HR practitioners want definition of pensionable pay

A seasoned human resources practitioner, Daphter Namandwa, says there is need to put a ceiling on pensionable emoluments.

Namandwa argued recently that failure to do that could lead to conflict of interest by some organisational heads.

Namandwa said this at a recent labour relation workshop organised by the Employers Consultative Association of Malawi (Ecam) in Blantyre.

He said pensionable emoluments are guaranteed wages and other earnings, but do not include personal investment income, capital gains or provision from employers in the form of houses or motor vehicles.

Namandwa noted that without a ceiling, organisational leaders would monetise all benefits into basic salary (clean wage) so that they have huge pensionable salaries.

“This will make matters worse for organisations which have defined benefit schemes whereby the monthly pension/annuity is a percentage of the final salary,” he said.

Namandwa said there are some flaws in the recent directive on withdrawal benefits, arguing that the directive does not state what happens to the forfeited money from employer contributions as the rules provided for the forfeiture of employer contributions if one gets dismissed.

“The directive does not state what happens to the forfeited money based on the old rules given that the [Pensions] Act does not allow an employer to have a claim for contributions that have been paid into the fund,” he argued.

Namandwa also noted the disparity on payment of pension benefits in provisions as laid down in the Employment Act and the Pensions Act.

The Employment Act provides for payment of pension benefits within six weeks whereas the Pensions Act provides for payment of withdrawal (pension) benefits (early benefits) within six months, he said.

Despite the act being effective June 1 2011, Namandwa also noted there are still employers that have not yet complied with it, due to either ignorance or deliberate non-compliance.

Bakhresa Grain Milling human resource manager Richard Tchereko earlier noted numerous challenges in the implementation of the Pensions Act 2011.

He said implementation of the Pensions Act is punishing employers through double payment of severance pay in the event of retrenchment and other modes of exits.

“This is the very challenge which employers were facing prior to the enactment of the Pensions Act. You will recall that employers were complaining of double payment in terms of pension and severance,” said Tchereko.

He said after the enactment of the Pensions Act, employers are required to calculate severance pay from date of joining employment by the employee to May 31 2011 and transfer the severance to pension fund.

Then, from June 1 onwards, Tchereko said, every employee was put on pension.

“Now, there is total confusion, as despite the transfer of the severance allowance, the Employment Amendment Act is stipulating that severance allowance should be paid to the employee for the same length of service, which to me is total duplication and applying the law retrospectively,” he said.

On early withdrawal of benefits, Tchereko noted that employees are struggling to get their money as the waiting period of six months is just too long.