With the advent of the Workers’ Rights Act (WRA) in October 2019, we have seen our labour laws being challenged in many ways in Mauritius. Our attention was quickly grasped by the introduction of the Portable Retirement Gratuity Fund (PRGF) which is deemed to have come into operation on the 1 January 2020. The obligations of employers to contribute to the PRGF was suspended for the period between January 2020 to December 2021. In the light of the communiqué issued by the Mauritius Revenue Authority (MRA) dated the 30 December 2021, employers were reminded that their obligation to contribute to the PRGF kicks in as from the month of January 2022.
The 28 February 2022 is the key date by which submission of the PRGF return for the month of January 2022 has to be made as well as payment of the PRGF contributions due. Since this date is dangerously approaching, it is time to look into some key issues about PRGF and what are the sanctions which employers risk if they do not abide by the provisions of the law when it comes to PRGF.
The PRGF has been set up with an objective to provide for the payment of gratuity to a worker on his retirement or to the legal heirs of a worker on the death of the worker, irrespective of the number of employers with whom the worker may have worked. In respect of every worker or self-employed, there is, in the PRGF, an individual non-withdrawal account. An employer now has the obligation of making PRGF contributions in respect of their employees and file a PRGF return with the MRA, setting out the remuneration paid to the worker as well as the amount of contributions made. The MRA is considered to be the administrator of the fund. The MRA will then remit the contributions collected to the Ministry of Social Security and National Solidarity and the contributions will be credited into the individual account of each worker under the PRGF. The rate of contribution to the PRGF consists of a cumulative figure of 4.5 % of the monthly remuneration of the employee. For the purposes of PRGF contributions, “monthly remuneration” consists of the basic monthly salary as well as productivity bonus, attendance bonus and payment for extra work performed. Non-performance related allowance such as end of year statutory bonus and travelling allowance are not included. The payment of contributions will have to be made not later than on the 20th of the following month to the MRA. PRGF contributions have to be made for all employees except for the following categories:
- A worker drawing a basic wage of more than MUR200 000 per month;
- A migrant worker or a non-citizen;
- A public officer or a local government officer; and
- A worker whose retirement benefits are payable either under the Statutory Bodies Pension Funds Act or in accordance with a private pension scheme.
‘Past services’ is defined as meaning the time of service with an employer from the date a worker started employment with that employer up to the start date of contributions to the PRGF. In addition to the monthly PRGF contributions which the employer has to make on behalf of its employees, the employer also has to pay the contributions in respect of the past services of an employee who was in its employment as at the 1 January 2020 and is still employed.
The first question that arises is when does the payment for past services has to be made by the employer to the MRA? Does it has to be made now or when the employee is retiring?
The law provides that the contributions for the past services can be paid to the MRA at any time or upon the occurrence of one of the following events:
- where the employment of the employee has been terminated;
- where the employee retires upon attaining the appropriate retirement age; or
- where the employee has passed away and the contributions have to be paid to the legal heirs of the deceased.
An employer, therefore, has an option to pay the contributions for past services at any time before the termination of employment, retirement or demise of the employee. In deciding when to make the payment for the past services of an employee, the employer has to bear in mind that the contributions for past services are computed on the last monthly remuneration drawn by the worker. The employer may need to take into the consideration its cash flow in deciding when to pay the contributions for the past services. In the event that the employer decides to pay the contributions for past services only upon the occurrence of one of the above-mentioned events, the amount to be paid will be much higher than if the employer was to pay the contributions for past services presently. This is so since it is most likely that the remuneration of the employee will increase as time passes by.
An employer also has the duty to submit a return in the form of a statement to the MRA when an employee’s employment is terminated or when an employee passes away before the retirement age. The employer has one month as from the date of termination of the employment or the date of the demise of the employee to file the exit statement with the MRA. An employer has a month delay to give written notice to the MRA in the event of change of employment or retirement of an employee.
Private Pension Scheme
The law, regulations and communiqués which have been issued are pretty clear; in the event that an employee whose retirement benefits are payable in accordance with a private pension scheme, the said employee is not eligible to join the PRGF. The question, however, arises in the event that an employer decides to subscribe to a private pension scheme, for example, as from January 2022. Would the employer still have a duty to pay PRGF contributions for the past services of the employee, that is, from the date that the employee took employment with the employer up until the adherence of the employer to a private pension scheme? It would seem that it would only be fair that the employer would have to pay for the past services under PRGF contributions up until the date that a private pension scheme is put in place, that is, as from when the employee starts deriving retirement benefits under a private pension scheme. The law does not make a distinction with regards to the timing as to when an employee’s retirement benefits are payable in accordance with a private pension scheme but only that an employee is not eligible to join the PRGF if the employee is benefitting from a private pension scheme.
This issue also gives rise to the next question as to what happen in the event that the contributions which an employer makes under a private pension scheme is much less than what it would have had to pay if it had to make contributions to the PRGF. Would the employer who has adhered to a private pension scheme need to top up so that at the end of the day it is contributing as much as an employer who is contributing to the PRGF? It would seem that the law does not make provisions for these circumstances and hopefully these issues will be tackled by our authorities shortly.
For an employer not complying with the PRGF obligations, the employer will be liable to the following sanctions:
- For non-payment of the whole or part of the contributions, a surcharge at the rate of 5% or such other rate as may be prescribed for every month or part of the month during which any contributions remains unpaid;
- For failure to submit monthly return, a surcharge of 1 % of the total contributions payable, for every day until the return in respect of an eligible person for that month is submitted ; and
- For failure to submit a yearly return, a surcharge of MUR 500 for every day until the return for that year is submitted.