The Minister of Employment and Labour (the Minister) have withdrawn a long-standing exemption that previously shielded employers from labour law enforcement regarding deadlines for payment of benefit fund contributions. This change strengthens the enforcement framework and creates additional compliance obligations for employers.
On 13 January 2025, the Minister withdrew the 2003 determination that exempted employers from the application of section 34A of the Basic Conditions of Employment Act (BCEA) in respect of contributions to benefit funds which include pension, provident, retirement, medical aid or similar fund. Notably, contributions to pension, provident or retirement funds are also regulated under the Pension Funds Act. In this regard, Labour Inspectors can now enforce compliance with section 34A alongside the existing regulatory powers of the Financial Sector Conduct Authority (FSCA).
The timing and nature of this 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. 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. These deadlines apply 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. 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.
These timeframes mirror the obligations under section 13A(3) of the Pension Funds Act, which requires relevant contributions to be transmitted 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. For example, if an employer’s payroll run on the 25th of each month, payment of contributions to the fund must take place within 7 days from the 25th.
What are the consequences of non-payment or late payment?
Employers are now subject to dual enforcement mechanisms as follows:
- Under the Pension Funds Act: Non-payment is a criminal offence punishable by a fine of up to ZAR 10 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.
The dual enforcement regime means that employers who fail to pay contributions timeously may face concurrent action from both Labour Inspectors and the FSCA, with potentially overlapping penalties.
Employers should immediately review their payroll processes to ensure compliance with the seven-day payment requirements for both employee deductions and employer contributions, paying particular attention to the different trigger dates under section 34A.
