MAURITIUS: PORTABLE RETIREMENT GRATUITY FUND – MANDATORY CONTRIBUTIONS BY EMPLOYERS AS FROM JANUARY 2022

By Rajiv Gujadhur,Sahirun Subadar ,Javed Niamut Wednesday, January 19, 2022
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With the new year comes new resolutions, or in case of employers, new obligations.

As from January 2022, employers in Mauritius are required to contribute to the Portable Retirement Gratuity Fund (PRGF) in respect of eligible employees. Eligible employees are employees other than the following categories of employees:

  • a job contractor, a migrant worker or a non-citizen;
  • a public officer or a local government officer;
  • an employee whose retirement benefits are payable under the Statutory Bodies Pension Funds Act or the Sugar Industry Pension Fund Act;
  • an employee whose retirement benefits are payable in accordance with a private pension scheme, provided the employer obtains a certificate issued by the Financial Services Commission certifying that it has a private pension scheme; and
  • an employee drawing a monthly basic wage or salary of more than MUR 200 000.

The PRGF was established under the Workers’ Rights Act, 2019, to provide for the payment of a gratuity to an eligible employee on his or her retirement or death, taking into account the employee’s length of service with each employer, irrespective of the number of employers the employee had worked for.

Previously, it was only the employee’s length of service with his or her last employer prior to retirement or death that was taken into account in determining the gratuity entitlement of the employee or that of his or her estate.

The first monthly contribution to the PRGF was initially scheduled in January 2020. However, due to the COVID-19 pandemic, the mandatory contribution to the PRGF was postponed until January 2022.

Rate of contribution

The PRGF contribution is set at 4.5% of the monthly remuneration of the employee. However, for the period between January 2022 and December 2024, small and medium enterprises (SMEs) having an annual turnover of not more than MUR 50 million, other than SMEs providing services, will benefit from a reduced contribution in the manner set out in the table below:

Annual Turnover Year % of monthly remuneration
Less than MUR 2 million 2022 2.1
2023 2.9
2024 3.7
Between MUR 2 million and MUR 10 million 2022 3.5
2023 3.7
2024 4.2
Between MUR 10 million and MUR 50 million 2022 3.5
2023 4.0
2024 4.2

 

The reduced contribution for SMEs as set out above are not applicable to SMEs providing services such as accounting, actuarial science, architecture, legal, tax, medical and allied health, engineering, land and quantity surveying, project management in the construction industry and property valuation.

Monthly remuneration means the monthly basic wages paid to a worker and any productivity bonus, attendance bonus and payment for extra work performed.

Payment of monthly contributions

The Mauritius Revenue Authority (MRA) is responsible for the collection of employers’ contributions, the enforcement of payments, and the remittance of those contributions to the administrator of the PRGF for the purposes of crediting the personal account of each employee.

Employers are required to pay their contributions to the PRGF to the MRA by no later than on the 20th of the month following the month in respect of which the contributions are due. However, in respect of the contributions for January 2022, the MRA in a communique issued on 31 December 2021, stated that the deadline for payment of the contributions and the return for the month of January 2022 is 28 February 2022.

Employers are also required to pay the contributions to the PRGF in respect of the past services of eligible employees who were in their employment on 1 January 2020 (i.e., the initial date of the coming into force of the PRGF).

In respect of eligible employees employed after 1 January 2020, the contributions from the first month of employment up to December 2021 are considered as past services. Employers may pay the contributions for past services at any time before the termination of employment of the eligible employees.

The contribution for past services is based on the last monthly remuneration of the eligible employee or, in respect of resigning employees in employment on or before 1 January 2020, their monthly remuneration as at 1 January 2020.

Reporting obligations and penalties

Employers contributing to the PRGF are required to make the following returns to the MRA:

  • A return in respect of every worker setting out the remuneration paid and the contribution made on his or her behalf, by the 20th day of every month; and
  • An annual return, including a list of the names and dates of birth of the workers in his or her employment as at 30 June of that year, by 15th July of every year.

Employers must also submit a return in a form of a statement to the administrator of the PRGF within one month of the termination or a death of an eligible employee. 

If an employer fails to submit a monthly return in time, it will be liable to a surcharge of 1% of the total contribution payable, for every day until the submission of the return in respect of every eligible person, while the late submission of an annual return will attract a surcharge of MUR 500 per day.

Late payment by an employer of any payable contribution will attract a surcharge of 5% (or some other prescribed rate) for every month or part of the month during which the contribution remains unpaid.

Lump sum payable on retirement or at death

The minimum lump sum payable to an employee whose employers have contributed to the PRGF, on retirement or to his or her heirs at death, is computed as follows:

  • an amount equivalent to 15 days of final remuneration for every period of 12 months in which the employee was in continuous employment; and
  • for any period of less than 12 months, a sum equal to one-twelfth of the sum calculated above, multiplied by the number of months during which the employee was in employment.

If the PRGF amount contributed by an employer for its employee into the PRGF at the time of termination of employment is less than the minimum lump sum payable to the employee, the employer must pay any such shortfall to the MRA.

However, any surplus on the contribution may be netted off against the contributions payable for the other employees of the employer.

For the purposes of the PRGF, final remuneration means the higher of either:

  • the remuneration drawn by a worker for the last complete month of his or her employment with an employer; or
  • the average monthly remuneration drawn by a worker, including payment made over a period of 12 months before the worker ceases to be in the employment of an employer in any manner whatsoever (such as commission in return for services up to MUR 1 200 000, end of year bonus or any other regular payment).

Private Pension Scheme as an alternative to PRGF contribution

As an alternative to the mandatory contributions towards the PRGF in respect of eligible employees, employers may seek to adopt a private pension scheme approved by the Financial Services Commission (Pension Scheme).

Employers adopting a Pension Scheme will need to submit to the supervising officer of the Ministry of Labour, Human Resource Development and Training, a certificate issued by the Financial Services Commission certifying that it has subscribed to a Pension Scheme.

Eligible employees whose employers have adopted a Pension Scheme will continue to be entitled to a gratuity on retirement or at death payable by their employers. The quantum of the gratuity is equivalent to the lump sum payable to eligible employees whose employers have contributed to the PRGF (i.e., 15 days remuneration per year of service).

However, such employers may deduct from the amount of gratuity payable on retirement or at death:

  • half the amount of the gratuity due under the Pension Scheme (by reference to the employer’s share of the contributions only);
  • five times the amount of any annual pension granted under the Pension Scheme (by reference to the employer’s share of the contributions only);
  • any other gratuity payable by the employer; and
  • 10 times the amount of any other annual pension granted by the employer at the age of 60 or 65 or at death. 

Accordingly, careful consideration should be given by employers to the selection of the Pension Scheme to ensure that no further gratuity payment is required to be made by the employer after applying the allowable deductions.

Conclusion

The PRGF is beneficial to eligible employees in that they will no longer be penalised by the period of employment with previous employers prior to retirement or death not being taken into account when calculating their entitlement on retirement or death.

The monthly contribution of employers to the PRGF also eliminates the risk of non-payment of retirement gratuities as a result of the declared bankruptcy or insolvency of the employer or termination of employment of an eligible employee shortly before attaining retirement age.

Employers who did not have pension schemes for their employees in place will benefit from the better planning that the monthly contribution to the PRGF offers. This approach will also pre-empt cashflow issues at the time of the retirement or death of eligible employees.

However, the timing of the resumption of the contributions may be unfavourable to certain employers who have been badly affected by COVID-19, in particular employers engaged in the tourism industry. A further extension granted to such employers would no doubt have given them a much-needed additional breather.