PFA Ruling: Payment of contributions
The pension funds adjudicator issued an important ruling concerning the non - payment of contributions by participating employers in pension and provident funds.
In Mali v Nabielah Trading CC t/a Security Wise & Private Security Sector Provident Fund the member, a security officer joined the employer on 1 June 2004 until 1 November 2005 when his employment contract was terminated. The fund failed to pay the complainant a withdrawal benefit after he left the services of his employer because of the employer's failure to pay the total contributions over to it. The employer, who joined the fund in 2005, paid over contributions only for the first two months of its membership despite deducting the same from the complainants salary for the duration of his membership of the fund. The member lodged a complaint with the adjudicators office.
The adjudicator firstly held that the employer's conduct is in contravention of section 13A of the Act which provides that contributions shall be paid over to the fund not later than seven days after the end of the month for which such a contribution is payable. Failure to do so is a criminal offence and punishable in terms of section 37 of the Act. The employer shall in terms of section 13A(7) also be liable to pay penalty interest, of 20% per annum for amounts less than R10 000 and 17% per annum for amounts exceeding R10 000, on the amount of any contribution not transmitted by the employer or received by the fund before the expiration period.
The adjudicator, however, concluded that the fund cannot be held liable to pay a member a benefit that he becomes entitled to if it has not received the requisite contributions. The appropriate relief is to put the member in the position in which he would have been had the employer regularly and timeously paid the contributions due. Thus, the fund was ordered to calculate the benefit the member would have received had the contributions been invested in the fund portfolios. The employer was ordered to pay the member this amount together with interest at the rate of 15.5% per annum. The Adjudicator as a penalty also ordered the employer to pay interest on the sum of all outstanding contributions, in respect of the complainant, at the rate of 20% per annum, directly to the fund.
There are currently 304 complaints pending against this fund and/or the participating employers and most of them relate to the non - payment of contributions. In light of the seeming culture of non-compliance among some of the participating employers of this fund, in particular, the non-payment of contributions, despite having deducted the same from the member's salaries, the adjudicator considered it necessary to inform the prosecuting authorities, the regulator, Minister of Labour and the Minister of Finance of the ruling.
