Mzwakhe Poswa | Senior Associate | Insurance and Financial Services Practice | Adams and Adams | mail me |
When provident fund contributions are not paid, it is the beneficiaries who suffer the most. A reconsideration application before the Financial Services Tribunal confirmed that employers remain bound to honour their obligations. This applies regardless of the probationary status of employees or any transfer of business.
The application arose from unpaid provident fund contributions on behalf of a deceased employee. As a result, his beneficiary received only the fund credit, while the insured risk benefit was withheld.
Background of the case
The deceased employee had long-standing service with a company that was later liquidated. After liquidation, the business was taken over and continued operations under a new entity. The deceased signed a new employment contract with the new employer but passed away shortly afterward.
When his wife claimed death benefits from the provident fund, the fund paid only the deceased’s fund credit. It declined to release the insured risk benefit because the provident fund contributions had not been remitted.
The Pension Funds Adjudicator found that the appropriate relief is the one that places the deceased’s beneficiaries in the position they would have been in if the employer had paid all contributions on time. On that basis, the employer was held responsible for the arrears and directed to pay the insured portion to the fund.
Tribunal’s reasoning
In its reconsideration application, the employer raised two arguments. First, it claimed that the deceased had not yet completed his probation period and was therefore not entitled to contributions. Second, it argued that liabilities from the previous employer remained with that entity and could not transfer to the new employer.
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Probation does not exempt contribution obligations
The tribunal held that probation does not alter the fundamental rights of an employee regarding benefits such as provident fund contributions. While probation may influence performance reviews or dismissal decisions, it cannot justify withholding contributions.
The tribunal also noted that there was no termination letter. This confirmed that the employment relationship had continued, which obligated the employer to pay provident fund contributions.
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The Labour Relations Act and continuity of employment
The tribunal further examined the transfer of business under Section 197 of the Labour Relations Act. It reiterated that when a business transfers as a going concern, the new employer assumes both the rights and obligations of the old one.
Evidence demonstrated continuity in operations, employees and management structures. Accordingly, the acquiring employer was required to honour obligations toward employees, including provident fund contributions.
The outcome
The tribunal dismissed the reconsideration application.
It affirmed that:
- Probation does not relieve an employer from the duty to remit provident fund contributions.
- A transfer of business under Section 197 creates continuity of obligations, which ensures employees’ rights remain protected.
Key takeaways
This decision reinforces two central principles of pension and labour law:
- Employer duties are non-negotiable. Regardless of probationary status or payroll disputes, employers must comply with fund rules.
- Failure to remit provident fund contributions undermines employee rights and exposes employers to potential liability.
