COVID-19 relief for employers
EMPLOYERS are a key stakeholder of the Fiji National Provident Fund (FNPF).
The definition of an employer as well as their role, which is mandated by law, is clearly outlined in the FNPF Act.
Their principal role is the timely payment of contributions for members’ retirement savings. This is very important and becomes even more so during the current health pandemic that we are experiencing.
The economic impact of COVID-19 has been far-reaching and six months after it was declared a global pandemic by the World Health Organization, there is still no end in sight as leading nations continue to search for a cure.
For FNPF members and their employers, one of the first relief measures put in place to cushion the impact of the pandemic, was the reduction in compulsory contribution rates from 18 per cent to 10 per cent.
This was announced as part of the Government’s COVID-19 Response Budget in March and was effective from April 1, 2020.
Before COVID-19, FNPF collected on average around $49 million in contributions every month.
After the implementation of the new contribution rate, monthly contributions are now around $23 million.
The rate of unemployment because of COVID-19 is also a factor because it means that there are no contributions paid for these members.
However, from April to August this year, 160 employers have been boosting the retirement savings for 6064 members through Employer Additional Contributions.
The employers can benefit from the 150 per centdeduction for Employer Addition al Contributions paid up to a maximum of 5 per cent.
For some employers, the additional contribution they are now paying is the difference between the old and new employer contribution rate.
It simply means that they are continuing with the old employer contribution rate of 10 per cent, only this time, 5 per cent of that is additional contribution.
Other relief measures that were implemented included the penalty waiver for late payment of contributions.
Employers would incur a $100 penalty per member for late payment of contributions.
More than $6 million in penalties for late payment has now been waived by FNPF.
This week, we take a look at some of the common questions pertaining to the Employers Relief Package for COVID-19.
The contribution rate is 10 per cent –– employers pay 5 per cent and members contribute 5 per cent from their wages. It was reduced by 8 per cent from 18 per cent to help both employers and members cop with this pandemic.
Before COVID-19, the total contribution rate for each compulsory member was 18 per cent –– 10 per cent paid by employers and 8 per cent paid by members.
It was effective from April 1, 2020 and will end on December 31, 2021.
The reduction in compulsory contribution rates paid by employers, would save them some $250 million until December 31, 2021.
It allowed them to divert these funds to keeping their businesses afloat, which in turn would reduce job losses or reduction in working hours for their staff or members of the FNPF.
Employers who have the financial capacity to continue paying employee contribution sat the old rate of 10 per cent, can do so.
If you can pay an additional 6-10 per cent, you will qualify for a 150 per cent tax deduction which will be backdated to April 1, 2020.
This additional contribution will not incur taxes for members.
The tax rebate initiative reflects Government’s concern about members’ retirement savings and this tax rebate COVID-19 relief for employers is aimed at incentivising employers to replenish what members are losing in terms of retirement savings.
The reduction from 8 per cent to 5 per cent for members’ compulsory contributions basically means that members are paying 3 per cent less than what they would normally pay. For example –– a member who’s paid $5/hour and works 80 hours in a fortnight, would be taking home an extra $24 every pay.
From April 1 to December 31, 2020, this change in contribution rate puts a total of around $150m right back in to member’s pockets. This is the amount that members can also convert to Additional Contributions.
The $100 penalty per employee is waived for all contribution payments received after the due date but no later than June 30, 2021. This only applies to the contribution period commencing from January 1, 2020. Previously, employers had to pay an additional $100 for each staff whose monthly contribution payment was delayed. This penalty has been waived for this specific contribution period.
Yes, employers can contact our team to make time payment arrangements, however you will only be required to pay 10 per cent of the contribution debt over a 12 month period.
Previously, employers were required to pay 44 per cent of the contribution debt upfront or their employees’ share of contributions.
The compliance letter is an important document for employers and FNPF will reissue conditional compliance letters if you’re unable to fully resolve your FNPF issues. It’s important that you reach out to our contribution, collection and compliance team to discuss your situation so that a workable solution is put in place.
Third-party notices are issued to those parties with whom the employers have a contract. Previously, whatever was owed to employers had to be paid directly to FNPF until the debt is cleared. Under the COVID-19 relief, these third parties will only need to pay 50 per cent of the value of the invoice.
Employers on DPO’s will have to pay up at least 20 per cent of their debts before they can travel. If they wish to travel again, they will need to pay at least 40 per cent of their existing debt.
You can call 3238 999 or email EmployerHelpline@fnpf.com.fj for any employer issues that you may have.