Ecam drills employers on severance pay, pension

The Employers Consultative Association of Malawi (Ecam) on Friday drilled human resource managers on transitional arrangements on accrued severance and pension fund.

Speaking after the workshop in Blantyre, Ecam president Emmanuel Banda said there are some grey areas relating to the Pension Act which employers have to clearly understand.

He noted that because pension is now mandatory, there has been confusion between severance pay, compensation made after termination of contract, and pension which his payment that carters for life after employment.

“We need to enlighten our members on the differences between participatory and mandatory scheme and the legal implications of the new arrangement. Because it is a law, it is not as easy as reading it like any other book,” said Banda.

Commenting on queries on delayed pension remittances, he said although he cannot statistically talk about the prevalence of the problem he said the complaints are pertinent.

Banda said Ecam has a duty to ensure that its members are well knowledgeable and compliant to the law.

The workshop was mainly facilitated by High Court judge Rachel Sikwese, Nico Life Insurance Company Limited and Old Mutual Limited.

Malawi started implementing the Pension Act in June 2011 which requires mandatory contribution by both employers and employees.

The Reserve Bank of Malawi (RBM) December 2013 Financial Stability Report shows that  assets of the pension sector grew to K110.7 billion in September 2013  from K101.7 billion in December 2012, attributing the growth to an  increase in contributions and favourable investment returns.

According to the same report, monthly pension fund contributions rose to an average K2 billion in September 2013 from K0.7 billion in December 2011.

The Pension Act provides that all remittances have to be made within 14 days after the month in which the liability to make the contributions arose, but experts have said what needs to be done is just to enforce it to the fullest.

The Ministry of Finance notice number 33 said employers are ordered to pay 35 percent—bank rate plus 10 percentage points—on delayed pension fund contributions.