Labour inspectors to regain powers to enforce pension fund contributions

IOL News

7 hours ago

Minister of Employment and Labour Nomakhosazana Meth says although the Pension Funds Act required employers to pay contributions within seven days and criminalise non-compliance, many employers continued to default.
Image: GCIS
Employment and Labour Minister Nomakhosazana Meth said she will restore labour inspectors' powers to enforce compliance by employers to pay pension fund contributions within seven days of deduction from employees' salaries.
Meth was responding to parliamentary questions from EFF MP Omphile Maotwe.
Maotwe noted that the report by the Financial Sector Conduct Authority (FSCA) revealed that approximately 7,770 employers, including a large number of municipalities and companies in the security and cleaning sectors, failed to pay over pension fund contributions deducted from employees' salaries as of December 2023.
She noted that the non-payment resulted in a pension debt of R5.2 billion, affecting over 31,000 workers and severely undermining the implementation of the two-pot retirement system.
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Maotwe asked whether the Employment and Labour Department has undertaken any investigations into the implicated employers and the number of labour inspectors assigned to conduct compliance checks.
She also enquired about enforcement measures taken against non-compliant employers and measures in place to ensure that affected workers were compensated and/or had their retirement savings restored.
In her reply, Meth said she was aware of the serious issue raised in the FSCA's 2023 report regarding failure by companies to pay pension fund contributions deducted from employees' salaries.
'This is particularly evident in the Private Security Sector, where membership in the Private Security Sector Provident Fund (PSSPF) is compulsory, even for non-signatory employers, under the collective agreement of the National Bargaining Council for the Private Security Sector,' she said.
Meth said that although the Pension Funds Act required employers to pay contributions within seven days and criminalise non-compliance, many employers continued to default, while the PSSPF also faces delays in disbursing benefits to retrenched or retired members.
'Despite the provisions of Section 34A of the Basic Conditions of Employment Act (BCEA), which mirrors the PFA by requiring employers to pay benefit fund contributions within seven days, labour inspectors are currently unable to enforce this section due to a 2003 Ministerial Determination issued under Section 50(1)(a) of the BCEA.'
Meth said the 2003 Ministerial Determination was introduced to prevent regulatory overlap with the PFA.
'This was based on the understanding that the PFA already had its own enforcement and compliance mechanisms in place, including oversight by the FSCA and dispute resolution by the Office of the Pension Fund Adjudicator. The intention was to ensure regulatory clarity and avoid conflicting responsibilities between labour inspectors and financial sector regulators.'
Meth also said that despite the regulatory measures to ensure the proper management of the PSSPF, many employers continued to miss deadlines for paying employees' contributions.
She further said the PSSPF has struggled to disburse benefits to retrenched or retired members.
'It has, therefore, become sensible for my department to consider how best to protect these workers, and the possibility could be to use the monitoring and enforcement provisions regulated by Section 34A of the BCEA.
'My department is in the process of withdrawing the determination to restore labour inspectors' powers, a proposal that has received the support of all NEDLAC Labour Law Reform Task Team Constituencies.'
Meth said her department has introduced amendments to the BCEA aimed at clarifying the enforcement of unpaid contributions and eliminating jurisdictional duplication with the Pension Fund Adjudicator, Commission for Conciliation, Mediation and Arbitration, and Labour Court.
The department has also engaged with the FSCA, Office of the Pension Fund Adjudicator, and National Treasury to align efforts and avoid regulatory overlap.
'Once enabled, labour inspectors will be assigned to enforce compliance, and affected workers will be better protected through strengthened oversight, improved fund administration, and legal recourse to recover unpaid pension contributions,' Meth said.
Last month, Independent Media quoted Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa as saying that 10 municipalities in five provinces have failed to pay salaries of municipal employees since April this year.
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