What is Contributory Pension Scheme?
Contributory pension scheme (“the scheme”) is created by law for payment of retirement benefits of employees. The scheme is generally applicable to employment in public sector and in private establishments with at least fifteen (15) employees. A minimum of ten (10) percent of the employee’s monthly emolument shall be contributed to the scheme by the employer and a minimum of eight (8) percent shall be deducted from the monthly emolument of the employees and remitted to the scheme by the employers.
Legal Obligations To Remit Pension Deductions under the Pension Reform Act 2014
Section 11 (3) of the Pension Reform Act 2014 (“the Act”) obligates employers to deduct monthly contribution of employees from source and remit the amount so deducted, not later than seven (7) working days within which salaries are paid. In spite of this provision, some employers are in the habit of not remitting pension deductions, citing one reason or the other.
Some employers have argued in the past that their failure to remit is owing to employees’ failure to provide Retirement Savings Accounts. Tempting as the excuse may appear, it is inconsistent with Section 11(5) of the Act which provides that where an employee fails to provide a Retirement Savings Account within six months of employment, the employer shall request a Pension Fund Administrator to open a nominal retirement savings account in favour of the employee and shall accordingly make remittances. Where the employee has not approached Pension Fund Administrator to ensure a nominal retirement savings account is created for the employees, non-remittance of pension deduction cannot be justified.
Instructively, the law provides that where an employer fails to remit deducted pension and make 10% contributions, it shall be liable to a penalty prescribed by the Pension Commission.
Conclusion
That said, in our years of litigating employment disputes, we observed that employers seem to comply more with the deduction of the statutory 8% from employees’ salaries but they sometimes fail to remit the deductions to employees’ nominated retirement savings account. The trend of non-remittance of deducted pension is wrongful and amounts to an unfair labour practice.
We understand it may be risky to file an action for recovery of the unremitted pension deduction against one’s employer while in active employment. However, employees should not hesitate to whistle-blow complaint of non-remittance with the Commission for employers found wanting. Post-employment, the ex-employees may also consider instituting legal actions against delinquent employers for recovery of the unremitted deductions at the National Industrial Court. And our Law Firm is happy to provide support in the process.
DISCLAIMER: This article is only intended to provide general information on the subject matter and does not by itself create a client/attorney relationship between readers and our Law Firm or serve as legal advice. We are available to provide specialist legal advice on the readers’ specific circumstances when they arise. Contact us at info@folegal.net +234 906 632 4982