EDITORIAL | Employers can’t go on stealing from retirement fund members

The revelation recently that 6,064 employers are in arrears with retirement fund contributions by employees is a systematic betrayal of the South African workforce.

What is comforting is that the Financial Sector Conduct Committee (FSCA) has announced it is working with the National Prosecuting Authority, the National Treasury and the Hawks to strengthen accountability of employers and their directors for non-compliance. This will go a long way to ensuring that employees’ contributions go where they should.

The FSCA revealed recently that total arrears are now estimated to be R8.33bn, affecting about 590,000 retirement fund members.

The FSCA also revealed that current data suggested that the severity of arrears was increasing, with late payment interest increasing by 21.5%, compared with a 9% increase in the capital portion of arrears. It said this indicated that outstanding contributions remain unpaid for longer periods and accumulate interest. This means employers are essentially using their employees’ deferred wages as interest-free loans to prop up failing business operations.

In addition, finance minister Enoch Godongwana revealed that struggling municipalities have failed to transfer R1.7bn from workers’ salaries to their pension funds. This is one of the reasons why Treasury temporarily halted equitable share funding to 69 transfer municipalities to ensure that municipalities comply.

The FSCA said Treasury’s move to withhold equitable share allocations from persistently non-compliant municipalities has begun to improve the regularity of contribution payments. While the move is welcome, it is a reactive measure to a long-standing pattern of theft.

These workers, either in the private or public sector, have worked long and hard and believe that deductions from their pay will ensure their retirement goals are met.

The failure by employers to transfer these amounts that have been deducted from employees’ salaries is unforgivable. There is no excuse for employers taking those amounts and using them for other purposes that do not benefit the employees, or to fund the companies’ or municipalities’ business operations.

With these laws and harsh penalties in place, it is a surprise employers continue to flout the law. The frequency of these offences suggests that employers view these laws as mere suggestions rather than enforceable.

Unions have been rightfully outraged by this revelation, especially by some of the municipalities’ failure to transfer employees’ deductions to provident and pension funds.

Saftu said it has repeatedly condemned the same criminal practice in the private security industry, where numerous employers deduct pension and provident fund contributions, UIF and medical aid contributions but fail to pay them over.

“We have consistently demanded criminal prosecution of those responsible. The same principle must apply here,” Saftu said.

The union said there cannot be one law for private employers and another for municipalities. It said public institutions cannot be allowed to commit the very crimes they are expected to prevent.

The state has laws to ensure that employers are compliant with their obligations and there are penalties for failure to do so.

Section 13A of the Pension Funds Act mandates employers to pay deducted contributions to a fund within seven days after month-end. Section 37(1) criminalises this non-compliance, carrying penalties of up to 10 years’ imprisonment, a fine of up to R10m or both.

Also, Section 34A of the Basic Conditions of Employment Act states that an employer that deducts from an employee’s remuneration any amount for payment to a benefit fund must pay the amount to the fund within seven days of the deduction being made.

With these laws and harsh penalties in place, it is a surprise employers continue to flout the law. The frequency of these offences suggests that employers view these laws as mere suggestions rather than enforceable.

It is time the state stepped up and used its powers to ensure compliance and accountability.

The intention by the FSCA should be applauded. Hopefully, this will push errant employers to follow the legal path and deposit employees’ deductions on time, every time.