Pressure is piling on government from employers and workers to review the Pension Act that was passed in 2011.
The Pension Act of 2011, which sparked a lot of controversy in Parliament and work places, came into force on June 1 2011 after government made some major amendments to the original Pension Bill.
With the Pension Act, Malawi has a mandatory pension scheme.
Bakhresa Grain Milling human resources manager Richard Tchereko said this week that there are numerous challenges in the implementation of the Pension Act 2011 which are affecting both the employer and the employee.
He pointed out some of the grey areas in the Act, including Section 65 on early payment of benefits, Section 91 on transitional arrangements which is directly linking to Section 35(5) of Employment Amendment Act of 2010.
Tchereko further said the implementation of the Pension Act is punishing employers into double payment of severance pay in the event of retrenchment and other modes of exits.
“This is the challenge employers were facing prior to the enactment of the Pension Act. You will recall that employers were complaining of double payment in terms of pension and severance.
“After the enactment of the Pension 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 a pension fund, and then from June 1 onwards, every eligible employee was put on pension.
“Now, there is total confusion, as notwithstanding 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.
“To make matters worse, the employer is requested to pay this severance allowance when it is facing economic difficulties, resulting in retrenchments, not considering that the same employer was contributing for pension as well and group life cover,” protested Tchereko.
He also observed that when it comes to early withdraw of benefits, employees are struggling to get their money as the waiting period of six months is just too long.
Tcherekoâ€™s remarks came against the background of Malawi Congress of Trade Unions (MCTU) calling for immediate review of the Pension Act for the mutual benefit of the employee and the employer.
MCTU secretary general, Robert Mkwezalamba, said in a media report last week his organisation and other stakeholders were already looking at the implementation challenges of the Act before change of regime.
Among other issues, MCTU wants to ensure that the Act does not impoverish the already poor working Malawians.
“We would want other strategies and policies to be formulated to aid the workers and members of the fund to access loans and do their investment ventures, including constructing homes,” said Mkwezalamba in the statement.