By Moshood Ayeni
All Employers under the mandatory Contributory Pension Scheme (CPS) are at the least expected to deduct and remit pension contributions on behalf of their workers. In addition, they are mandated to maintain a Group Life insurance Premium Policy (GLIP) for their workers as well. These really are the basics or minimum standards that are expected from the employer. According to S4 of the Pension Reform Act (PRA 2014), failure to comply attracts sanctions and penalties for the employer.
Meanwhile, the National Pension Commission in its drive to ensure compliance has been at the forefront sanctioning erring employers as evidenced in its latest report and recovering over NGN553 million from defaulting employers in principal contributions and penalties. However, in practice, most employers still do not comply with the pension laws. They see pension cost as an additional operation’s cost which to them does not bring any immediate benefits.
Rather than complying, some employers go further to also disallow pension contributions on behalf of their employees in their organisations. While in some extreme cases, some of them, having deducted pension contributions from the employee’s pay, fail to remit to the employee’s PFA, an act that is a flagrant disobedience to the extant pension law.
The above sharp practices by some employers of labour are not only wicked but entirely unjustifiable.
Employers should not see pension contributions cost as merely “operational cost” but rather they need to see it as a fixed cost that is necessary and compulsory in nature.
Complying with the pension law (the PRA) should be taken with the same level of seriousness as complying with the Tax laws for example, failure of which attracts sanctions and penalties.
The benefits of complying with the extant pension law is enormous especially for the business and far outweighs the expense or the charge to profitability it portrays.
What are the benefits of complying with the Pension law:
*A compliant entity will be issued a Certificate of Pension Compliance by the National Pension Commission (PenCom). Such certificate is an attestation to the entity’s level of compliance with the extant pension law. Organisation with such certificate are the ones only allowed to bid for Federal Government contracts.
What is really expected from the Employer and Employee?
*From the employee or worker, what is expected are:
1) Open a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of choice.
2) Submit RSA details (RSA PIN and PFA name) to the employer.
3) In addition, if he or she can decides to make additional Voluntary Contribution (VC), the total amount so decided should be communicated to the employer, who will deduct such VC every month in addition to the statutory deductions (see below)