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Funds must be harder on employers who fail to pay contributions

02 August 2022 The Office of the Pension Funds Adjudicator (OPFA)
Muvhango Lukhaimane

Muvhango Lukhaimane

A provident fund is empowered to take legal action against employers who fail to pay contributions. It is not enough to only send letters to employers pointing out non-compliance.

This was said by the Pension Funds Adjudicator Muvhango Lukhaimane in a matter where a complainant claimed an employer had failed to pay contributions for four years.

Voltampere Electrical and Mechanical Engineering (Pty) Ltd had failed to pay provident fund contributions on behalf of the complainant to the Metal Industries Provident Fund.

The complainant submitted that the employer last paid contributions in September 2018 whilst continuing to deduct same from his salary.

In its response to the Office of the Pensions Funds Adjudicator, the fund submitted that contributions were received on the complainant’s behalf for the period January 2012 to June 2018 and September 2018. Contributions were outstanding for the period July 2018 to August 2018 and October 2018 to date.

The total outstanding contributions were R192 305.13 for the period July 2018 to August 2018 and October 2018 to March 2022.

The fund’s administrator submitted that it notified the director of the employer and all parties concerned regarding the outstanding contributions. Despite letters being sent, the employer had not paid the outstanding contributions.

The fund also said the employer had signed an Acknowledgement of Debt with the fund’s attorneys but had since defaulted. The matter was referred back to the attorneys to enforce legal action against the employer.

Although the employer was granted an opportunity to respond to the complaint, no response was received.

In her determination Ms Lukhaimane said on the evidence submitted, the employer owed provident fund contributions for the period July 2018 to August 2018 and October 2018 to date. Therefore, the employer was in contravention of section 13A of the Act and rule 8 of the fund.

She said Section 13A (6) of the Pension Funds Act placed the duty on the fund to monitor and ensure that the employer complied with payment of provident fund contributions. Regulation 33(4) of the Act required the monitoring person indicated in Section 13A (6) of the Act to bring the infringement of Section 13A(2)(b) to the attention of the members of the fund in respect of whom the contributions are payable and the Financial Sector Conduct Authority (“FSCA”) must be advised of the action taken. Regulation 33(5) states that if any failure to transmit contributions continues for 90 days, the monitoring person shall report the matter to the FSCA.

“It is not enough for the fund to just say that it sent non-compliance letters to the employer. The fund has a duty to take further steps which includes notifying the employees of the employer regarding the non-compliance and taking legal action against the employer,” said Ms Lukhaimane.

The employer was ordered to pay to the fund the amount of R192 305.13 for the period July 2018 to August 2018 and October 2018 to March 2022.

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