Business
South African employers face tougher benefit fund enforcement in 2025
For years, many South African employers operated in a grey zone when it came to paying over employee benefit fund contributions. That space quietly disappeared in January 2025, and the fallout is already sending shockwaves through payroll departments and boardrooms alike.
The change may look technical on paper, but in reality, it tightens the net around employers who deduct pension, provident, retirement, or medical aid contributions and fail to pay them over on time. The consequences now stretch far beyond a slap on the wrist.
A quiet rule change with big consequences
On 13 January 2025, Employment and Labour Minister Nomakhosazana Meth withdrew a determination dating back to 2003. That determination had exempted employers from the application of Section 34A of the Basic Conditions of Employment Act.
Section 34A sets strict deadlines for paying benefit fund contributions. Until now, employers were largely shielded from labour law enforcement if they missed those deadlines. That shield is gone.
Legal experts Nicci van Vuuren and Amy King from Webber Wentzel have pointed out that this withdrawal fundamentally strengthens enforcement. Employers now face additional compliance obligations and far less room for error.
Why this happened now
The timing of the change is not accidental. The law allows the minister to withdraw a determination after an application by an affected party. That could include employer bodies, trade unions, or employees themselves.
According to legal commentary, the move strongly suggests mounting concern over widespread non-compliance. The introduction of South Africa’s two-pot retirement system in September 2024 brought long-hidden problems into the open.
That system revealed that many employers were deducting retirement contributions from salaries but failing to pass the money on to the funds. The shortfall ran into billions of rands. For employees, it was a breach of trust. For regulators, it was a red flag.
This latest step appears to be a direct response aimed at closing enforcement gaps and restoring confidence in the system.
What the law now requires
Section 34A of the BCEA sets out clear timelines, and they are stricter than many employers realise.
If an employer deducts any amount from an employee’s pay for a benefit fund, that money must be paid to the fund within seven days of the deduction being made.
If the employer is required to make a contribution on behalf of the employee, that payment must be made within seven days of the end of the period to which the contribution relates.
These rules apply regardless of payroll timing. If payroll runs on the 25th of the month, the seven-day clock starts ticking from that date, not from month end.
This framework mirrors requirements under the Pension Funds Act, but the trigger dates differ. That difference is where many employers risk slipping up.
Double trouble for non-compliant employers
Perhaps the biggest shift is not the deadlines themselves, but who can now enforce them.
Benefit fund contributions are regulated under the Pension Funds Act, which gives the Financial Sector Conduct Authority significant powers. Failure to pay is a criminal offence, punishable by fines of up to R10 million, prison sentences of up to ten years, or both. Directors and senior managers can also be held personally liable.
With the exemption gone, labour inspectors can now enforce section 34A of the BCEA at the same time. That means compliance orders, administrative penalties, and parallel investigations.
In simple terms, employers can now be pursued by both labour authorities and financial regulators for the same failure.
Reaction from the business and labour space
The move has sparked anxious conversations across HR and payroll circles. On professional forums and LinkedIn, compliance specialists are warning that legacy payroll systems and informal practices will not survive this new environment.
Trade union voices have broadly welcomed the change, seeing it as long overdue protection for workers whose retirement savings were quietly put at risk. For employees, especially those affected by the two-pot system revelations, the change feels like accountability finally catching up.
What employers should do now
The message from legal experts is blunt. Employers need to review payroll processes immediately.
It is no longer enough to assume monthly payments are sufficient. Employers must understand exactly when deductions are made, when payroll runs occur, and how the seven-day payment window applies in each case.
In 2025, benefit fund compliance is no longer a background admin issue. It is a frontline risk that carries financial, legal, and reputational consequences.
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Source: Daily Investor
Featured Image: The Student Room
