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Employee Benefits
Tuesday, November 17, 2015 - 03:16
Fair exchange…

Certain deductions in favour of the employer can be made from your employees’ retirement savings when they retire or resign.

Explains Hettie Joubert, Head: Retirement fund governance at MMI Investments and Savings, “If an employee owes money to his/her employer as compensation for certain damages that they caused to the employer, the retirement fund that the employee belongs to may deduct that amount from the employee's retirement savings benefit on the date that his/her pension or provident fund benefit is paid out. This is either if the benefit pays out to the employee or the employee’s beneficiaries (If certain criteria are met). The employer may also claim the costs for the legal proceedings against the employee and submit a claim to the fund for these costs.”
Where an employee's dishonest conduct causes loss to the employer, the deduction of monies from the employee’s pension benefit in favour of the employer is regulated by section 37D(1)(b) of the Pension Funds Act. All of the following requirements must be met before a fund may make a deduction:
1. There must be a retirement savings benefit payable to the employee by a pension or provident fund.
2. The employee must owe an amount to his employer on the date on which his membership of the fund ends.
3. The damage(s) caused to the employer must be as a result of theft, dishonesty, fraud or misconduct by the employee. The term “misconduct” in this phrase means conduct which contains an element of dishonesty. This does not include negligent conduct.
4. The employee must either admit liability in writing to the employer, or the employer must get a ruling in a court of law for payment of the amount. This is referred to as a civil judgment. The employer should make sure that if they bring criminal charges against the employee, they also ask that a compensation order be issued in terms of the Criminal Procedure Act. The criminal conviction of the employee might only put them in jail; resulting in the employee then not having to pay damages to the employer.
5. The written admission must be made voluntarily, not under duress or undue influence.
6. The judgment or the written admission of liability must relate to the compensation due in respect of the damage caused to the employer by the employee's dishonest conduct.
7. The written admission or court judgment must clearly state the exact amount compensation or damages.

“One of the practical problems employers are often faced with,” she says, “is that at the time of termination of the employment contract, the employee refuses to sign an acknowledgment of debt and the employer has not yet gotten a court judgment. It might even happen that at that time, the employer only suspects dishonesty on the employee's part, but still has to prove it and determine the amount that the employee owes.
“The question is whether the retirement fund can then withhold payment of the employee's withdrawal benefit to give the employer time to get the court judgment. In 2008, the Supreme Court in dealing with just such a question, held that the right to deduct money from an employee's withdrawal benefit also included the power to withhold payment of the benefit pending the determination of the employee's liability in a court of law.” A retirement fund therefore does have the discretion to withhold payments of the benefits. This should not be done for an indefinite period though, and the fund should not withhold the employee's total benefit if the suspected total amount of damages is only a small portion thereof.
“When an employee has caused damages to the employer,” says Joubert, “and their employment contract comes to an end due to said misconduct, the employer cannot refuse to complete the employee's withdrawal form from the retirement fund as a way of ensuring that the benefit is not paid.” Instead, the employer should complete the withdrawal form and indicate that they have a claim against the employee, or submit a request for withholding the employee's benefit until it has received a court judgment.

Copyright © Insurance Times and Investments® Vol:28.11 1st November, 2015
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