The Minister of Employment and Labour, Nomakhosazana Meth, has restored labour inspectors’ power to enforce compliance with the requirement that employers pay retirement contributions to funds within seven days of deduction from employees’ salaries.
On 13 January, Meth published Notice 6994 in Government Gazette 53951, withdrawing a 2003 determination that exempted employers from the application of section 34A of the Basic Conditions of Employment Act (BCEA) in respect of the payment of employer and employee contributions to any benefit fund regulated under the Pension Funds Act (PFA).
The withdrawal of the variation notice means labour inspectors can now enforce compliance with section 34A alongside the regulatory powers of the Financial Sector Conduct Authority.
Webber Wentzel said the timing and nature of the withdrawal is significant.
“Section 50(9) of the BCEA provides that the minister may withdraw a determination following an application by an affected party, being an employer organisation, registered trade union, or covered employee. This procedure suggests that the change was prompted by stakeholder concerns about widespread employer non-compliance, likely linked to issues identified following the implementation of the two-pot retirement system in September 2024,” wrote Nicolette van Vuuren, a partner at the law firm, and Amy King, a knowledge lawyer.
“The two-pot system exposed reams of employers who had been deducting pension contributions from employees’ salaries but failing to remit those funds to retirement funds, with outstanding contributions totalling billions of rands. The withdrawal of the exemption is likely a legislative response to strengthen enforcement mechanisms against such non-compliance.”
Section 34A of the BCEA sets out strict payment deadlines that employers must meet in respect of any amount deducted. An employer that deducts any amount from an employee’s remuneration for payment to a benefit fund must pay the amount to the fund within seven days of the deduction being made, Van Vuuren and King said in their commentary.
“Any contribution that an employer is required to make to a benefit fund on behalf of an employee that is not deducted from the employee’s remuneration must be paid to the fund within seven days of the end of the period in respect of which the payment is made. These obligations do not affect any requirement under the rules of a benefit fund to make payment within a shorter period.”
Section 34A mirrors section 13A(3)(a) of the PFA by requiring employers to transmit contributions to the fund not later than seven days after the end of the month for which the contribution is payable.
“The practical difference is that section 34A of the BCEA imposes different trigger dates depending on whether the contribution is an employee deduction or an employer contribution and when the employer does the payroll run, which may not necessarily be at the end of the month,” said Van Vuuren and King. For example, if an employer’s payroll is run on the 25th of each month, payment of contributions to the fund must take place within seven days from the 25th.
They said employers are now subject to a dual enforcement regime:
- Under the PFA, non-payment of contributions is a criminal offence punishable by a fine of up to R10 million, imprisonment for up to 10 years, or both. Directors and senior management can be held personally liable under section 13A(8).
- Under the BCEA, labour inspectors can issue compliance orders and impose administrative penalties for contraventions of section 34A.
Employers that fail to pay contributions timeously may face concurrent action from both labour inspectors and the FSCA, with potentially overlapping penalties, said Van Vuuren and King.
