Warning for directors in South Africa

 ·13 Apr 2024

When an employer fails to pay contributions to their employees’ pension fund timeously and in full, the directors or those managing the entity’s financial affairs can be held personally liable for the payment.

This was outlined by legal experts at ENS Africa, Wandile Ndabambi and Atlegang Raganya, who said that this is stipulated in black and white in the Pension Funds Act.

The legal experts said that “regardless of a registered fund’s internal rules, an employer is obligated to transfer all deducted member’s contributions into the member’s pension fund’s account within seven days after each month-end.”

“Section 13A(8) of the Act… enable[s] a fund to identify and hold persons involved in managing the employer’s financial affairs accountable and personally liable for non-compliance,” said Ndabambi and Raganya.

A recently settled case proved just that, where the Pension Fund Adjudicator in the matter ordered that the company’s directors pay the contributions in arrears.

A provident fund complained that an employer did not follow the rules about employee contributions by failing to submit contribution schedules and pay the provident fund the contributions due to its employees.

The employer said it was too late to complain because three years had passed.

However, the law says the countdown starts when the debt is officially recognised and since each month’s payment is its own separate issue, each has its own three-year period.

Additionally, the employer and fund were already talking through lawyers during this time, and the employer had agreed to pay some money towards what was owed, showing that they knew they had to pay.

The applicant requested to identify those involved in managing the employer’s financial affairs, however the employer failed to provide the name of the person responsible.

As a result, the directors and employer were held jointly and severally liable and were ordered to pay the fund the amount of arrear contributions plus interest.

The legal experts said that this should serve as a warning, and “employers should ensure that pension fund contributions are paid timeously and in full to avoid personal liability.”

Read: A warning to employers in South Africa

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