,” said a chief stew in the industry less than 10 years. “I can pay bills from that and draw cash when needed.”

“I have a captain friend who was paid offshore for 16 years and had an IRS nightmare when he wanted to get back on the books and come home,” said a captain of a yacht 100-120 feet in the industry more than 30 years.

Just 3 percent don’t have accounts and live on cash.

And about 2.3 percent admitted that they simply send it home and that they have no idea what happens to it there.

The results from this question got us wondering if longevity in the industry had anything to do with how a yacht crew member handled their accounts. So we crunched this data further by tenure and learned something interesting.

Those new to yachting tended not to have separate accounts, but the longer they were in, the more common it became, until they were in 15-19 years, where it was most common. Then, it became less common. This suggests that longevity was a factor in the likelihood to have a separate account but not the only factor.

Perhaps crew at the start of their careers are getting in and learning the landscape — getting their financial sea legs, if you will.

Then possibly, as crew stayed in and got older, they began thinking of long-term things such as investments and created separate accounts.

But the decline for the people with more than 20 years in the industry could be explained by the reality of retirement. Individual financial planning is something relatively new in the financial landscape, with personal retirement accounts and personal incorporations starting to pick up momentum in the 1990s. (Though IRAs were created in 1974, only people not in a company IRA were allowed to contribute. Those laws were changed in 1981.) Long-term captains and crew may very well be more apt to take advantage of these tools.

Another of the main questions our curious crew wanted to know was if they should be paying taxes on their yacht income earned overseas. So we asked Are there deductions made to your salary (for things like taxes and health insurance)?

Please note: This data is not presented as a guideline for how to pay or avoid taxes. Every crew member must work out what’s best for them based on their individual circumstances. This data only shows what some other crew are doing.

Most crew — nearly 70 percent — do not pay take deductions through their paychecks. That is not to say that they don’t pay taxes. One respondent rightly noted that many long-term crew have created corporations for themselves so that they are employed as independent contractors. The yacht pays their company, which in turn pays them. Their company pays all the taxes and other deductions we inquired about.

“We are paid a gross amount as independent contractors and receive a 1099 each year,” said a captain in the industry more than 15 years. “No benefits, no deductions. You should have asked if we receive our income in the name of a corporation or as individuals.”

“I work as an S Corporation and get paid as a contractor,” said a captain in the industry more than 10 years. “This is good for both me and the boss.”

Of the 30 percent who do take deductions from their checks, they do so mostly for taxes and social security in their home country. The only other deduction of note was for health insurance premiums or health savings accounts.

Lucy Chabot Reed is editor of The Triton. Associate Editor Lawrence Hollyfield analyzed the statistics. Comments on this survey are welcome at lucy@the-triton.com. We conduct our monthly surveys online. All captains and crew are welcome to participate. If you haven’t been invited to take our surveys and would like to be, register for our e-mails online at www.the-triton.com.

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