The Portable Retirement Gratuity Fund (PRGF) is a fund which is established under the Mauritius Workers’ Rights Act 2019 for the purpose of providing for the payment of a gratuity on the death or retirement of an employee, while recognizing the employee’s terms of service irrespective of the number of employers served. The PRGF will come into operation on 01 January 2020.
The PRGF applies to all employees other than:
- Public sector employees whose retirement benefits are administered by the Statutory Bodies Pension Funds Act;
- Employees drawing a monthly basic salary of over MUR 200,000;
- Employees already covered by a private pension fund.
Self-employed individuals are also eligible to join the PRGF.
Terms of service covered
Under the present regime, the retirement gratuity of an employee is computed on his length of service with his final employer. After the coming into operation of the PRGF on 1 January 2020, the retirement gratuity will be based on the full length of service with the current employer at 1 January 2020, as well as with any other future employer(s) after that date.
Employers’ contributions to the PRGF
The PRGF will operate as a centralised defined contribution scheme. Employers will be required to make an upfront contribution, at a prescribed rate, on the monthly remuneration of each eligible employee. The monthly remuneration, for the purpose of the PRGF, is defined as the sum total of the monthly basic wage, any productivity and attendance bonus, and any payment for extra work performed.
Payment of contributions
The Mauritius Revenue Authority is the entity responsible for the collection of employers’ contributions, for the enforcement of payments, and for the remittance of those contributions to the administrator of the PRGF for credit into the personal account of each employee.
Employers are required to pay their contributions no later than on the 20th of the month following the month in respect of which the contributions are due. Employment payslips would need to indicate any contribution made by the employer to the PRGF.
Contributions for services prior to 1 January 2020
An employer will be required to pay contributions in respect of eligible employees who are in his employment on 1 January 2020, for the services of those employees from their date of entry to 31 December 2019.
A moratorium period will be granted with a view to alleviating the initial financial burden on employers in respect of those contributions for past services. Contributions for past services can be paid at the end of the term of service of the employee, with the contribution based on the final monthly salary.
The employer has also the option to pay the contribution for past services at any time before the end of the term of service of the employee, in which case the contribution for those past services will be computed based on the last monthly salary as at 1 January 2020.
Shortfall or surplus on contribution
At the time when an employee’s term of service with an employer ends, the value of the accumulated fund standing in his individual account, in respect of his length of service with that employer, will be compared with the minimum gratuity payable, or any amount payable under any other enactment or agreement if higher.
The employer would be liable to pay any shortfall, while any surplus may be netted off against the contributions payable for his other employees.
Minimum gratuity payable
The minimum lump sum gratuity payable at the termination of employment of the worker, or his resignation, or retirement, or death, is computed on the following basis:
- For every period of 12 months’ employment: 15 days’ final remuneration;
- For every period of less than 12 months’ employment: 1/12 of the sum payable for 12 months’ employment x number of months in employment.
The final remuneration is defined as the higher of the following:
- Remuneration drawn for the last complete month of employment with the employer;
- Average monthly remuneration drawn, including payments made over a period of 12 months before the employee ceases to be in employment, as commissions (up to a maximum of MRU 1.2 million), as end of year bonus, and as other regular payments.
Joint liability of employer and job contractor
When an employer has recourse to a job contractor, the employer and the job contractor are jointly and severally liable to pay contributions in respect of workers employed by the job contractor in the execution of the work or service.
Private pension scheme
An employer, contributing towards his employees’ retirement gratuity through a private pension scheme registered with the Mauritius Financial Services Commission, would be required to submit a certificate issued by the Financial Services Commission certifying that he has a private pension scheme.
If the rate of contribution paid to the private pension scheme is less favourable than the rate prescribed in the PRGF, the employer would be required to top up to the level equivalent to the prescribed rate, and pay the difference for past services in accordance with the moratorium period.
Where a worker changes employment, the value of his accrued benefits held in a private pension scheme may be transferred to the PRGF or the private pension scheme held by his new employer.
An employer required to make contributions to the PRGF is required to submit to the Director-General of the Fund:
- By the 20th of every month: A return in respect of every worker setting out the remuneration paid and the amount of contribution made on his behalf.
- By 15th July of every year: An annual return containing the names and date of birth of the workers in his employment as at 30 June of that year.
Particulars about the cessation or termination of employment of a worker, his retirement, or his death, need to be submitted to the Director-General of the Fund within one month of the occurrence.
Penalty on late return or contribution
For failure to submit a monthly return in time, the employer becomes liable to a surcharge of 1% of the total contribution payable, for every day until the return in respect of every eligible person for that month is submitted.
For late submission of the annual return, the surcharge is MUR 500 per day.
A surcharge for late contribution of 5% (or some other prescribed rate) is payable for every month or part of the month during which the contribution remains unpaid.
Small and medium enterprises
Small and medium enterprises with an annual turnover not exceeding MUR 50 million are entitled to pay a reduced contribution for the period until December 2022, the difference being subsidised by the Mauritius government.
The establishment of the PRGF would assist in providing peace of mind to thousands of persons employed in less stable sectors of the economy. For smaller businesses, the funding of the retirement gratuity over the time of service of employees would facilitate cash flow planning. The PRGF would also reduce frictional impediments to the mobility of labour, making it imperative for businesses to maintain competitive work conditions. Employers in Mauritius are furthermore advised to seek professional advice to ensure that they are meeting their statutory obligations under the Workers’ Rights Act 2019.
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Fred Yeung Sik Yuen CPA FCCA CGMA MBA
Date of Publication: 12 December 2019
LATEST NEWS: On 13 December 2020, the Government of Mauritius decided to postpone the entry into force of the Portable Retirement Gratuity Fund from 1 January 2020 to 1 April 2020. Employers in Mauritius are advised to take advantage of this moratorium of three months and seek appropriate professional assistance in order to ensure that their IT and payroll system is up-to-date and compliant with the law, and to familiarise themselves with their statutory reporting obligations.