Pension fund contributions

Our client has been employed by a single employer since 1993. In terms of his employment contract, his employer was obliged to deduct a pension fund contribution from his salary at the rate of 6.6% and it was obliged to pay its portion of contributions at the same rate, to the fund. Our client found that the amount deducted from his salary was not equal to 6.6% of his salary and this resulted in an under-deduction. This in turn affected our client’s fund credit. In 2009 our client’s employer switched from a typed system to an electronic system for the issuing of payslips. Our client then realised that since 1993 his employer had been unlawfully and fraudulently splitting his salary each month into a basic salary and an ex gratia bonus. His salary was not split in his employment contract and there was no justification for this. The result was that the 6.6% contribution to our client’s pension fund was only on the basic salary.

After our client instructed numerous attorneys, who failed to help him, he contacted us. In 2017 we were appointed to represent our client. We immediately wrote a letter to the relevant bargaining council in which we explained the facts of this matter and we also attached proof of our client’s payslips that prove his salary was unlawfully split into a basic salary and an ex gratia bonus in order for his employer to pay a pension fund contribution on a lesser amount. It should be noted that Section 13A (8) of the Act provides for personal liability for failure to comply with this section and for the payment of all contributions referred to in the act, for every director and employer who is regularly involved with the financial affairs of a company, every member who regularly controls or is involved with the financial management of a close corporation and persons entrusted with managing the overall financial affairs of the employer. We therefore informed the relevant bargaining council that should they have been aware of the fraudulent actions of the employer, not only could we hold the employer criminally liable, but we could also hold their director liable. In this case the bargaining council had failed to assist our client properly and correctly. An investigation was then launched by the Pension Funds Adjudicator.

We have recently received the following determination from the Pension Funds Adjudicator:

“The appropriate relief is for the complainant to provide the second respondent and the MEIBC with copies of his payslips for the period December 2008 to April 2011 in order for them to determine and compute if correct pensionable salary was paid on his behalf. The third respondent should pay any arrear amount (if any) if the computation indicates that it underpaid any contributions in respect of the complaint.”

The Pension Funds Adjudicator informed us that their office only has jurisdiction for the 2008-2011 period of this claim, and that our client has to lodge his 1993-2008 claim related to the corresponding years with his bargaining council. The determination also referenced Section 13 of the Pension Funds Act, 24 of 1956 which states that “the rules of a registered fund shall be binding on the fund and the members, shareholders and officers thereof, and on any person who claims under the rules or whose claim is derived from a person so claiming.” The definition of a pensionable salary does not include overtime, allowances and leave bonuses, according to its definition in the Rules of our client’s Pension Fund.

The determination stated that “ex gratia bonuses are not part of a member’s pensionable salary as this is part of allowances”. However if the split of remuneration into a basic salary and an ex gratia bonus is unlawful, this will not be a lawful defence.

We are of the opinion that because our client’s employment contract was not amended, the contribution should be based on his salary as a whole. This is a caveat to all employers to have their contracts reviewed on a regular basis to reflect the status quo and a friendly reminder to all employees to always request a payslip, as you are entitled to it in terms of law.