The recent wave of strikes in the mining and the metals and engineering industries has led to the identification of a loophole between two key pieces of South African legislation and left companies uncertain about whether they were legally compelled to maintain pension contributions on behalf of striking workers, pan-African law firm Bowman Gilfillan attorney Rebecca Jansch said on Friday.
She explained that, while the Labour Relations Act allowed employers to discontinue the payment of salaries to striking workers during protected strikes, the Pension Funds Act did not provide for a suspension of pension fund contributions in strike-like situations where workers were not being paid, despite remaining employed.
“There are serious legal consequences when a company stops paying pension fund contributions without having a legitimate basis for nonpayment,” Jansch said, stating that the company in question would be subject to penalty interest on late payments, while the directors of the company could also be held financially and criminally liable for outstanding contributions in their personal capacity.
Further, the nonpayment of pension fund contributions by companies during strike periods would also have serious financial consequences for the members of the pension fund, she added.
“The loss of contributions reduces their retirement benefit, they may lose their group risk cover, and the nonpayment of salaries could cause them to default on their home loans, prompting banks to call upon guarantees provided by the pension fund,” Jansch explained.
She said that, to bridge this legislative gap, pension fund rules would have to make explicit provision for the legitimate suspension of contributions during strikes and other applicable scenarios.
“Where the rule is correctly drafted, the aforementioned undesirable consequences can be averted,” she stated.