The Pension Funds Adjudicator has ordered an employer who deducted pension fund contributions from an employee's wages but failed to register him on its provident fund, to repay him what he would have been entitled to had he been a member of the fund.
Mamodupi Mohlala, the adjudicator, says in a ruling released this week that although her office does not have the jurisdiction to adju-dicate the matter of MB Mthimkhulu versus Compra CC because Mthimkhulu was not a member of a pension fund, she could not "turn a blind eye" to the employer's "bad business practice".
Mthimkhulu complained to the adjudicator in April 2006 that he had been employed by Compra and it had deducted pension fund contributions regularly from his salary, but had failed to register him as a member of the Contract Cleaning National Provident Fund.
Mthimkhulu was employed by Compra as a cleaner from September 2004 until his employment was terminated in October 2005. An amount of R47.20 was deducted from his salary each month over this period for contributions to a pension fund.
When his employment at Compra was terminated, Mthimkhulu claimed his withdrawal benefit from the Contract Cleaning National Provident Fund's administrator, NBC Holdings.
NBC then advised Mthimkhulu that he was not registered as a member of the fund.
Mistake admitted
Compra admitted to the adjudicator it had made the deductions and said a former employee of the company had "made a mistake" by deducting the money without registering Mthimkhulu with the fund.
Compra said it had explained this to Mthimkhulu and paid him an amount of R317.25 for the deductions made from his salary.
Mohlala says in her ruling that the employer cannot shift the blame for deducting contributions and failing to register Mthimkhulu with the fund on to its former employee, because its former employee was acting as its agent.
The Pension Funds Act prohibits anyone or any entity from carrying on the business of a pension fund or using the words "pension fund" without being registered as one, Mohlala says.
By deducting money from Mthimkhulu's salary for a "pension fund", Compra had contravened the Act, she says.
Mohlala says Compra was one of many employers participating in the provident fund and as such had a duty of good faith to all employees who are members of the fund.
It also had a fiduciary relationship with all its employees, especially in matters relating to their pension benefits, and failed to comply with these duties.
Mohlala says Compra also failed to explain how it arrived at the R317.25 it paid Mthimkhulu, because this does not cover the R47.20 a month deducted from his salary for the almost 14 months he worked for the cleaning firm.
Entitled to claim
She says Mthimkhulu was under the impression that his contributions were being paid over to the fund, that he was a member of the fund and therefore that he would receive a withdrawal benefit when his employment was terminated.
This was not the case as a result of Compra's conduct and therefore Mthimkhulu is entitled to claim the loss of his withdrawal benefit from his employer, Mohlala says.
She therefore ordered Compra to pay Mthimkhulu the amount he would have received from the fund had he been registered as a member of it and had the deductions from his salary been paid to the fund as contributions.
She asked NBC to compute the value of the withdrawal benefit and ordered Compra to pay this amount, less the money it had already paid Mthimkhulu, together with interest calculated at 15.5 percent a year from the date his employment was terminated.
Contact
You can write to the Pension Funds Adjudicator, Mamodupi Mohlala, at PO Box 651826, Benmore, 2010, telephone 011 884 8454, fax 011 884 1144, email [email protected] or visit the adjudicator's website at www.pfa.org.za