Out of the 32,304 active establishments registered under the Basic Social Security Scheme in the country, only 2,691, representing 8.33 per cent, have been covered under the mandatory occupational pension schemes also known as Tier two of the new pension reforms as at April 19, 2013.
The second tier, is a fully funded and privately managed work-based scheme which has been designed to primarily give contributors a lump sum benefit in replacement.
However, most companies registered under the Social Security Scheme have not yet registered their second tier scheme with the NPRA
The situation has alarmed the NPRA which has subsequently warned employers who have not registered their employees on any scheme to do so with immediate effect or face sanctions under the law which includes penalties or imprisonment.
In an interview with the GRAPHIC BUSINESS, the Chief Executive Officer of the NPRA, Mr Sam P. Yalley, said the low registration numbers was “unacceptable because the more they hold the money, the more they deny workers their benefits on retirement”.
Under Section Three (1) of the National Pensions Act, 2008, ACT 766, “An employer of an establishment shall deduct from the salary of every worker in the establishment immediately at the end of the month, a worker’s contribution of an amount equivalent to five and half per centum of the worker’s salary for the period, irrespective of whether or not the salary is actually paid to the worker”.
Section Three (2) also states that “An employer of an establishment shall pay for each month in respect of each worker, an employer’s contribution an amount equal to thirteen per centum of the worker’s salary during the month”.
At the end of the day, the employer is expected to pay 13 and half per centum of the amount to the first tier of the scheme run by SSNIT while the remaining five per cent is paid to the second tier scheme which is privately run.
In spite of this, it has become the phenomenon for many employers who deliberately refuse to pay their workers contributions to the pension authorities even when they have deducted the money from the salaries of their workers.
Some of them have been found to be using the money as running capital to operate their businesses or deliberately invest in government paper only to take the interest at their employees’ expense.
SSNIT for instance has had to cause to prosecute many Chief Executives and Managing Directors because of such unfortunate acts although there are many more in the system who continue to violate the law.
There have been instances where some employers have deliberately adopted that strategy only to call on SSNIT to spread payment over time while they use the money they have deducted from the employees to do other things that benefited them only.
Mr Yalley said the NPRA was set to go after the recalcitrant employers who are abusing the system to get them to fully comply under the law.
He said the NPRA was open for clarifications on the scheme and urged those who require assistance to meet the NPRA for the necessary assistance.
Mr Yalley said employers in doubt of which scheme to join because of their small numbers could opt to join their chosen schemes with other companies and reap the same benefit.
He reiterated that refusal for the employers to comply with the law is a grievous offence and pledged the commitment of the NPRA to enforce the law under its mandate to protect employees.
Advice to Employees
The NPRA boss said the period when some employees were not interested in knowing the status of their contributions should be a thing of the past.
“Workers must take fully interest in their contributions because of the value it holds for their future”, he said adding that “they need to check their statements regularly to know what their employers are doing for them”.
He said once the payslips indicate a deduction, it can only be in their interest to also crosscheck from the appropriate authorities whether the payments have been done on their behalf.
Mr Yalley said it was frustrating and sad to find pensioners struggle to reconcile their accounts with SSNIT for instance after retirement but noted that most of those who suffer such mishaps were those who refused to take the scheme seriously.
“I urge those in active service to desist from such practice and do what is right in their own interest”. He said.
Meanwhile, he said the authority would soon begin an exercise to fish out employers who refuse to pay their workers contributions after deducting them from their salaries.
Story: Charles Benoni Okine/Graphic Business