The National Pension Commission (PenCom) has disclosed in its quarterly report for 1st quarter of 2022 that 23 defaulting employers paid a total sum of N295.45 million as penalty for late remittance of pension contribution during the quarter.
PenCom while giving update on the, recovery of outstanding pension contributions and penalties from defaulting employers, said it issued demand notices to defaulting employers whose pension liabilities were established by the Recovery Agents (RAs).
PenCom said the sum of N422.34 million representing principal contribution (N124.89 million) and penalty (N295.45 million) was recovered from 23 defaulting employers during the quarter under review.
PenCom further disclosed that it has also recommended appropriate legal action for 6 defaulting employers for refusing to remit pension contributions of their employees after all administrative actions to make them comply failed.
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PenCom however did not disclose the identity of the defaulting employers and the process of reporting defaulting employers is currently manual.
Explanation of Terms
A recovery agent is any company engaged by PenCom to recover outstanding pension contributions with interest penalty from defaulting employers within a specified timeframe and under agreed terms and conditions.
A defaulting employer is an employer who has defaulted in the remittance of pension contributions either for non remittance, incomplete remittance or late remittance.
Where an employer fails to deduct and or fails to remit pension contributions for its employees.
This occurs when an employer remits an amount lower than the amount mandated by law. The percentage for pension contribution is a minimum of 8% by employee and minimum of 10% by employer, the percentages are to be applied to the employee’s monthly emolument which must not be lower than the employee Basic salary, transport and housing allowance.
Late remittance occurs when the employer does not remit the employees’ pension contribution within the period mandated by Pension Reform Act 2014. Employers are required to deduct at source the pension contributions of their employees, and within 7 working days after the payment of salary, remit same to the Pension Fund Custodian (PFC) of the employees’ Pension Fund Administrator (PFA).
Any employer who fails to deduct or remit pension contributions within 7 working days after payment of salary, shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by PenCom from time to time, but the penalty shall not be less than 2% of the total contribution that remains unpaid for each month or part of each month the default continues and the amount of the penalty shall be recoverable as a debt owed to the employee’s retirement savings account.