Retirement funds and employers are awaiting regulatory clarity after the withdrawal of a long-standing exemption has created overlapping contribution-payment obligations under South Africa’s labour and retirement fund laws.
The Financial Sector Conduct Authority is engaging with the Department of Employment and Labour after the industry raised concerns about conflicting timing requirements, operational disruption, and the risk of parallel enforcement action, Nancy Andrews of the Institute of Retirement Funds Africa (IRFA) told a webinar last week.
Under the Basic Conditions of Employment Act (BCEA), section 34A sets out strict timing requirements for the payment of amounts deducted from employees’ remuneration to benefit funds. However, a ministerial exemption dating back to 2003 meant that retirement fund contributions were excluded from section 34A’s timing rules. Instead, the timing and enforcement of retirement fund contribution payments were governed solely by the Pension Funds Act (PFA), particularly section 13A.
For roughly two decades, this single‑regime approach allowed the retirement funds industry to structure its systems, processes, and compliance monitoring around section 13A of the PFA, without having to factor in the BCEA’s section 34A provisions.
The position changed significantly on 13 January this year, when the long‑standing BCEA exemption was withdrawn.
Andrews, the chairperson of IRFA’s Legal and Technical Committee, said this development has created “a problem all round”, because it reintroduces the overlap and potential conflict between the two statutes that the 2003 exemption originally sought to remove.
Under the PFA, contributions become due at the end of that month, and employers have until the seventh day of the following month to pay those contributions to the fund.
The administration, monitoring, and reporting frameworks within funds and administrators are built around this “end of month plus seven days” paradigm.
The BCEA uses a different trigger. Once a deduction is made from an employee’s salary, the amount must be paid over within seven days of the deduction.
This means employers with different payroll cycles could face different contribution-payment dates. If salaries are paid on the 20th of the month, for example, the BCEA would require payment by the 27th, even though the PFA would still permit payment by the seventh day of the following month.
Andrews said the overlap becomes particularly difficult where employees are paid weekly because funds and administrators could begin receiving multiple contribution payments during a single month instead of one consolidated monthly payment.
“You could be getting contributions earlier, at different times,” she said.
She said this creates introduces significant operational and systems challenges for funds and administrators, particularly where employees are paid weekly or on irregular cycles, leading to multiple, small contribution payments throughout the month.
Funds must still deduct risk premiums and administration fees from contributions, which are typically structured monthly. This also creates complications for funds on how they should invest the contributions of weekly-paid employees, which are typically low.
Systems, control mechanisms, and reporting processes need to be adjusted to track more frequent contribution flows and identify and report breaches under both legislative frameworks.
The increased monitoring and record‑keeping obligations, she said, are likely to amplify the administrative burden and costs borne by funds and, ultimately, by members.
Separate from the operational burden, the industry is also concerned about overlapping enforcement mechanisms.
The PFA attaches serious consequences to non‑compliance with section 13A. Non‑payment or late payment may result in a fine of up to R10 million or imprisonment for up to 10 years, or both a fine and imprisonment. Certain directors and senior officials designated as responsible persons for contributions can incur personal liability.
Under the BCEA, failure to comply with section 34A can trigger inspections by labour inspectors, compliance orders, and other forms of labour‑law enforcement action.
Andrews reminded attendees that section 13A contraventions were already a significant concern in the industry before the exemption was withdrawn. Adding the BCEA timing requirements to this environment risks increasing the incidence and complexity of non‑compliance.
Engagement between the FSCA and the Department
Andrews said IRFA’s Legal and Technical Committee has formally raised concerns with the FSCA, including the risk of parallel enforcement action and the operational impact on retirement funds and administrators.
She said the FSCA was engaging with the Department of Employment and Labour on the issue. She noted that the FSCA cannot unilaterally issue a guidance on how to interpret or apply section 34A unless it receives a directive from the Department.
Asked how the industry should operate in the interim, Andrews said many funds appear to be applying section 13A of the PFA as the primary basis for assessing their own compliance. In other words, they treat contributions as due at month‑end and expect employers to pay them by the seventh of the following month.
“My personal view is that we are bound by the PFA, so we should actually be applying the rules of the Pension Funds Act,” she said.
Andrews acknowledged that employers participating in umbrella funds or sponsoring their own funds face significant uncertainty and risk. They must now satisfy both the PFA’s “month‑end plus seven days” rule and the BCEA’s “seven days after deduction” rule.
There was limited guidance funds could currently provide to employers beyond confirming that many funds were continuing to apply the section 13A framework under the PFA. “We would only start counting it as a contravention if you actually don’t comply with the rules under 13A,” she said.
