Cabinet postponed the entry into force of the Portable Gratuity Retirement Fund until 1 April 2020.
Following its meeting of 13 December 2019, Cabinet has decided to postpone the entry into force of Part VIII of the Workers' Rights Act (the 'Act'), initially scheduled on 1 January 2020 – to 1 April 2020. The official communique states that many firms may not be ready with the IT system required to implement Part VIII of the Act, hence the moratorium of three months.
Part VIII of the Act makes provision for the setting up of the Portable Retirement Gratuity Fund ('PRGF') whose aim is to provide for payment of a gratuity to an employee at the time of his retirement or to his heirs in the event that the employee is still in service of an employer at the time of his demise. Self-employed people can also benefit from the PRGF scheme.
The PRGF scheme does not apply to:
- migrant workers;
- employees drawing a monthly basic salary of more than MUR200, 000; and
- employees whose retirement benefits are payable under a private pension scheme of the employer.
As the Act currently stands, an employer who has a private pension scheme is entitled to make deductions representing his share of contribution to such private pension scheme from the gratuity on retirement / at death that he is required to pay. The Act does not currently allow similar deductions to be made in respect of contributions made to the PRGF.
Employers not having a private pension scheme
Monthly contribution from April 2020
Under the Act, as from April 1, 2020, an employer is bound to make monthly contributions to the PRGF for every employee in his employment who draws up to MUR200, 000 per month.
It was originally contemplated that the rate of contribution by the employer would be 4.8% of the monthly remuneration of the employee. This rate has however not been confirmed by any regulation as at date.
The monthly contribution will be payable to the Mauritius Revenue Authority('MRA') in arrears by the 20th of each month.
Contribution for past services
In addition, the employer also has to pay contributions for past years of service of the employee. This contribution is calculated on the basis of the last monthly salary drawn by the employee. It can be paid either:
- to the MRA:
- at the time of the termination of the employment of any employee after 1 April, 2020, or
- at any time before the termination of employment, retirement or demise of any employee; or
- directly to the employee at latest one month after his retirement; or
- to the employee's heirs at latest one month after his demise.
We understand that the Ministry of Labour may issue regulations providing for transitional measures.
Liability for shortfall at the time of employee's retirement/demise
An employee is entitled to receive from the PRGF 15 days' final remuneration, at the time of retirement, for every year in service with each employer. In case of his demise, his heirs can claim this sum from the PGRF.
In case there is a shortfall between the value of the accumulated fund in an employee's account at the PRGF and the sum representing 15 days' final remuneration calculated at the time of his retirement/demise, the employee's last employer is liable to make up for the shortfall for such period that the employee has been in employment of that employer.
Employers having a private pension scheme
For employers having a private pension scheme, the law contemplates that the employer's contribution will have to be at least the same as the contribution payable to the PRGF. This provision has however not come into force yet. Employers who wish to be exemped from the PRGF are required to submit a certificate from the Financial Services Commission to the Ministry of Labour certifying that a private pension scheme is in place.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.