Here’s something to consider, because this could easily be you. You’re a company employee receiving a monthly salary. Your salary slip shows the amount deducted for your pension fund contribution and how much your employer may be additionally contributing. You haven’t checked on your fund balance for a while, reasoning that, as long as you are maintaining your contributions, your savings are building up in the fund. Then the two-pot system comes into operation and, just out of interest, you contact the fund to see how much is in your savings pot.
It comes as a shock to find out that, for the past six months, there have been zero deposits into the fund. Nothing has been paid over by your employer – not your contributions nor the employer’s supplementary contributions.
How can that be? Your salary slip clearly shows the contribution amounts, and yet nothing has been received by the fund!
Unfortunately, this scenario plays out again and again in South Africa. Often it’s a temporary problem, where the employer experiences cash-flow problems and rectifies matters as soon as business picks up. But sadly, in too many cases, there is habitual non-compliance by employers. This is nothing short of theft: the company is stealing what is rightfully yours, month after month.
Shocking statistics
The Financial Sector Conduct Authority (FSCA) has faced this problem for many years, and the situation is getting worse. But the authorities have now had enough. In two recent presentations (the first a public lecture by Commissioner Unathi Kamlana at Stellenbosch Business School and the second a media round table featuring, among others, Kamlana and head of retirement funds conduct supervision Corlia Buitendag), the FSCA spelled out measures they were taking to crack down on errant employers.
Let’s look at a few figures. There is currently about R5.2 billion in outstanding contributions from employers, about 7 770 employers have been reported to the authorities, and about 310 million employees are affected.
In the private sector, the problem lies mostly with small companies with variable incomes whose employees work on contract and belong to a trade union retirement fund. Industries affected include security, contract cleaning, hairdressing and skin care, furniture manufacturing, building and electrical contracting, and transport.
The private security industry, represented mainly by the Private Sector Security Provident Fund (PSSPF), whose quarter-of-a-million active members are contracted to small security firms around the country, accounts for over 36% of arrears contributions. This far exceeds the next most non-compliant industry, hairdressing, and skin care (12%).
In the public sector, municipalities account for R1.4bn of arrears contributions across 10 retirement funds. The figures are shocking: 149 (58%) of the country’s 257 municipalities were reported to be in arrears. Over two-thirds (69%) of arrears come from the Free State, where 22 out of 23 municipalities are not paying over the retirement contributions of their workers. The most compliant province is the Western Cape, where 8 out of 30 municipalities are in arrears (but this is up from six last year).
Name and shame
So what are the authorities doing, and what can you as an employee do if what I described above happens to you?
Non-compliance by a company in paying over employee contributions to a retirement fund is a criminal offence. Funds are obliged by law to monitor contributions and act on non-compliance, by reporting a company to the police and to the FSCA. While the FSCA can put pressure on funds to monitor and report non-compliance, it does not have the power to go after the primary culprits, the employers.
This may change in the future – the Conduct of Financial Institutions Bill, which is expected to be enacted next year, will strengthen the FSCA’s hand in dealing with errant employers.
Meanwhile, the FSCA is naming and shaming the most serious offenders. The list of errant employers as of December 31, 2023, can be found on the FSCA website. It names 1 800 employers (companies and municipalities) that are more than 18 months in arrears. Among them are:
What to do?
So what should you do if you find yourself in the position I have described above? Referring to the FSCA’s online guide “Know your rights FAQs”:
[blob] Visit the FSCA website (www.fsca.co.za) and check if your employer is on the list of defaulting companies. It may help to know that others are in the same position as you.
PERSONAL FINANCE