Paying over retirement fund contributions is a core obligation for any employer who offers a retirement fund arrangement. Recent regulatory changes mean that contributions are now governed by both labour and pension fund laws. While this is a win for members, it introduces more complexity into the system. Felicia Hlophe explains.
When an employer participates in an occupational retirement fund, the obligation to pay contributions is both contractual and statutory. There are two pieces of legislation that govern that obligation: section 13A of the Pension Funds Act 24 of 1956 (PFA), which governs retirement funds, and section 34A of the Basic Conditions of Employment Act 75 of 1997 (BCEA), which governs employers.
While these sections strengthen fund member protection, they also introduce complexity. For employers and financial advisers, understanding these provisions is critical to protecting member outcomes and avoiding unintended breaches.
Strengthening the system
Occupational retirement funds remain a cornerstone of employee benefits in South Africa. For many members, their retirement fund benefit is the most significant financial asset they will accumulate – an outcome that relies on contributions being paid accurately and on time.
Historically, contributions to retirement funds were regulated primarily through section 13A of the PFA. This meant compliance was assessed largely within the retirement fund regulatory environment.
In 2003, the Minister of Employment and Labour provided an exemption from section 34A of the BCEA in relation to retirement funds. More recently, section 34A has come back into the picture after the introduction of the two-pot retirement system in September 2024 exposed widespread payment non-compliance. Reams of employers were deducting retirement fund contributions from employees’ salaries but failing to remit those amounts to retirement funds. Outstanding contributions totalled billions of rands. The withdrawal of the section 34A exemption reintroduces labour law oversight into the retirement fund contribution process.
This change has two immediate consequences for employers:
- Labour inspectors can now enforce contribution payments, including requesting proof of payment and issuing compliance orders.
- Employers are subject to dual enforcement under both labour and financial regulatory frameworks.
In practice, this reinforces the importance of prompt contribution payments and significantly raises the stakes for non-compliance.
Same objective, different mechanics
At their core, both provisions aim to ensure that retirement fund contributions are paid in full and on time. However, having two laws that aren’t fully aligned introduces some confusion and complexity.
Section 13A of the PFA:
- Requires contributions to be paid within seven days* after the end of the month for which they are due. For example, contributions for the month of May will be due by 7 June.
- Applies a standardised monthly deadline, regardless of payroll timing.
- Imposes strict consequences, including late-payment interest, criminal consequences for non-payment and personal liability for directors and other responsible persons.
Section 34A of the BCEA:
- Requires employee contributions to be paid within seven days of the deduction being made from the employee’s salary or wages, and employer contributions within seven days of the end of the relevant period. For example, if payroll makes deductions on 25 May, contributions for the month of May are due within seven days* (i.e. 1 June).
- Introduces earlier and potentially multiple payment triggers, depending on payroll cycles.
- Enables labour-law enforcement mechanisms, including inspections and administrative penalties.
Viewed in isolation, each framework is relatively clear. The most significant complexity arises from the misalignment in timing requirements, as an employer may fully comply with one statute while inadvertently breaching the other.
For example: A weekly payroll may trigger multiple section 34A deadlines within a single month, while section 13A still measures compliance based on month-end.
This discrepancy introduces operational risk, particularly for employers with non-monthly payroll cycles.
Turning complexity into compliance
The intention behind both statutes is to protect members and improve compliance. However, the misalignment in timing rules has created some uncertainty. Advisers play a critical role in helping employers to interpret overlapping obligations and adapt processes to make them compliant.
To get started, employers can:
- Align their payroll and contribution processes to ensure systems can accommodate both deduction-based and month-end triggers.
- Review payment timing as contributions may need to be paid earlier than historically required.
- Strengthen controls and documentation to ensure proof of payment and schedules are readily available if requested.
- Educate internal stakeholders such as payroll, human resources and finance teams in understanding the dual framework.
Improving accountability
The reintroduction of section 34A into the retirement fund environment marks a decisive shift towards stronger enforcement and greater accountability. For employers and advisers alike, success will depend on moving beyond a compliance mindset to a more integrated, proactive approach to contribution management, focused on protecting member outcomes in an increasingly complex regulatory environment.
While regulatory consequences are significant, the most direct impact is felt by fund members. Late or unpaid contributions can result in lost investment returns and reduced compounding over time, with lasting consequences for retirement outcomes. Where non-compliance is persistent, the effects can be severe. Therefore, despite the added complexity, this additional step further protects member interests.