New re­tire­ment law will cre­ate busi­ness risk

RISKSA Magazine - - NEWS -

New leg­is­la­tion to be en­forced from March 2015 af­fect­ing re­tire­ment funds could make non- pay­ment of re­tire­ment fund con­tri­bu­tions by em­ploy­ers a crim­i­nal of­fence. Penal­ties for non- com­pli­ance will in­clude fines of up to R10 mil­lion and the pos­si­bil­ity of im­pris­on­ment for up to 10 years. Com­pany di­rec­tors could also be held per­son­ally li­able for non- pay­ment. In ad­di­tion, pen­sion fund con­tri­bu­tion rates have also been raised to 17.5 per cent of em­ploy­ees’ wages. Sanlam Um­brella Fund prin­ci­pal of­fi­cer, Kobus Hanekom, com­mented that while the amend­ment should be wel­comed, it may con­sti­tute a sig­nif­i­cant busi­ness risk for em­ploy­ers. “In the past, non- pay­ment of em­ployer con­tri­bu­tions was, to a large ex­tent, merely re­garded as a breach of con­tract.” he said in a state­ment. “All the im­pli­ca­tions of the leg­is­la­tion have not yet been fully con­sid­ered. If in­abil­ity to pay will con­sti­tute a le­gal ex­cuse, un­der what cir­cum­stances will they be ex­cused? Ul­ti­mately we’ll have to wait and see how our courts will in­ter­pret these rules,” he added. In re­sponse, Sanlam Um­brella Fund has amended its rules and in­tro­duced a tem­po­rary sus­pen­sion of par­tic­i­pa­tion ar­range­ment for its mem­bers. Fund rules pre­vi­ously al­lowed for em­ploy­ers to ter­mi­nate par­tic­i­pa­tion in the fund only. “This is a fi­nal and dras­tic mea­sure, es­pe­cially if the em­ployer be­lieves the cash flow con­cerns are of a tem­po­rary na­ture. We also un­der­stand that smaller em­ploy­ers are more of­ten ex­posed to tem­po­rary pe­ri­ods of cash flow con­straint, and cre­ative ways must be found to as­sist them,” said Hanekom. Par­tic­i­pat­ing em­ploy­ers will now have the op­tion of ei­ther im­me­di­ate ter­mi­na­tion if a fi­nan­cial re­cov­ery is un­likely, or a six- month sus­pen­sion if the em­ployer be­lieves it will re­cover fi­nan­cially.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.