Pension plain: are you liable for your employer's unpaid retirement fund contributions?

Are you the person who is responsible for the financial affairs of your employer, including the responsibility to ensure that retirement fund contributions are paid to the retirement fund every month? If so, are you aware of your personal liability to pay retirement fund contributions where your employer fails to pay retirement fund contributions on behalf of its employees?

Between the end of 2023 and September 2025, the arrear contributions that employers owed their respective funds increased dramatically from about R5 billion to more than R7 billion. If this growth trend in arrear fund contributions continues, we will soon reach the R10 billion in arrear contributions mark. These unpaid contributions, where deductions in relation to employee contributions were, in many cases, made by the employer from the salaries of employees, have negatively affected the retirement outcomes of about 600 000 fund members.

Section 13A of the Pension Funds Act puts an obligation on employers to pay member and employer retirement fund contributions in full within seven days of the end of the month for which those contributions are payable. Non-payment of retirement fund contributions is a criminal offence that can lead to a jail sentence for the person who is responsible for the payment of contributions on behalf of the employer and who neglected to do so. 

As of January 2026, employers must also comply with Section 34A of the Basic Conditions of Employment Act, which requires the employer to pay over any employee fund contribution deducted from the salary of the employee within seven days of the date of deduction. If the employee fund contribution is thus deducted from the salary of the employee on the 15th of the month, it must be paid to the fund within seven days of the 15th day of that month and not within 7 days from the end of that particular month. If the employer fails to make the payment to the retirement fund within this period, it might lead to an administrative penalty being issued against the employer.

Section 13A(8) of the Pension Funds Act further states that persons who are involved with the management of the financial affairs of the employer, including the payment of retirement fund contributions, are personally responsible to ensure that retirement fund contributions are paid. This personal responsibility ensures that contributions are paid and prevents the evasion of this obligation through financial stress of the employer.

 The question of the personal liability of employees who failed to make fund contributions on behalf of the employer was addressed by the Financial Services Tribunal in the case of the Transport Sector Retirement Fund against Jack Transport (Pty) Ltd and two of its employees. In this case, the employer went into liquidation before the arrear fund contributions were paid to the relevant retirement fund. The question that had to be answered was whether the responsible employees could be held personally liable for the payment of the arrear fund contributions after the employer went into liquidation and was thus not able to pay the arrear contributions. The Financial Services Tribunal found that:

• Section 13A(8) of the Pension Funds Act creates a direct statutory personal liability for employees that exists independently from the liability of the employer to pay fund contributions.
• The liquidation of the employer does not extinguish the liability under section 13A of the Pension Funds Act to pay arrear fund contributions.
• The personal liability attaches to those persons responsible for the employer’s financial affairs. Directors of companies can be held personally liable, and a court has in one case granted an order against directors to personally pay arrear fund contributions even though the employer was in liquidation.
• The personal liability is specifically designed to address situations where the employer fails to meet its obligations, including circumstances of financial distress or liquidation of the employer.
• The business status of the employer does not preclude the Pension Funds Adjudicator from making an order against the employer or employees who were responsible for the payment of contributions while the employer was operational.
• The Pension Funds Adjudicator has the jurisdiction and the duty to investigate a complaint against employees of a company for non-payment of fund contributions, even in cases where the employer is in liquidation. 

If you are a director of a company or an employee who is responsible for the financial affairs of the employer, you must ensure that the employer meets its obligations to pay retirement fund contributions that are due and payable in terms of the rules of the fund.  Where you become aware of the inability of the employer to pay future fund contributions, you must ensure that the mechanisms in the fund rules, including the withdrawal of the participation of the employer from the fund, are triggered that will limit or stop the future liability in regard to fund contributions.  If you do not do this, you will have to accept the possible personal liability to pay the arrear contributions and the possible criminal liability that will be assigned to you in terms of section 13A of the Pension Funds Act.

* Ladouce is a pension fund lawyer and the author of the book, Pensions for Palookas.

PERSONAL FINANCE