• HOME
  • LIBRARY
  • CLIENT
    PORTAL
  • UNCLAIMED
    BENEFITS
  • CONTACT

Whilst the dismissal of an employee may appear to be purely a matter of following the correct procedures as envisaged in the Labour Act, the implications for the employer may be a lot more profound than just a possible reinstatement.

Consider the scenario of dismissing an employee. HR will now complete a withdrawal form that will be forwarded to the pension fund administrator. As far as the Fund is concerned its rules would typically determine that membership of the Fund terminates upon termination of employment by the employer. The implication for the administrator is that a termination benefit must be paid. Whether or not the employer was within its rights to initiate the termination of this person’s membership of the Fund is not within the administrator’s knowledge. The fund administrator will therefor terminate the employee’s membership of the fund and will pay out the benefit due to the employee in terms of the fund’s rules.

The employee then challenges his dismissal. In the meantime and before the matter is concluded, the employee passes away or becomes disabled. The court then finds the dismissal to have been unfair and orders the reinstatement of the employee. Where does this now leave the employer as far as the fund’s death or disability benefit is concerned, to which the employee should now be entitled in the light of his reinstatement?

The dismissal of an employee can clearly create a dilemma for the employer given that the employee can challenge such dismissal, while the fund is obliged to terminate fund membership once a notification of termination of service has been issued by the employer.
To avoid the risk of being held liable to make good the loss of the benefit that would have been due to the employee from his fund upon death or disability, the employer should rather consider suspending contributions to the fund in case of a dismissal where there is any possibility of such dismissal being challenged by the employee. The employer would thus not contribute to the fund in respect of the employee but the fund would maintain death and disability benefits. The cost of keeping cover in force will be a fraction of the cost of making good the loss of the benefit to the employee.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

PENSION CALCULATOR
How much will you need when you retire and are you investing enough?
GALLERY
CLIENT COM(PLI)MENTS
FREE INVESTMENT AND PENSION FUND NEWS
Subscribe now to receive our monthly newsletter.
We use cookies to make this site simpler. By using this site, you permit the use of cookies.
More information Ok