The number of employers ― including municipalities ― defaulting on pension, medical aid, provident and retirement fund contributions has more than doubled over the past three years, affecting nearly 600,000 employees, with outstanding contributions exceeding R7bn.
According to the Financial Sector Conduct Authority (FSCA), which regulates the country’s financial institutions, the number of defaulters surged from 4,000 in 2023 ― when employment & labour minister Nomakhosazana Meth gazetted a determination exempting employers who failed to pay contributions on time ― to 7,700 in 2024 and 15,521 in 2025.
In the Government Gazette published on January 13, Meth stated she was withdrawing the determination gazetted in December 2023, “which excluded the application of section 34A of the [Basic Conditions of Employment] Act [BCEA] to employers and employees in respect of the payment of contributions to any benefit fund regulated under the Pension Funds Act”.
The exemption’s withdrawal effectively enables labour inspectors to enforce compliance with section 34A of the BCEA, which requires employers to pay pension fund contributions within seven days.
Meth’s spokesperson, Thobeka Magcai, said: “The exemption was made to avoid duplication of enforcement, since the Pension Fund Adjudicator already had authority in that area. This notice [in the Government Gazette] was published to prevent duplication of enforcement between our inspectors and the adjudicator.”
Magcai said the exemption’s withdrawal “now allows inspectors to enforce Section 34A again, alongside the Pension Fund Adjudicator. Sectors such as the security, for example, have been failing to comply with this law”.
In a note, Nicci van Vuuren, a partner at Webber Wentzel, and Amy King, a lawyer at the law firm, explained that contributions to pension, provident or retirement funds were 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 FSCA,” they said, adding the exemption’s withdrawal appears to be a response to “widespread non-compliance exposed by the two-pot retirement system introduced in September 2024”.
Van Vuuren and King said the system revealed that many employers deducted pension contributions but failed to remit them, “amounting to billions of rand. Section 34A imposes strict seven-day payment deadlines for both employee deductions and employer contributions, with trigger dates that may differ from those under the Pension Funds Act depending on payroll cycles”.
“As a result, employers are now subject to dual enforcement. Late or non-payment of benefit fund contributions is a criminal offence under the Pension Funds Act, punishable by a fine of up to R10m, imprisonment for up to 10 years, or both, with directors and senior management potentially held personally liable,” Van Vuuren and King said.
“In addition, labour inspectors may issue compliance orders and impose administrative penalties under the BCEA, meaning employers can face simultaneous action from both labour authorities and the FSCA.”
Sowetan
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