• Tuesday, June 18, 2024
businessday logo


Employers have legal obligations to remit pension contributions monthly to PFAs

Nigerians tap N208bn pension savings as job crisis worsens

There is no doubt that there are still some provisions of the Pension Reform Act, 2014, that are yet to be appreciated by the stakeholders. Some of its provisions have been fully embraced by stakeholders in Nigeria with very few records of misapplication.

Misapplication of a law is the act or an instance of applying the law badly, wrongly or in a way that was not intended. This could be deliberate or due to ignorance. Unfortunately, ignorance is not an excuse in law.

One of the provisions of the Pension Reform Act, 2014 that have been subjected to misapplication is the provision on deduction and remittance of employees’ monthly pension contributions. While I have observed, sadly, the variance in practice, and application of the relevant section of the Act on when an employer should remit an employee’s monthly pension contributions in cases have been privileged to handle at the National Industrial Court in Nigeria.

Unfortunately, these misapplications are by some professionals and units in charge of payroll, labour, workforce, and personnel of some organizations. It has never being a subject of address or argument by the opposing counsel in defending or justifying the failure to remit by the employer within the timeline stipulated by the Act.

Also, I have never seen a judgment of the court exposing an exception or accommodating any variation in the application of the section of the Act on when an employer should remit an employee’s monthly pension contributions. It is not in the Act itself.

Some professionals and units in charge of payroll, labour, workforce, and personnel of some organizations have introduced, rather ingenuous or due to ignorance, actions to suit the employer on when an employer should remit an employee’s monthly pension contributions. Some of these actions have been argued by some of these professional, are for business exigencies. Pension contributions are budgeted for from the beginning of the year.

They presumed there are no penalties for default. The fund is diverted into profit yielding ventures pending when it is needed. To some, it is for convenience. Monthly pension contributions are considered too small. They prefer to pay lump sum. To some, they deliberately default and do not remit at all.

Hence, some employers remit employee’s monthly pension contribution quarterly or yearly. Some remit only on an employee’s demand. Some claim it is computed whenever an employee leaves the employment and remitted to the Retirement Savings Account provided by such employee.

The above were some reflections on the subject matter at a forum without any regard for the consequences of such default by the employer.

More shocking is that well-established and structured organizations and well-exposed human resources and personnel managers are also involved. Also, there is no well-publicized evidence that an organization has been sanctioned for default by the Pension Commission. Also, the penalties under the Act are inadequate.

No matter the good intentions of the employers in remitting employees’ monthly pension contributions beside the monthly remittance stipulated by the Act. It is a breach of Pension Reform Act, 2014.

Read also: Pension for mortgage seen as ‘massive’

For clarity, section 11(3)(a) of the Pension Reform Act states that the employer shall deduct from source the monthly contribution of the employee not later than 7 working days from the day the employee is paid his salary, remit an amount comprising the employee’s and employer’s contribution to the Pension Fund Custodian specified by the Pension Fund Administrator of the employee.

This provision above read literally is not ambiguous. Except one wants to be mischievous or read and practices something else.

The Act in section 11(6) further stipulates that an employee who fails to deduct or remit the contribution within the 7 days the employee is paid his salary shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission.

The penalty referred to in subsection 6 above shall not be less than 2 percent of the total contribution that remains unpaid for each month or part of each month the default continues and the amount of the penalty shall be recoverable as a debt owed to the employee’s retirement savings account.

Besides the employee having the right to sue the employer to demand for remittance of pension contribution, the Commission has the right to enforce compliance of the Act. Also, an employer has legal obligations to make contributory pension remittance to Pension Fund Administrators. This position was affirmed by the National Industrial Court in a judgment delivered by Honorable Justice Edith Agbakoba.

The National Pension Commission sued Hadfat Pharm Limited for an order directing the firm to furnish evidence of remittance from 2013 till date of its employees’ monthly pension deductions. In defense, Hadfat Pharm Limited stated that it has made available to the commission the necessary documents and that its ceases being liable to remit pensions for exited staff.

Employers must pay attention to the provisions of the Act referred above, deduct, and remit employees’ monthly pension contributions monthly to avoid penalties from the Pension Commission, cost of litigation, general damages, interest on sums claimed if the claims end up in litigation and expenses of getting a lawyer to defend the matter in court.

Besides, non-remittance of monthly pension contributions is a red flag for some job applicants and gives a bad reputation too. Employees are also denied of the possible investment gains on unremitted monthly pension contributions.

Adekola, a legal practitioner, writes from Lagos