Employer not paying his share of pension

I’m currently employed in a position where I get paid by commission only. My employer has me pay my 5% pension each pay cheque but says he doesn’t have to match it because my pay is commission based. Is this correct or should my employer follow the National Pensions Law and pay his 5% share?

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Auntie’s answer: Yes, your employer is in breach of the pensions law, but before we get to that, let’s go over how he/she is actually breaking another law as well. The National Minimum Wage Law that was passed in February this year mandates that all employees are paid a minimum wage of $6 per hour and only 25% ($1.50) can be commission (or benefits or gratuities). So you must be paid at an hourly rate of $4.50 per hour plus commission and your basic wage plus commission must be no less than $6 per hour.

In addition, your employer must pay you your full commission. My very helpful source at the labour office explained it like this: “Please also note that the inclusion of commissions in the computation of meeting the National Minimum Basic Wage must not prevent that employee from receiving all commissions earned. In other words, the difference between the 25% taken from the commission earned by the employee to make up the CI$6/hr and the total commission earned by the employee, should still be paid to the employee.”

Here is the Fact sheet on Minimum Wage. Pay particular attention to point 8.

So, let’s say you work a 40-hour week and earn 10% commission. Your boss must pay you $4.50 per hour basic wage, which is $180 per week. When commission is included, you cannot earn less than $6 per hour, which is $240 per week.

Now let’s say that your commission is based on sales and you sold $1,000 of goods, so your commission is $100. Your employer has to pay you that whole commission. Only $60 of it will go towards plugging the gap on the minimum wage (so you get that minimum of $240) but you must get the other $40. So your total pay for that week will be $280.

This applies however big your commission is. So, if it had been $5,000 that week, your boss would still have had to pay that basic $4.50 per hour and your pay packet for that week would have been $180 plus $5,000, for a total of $5,180. Lucky you! But if you had a very bad week, or month if that is how often you are paid, and your commission was not enough to bring your pay up to the minimum wage, then your employer must make up that difference.

Note, however, that if you work for a registered church or a charitable organisation, you’re out of luck because the law does not apply to them at this time. The critical word here is “registered”. Employers cannot just claim to be a non-profit and therefore exempt from following the various laws.

Now, let’s move on to your actual question.

On the point of commission and pension, the law is very clear (and here is a link to the law so you can see for yourself). Out of your total pay, you must pay 5% and your boss must pay 5% into the pension plan.

In our hypothetical pay packet above, where you received a total of $280 for the week (a combination of basic pay plus commission), you would each pay $14, for a grand total of $28 going into your pension plan.

A spokesperson at the pensions office explained it like this: “The employer’s actions are not correct and he/she is in contravention of Section 47 of the National Pensions Law (2012 Revision). The law requires the employer and employee to remit a total of 10% to a pension plan on a regular basis.

“The employer should deduct no more than 5% from the employee’s earnings and match said 5% to total 10%. Commission is defined in the law as earnings, therefore whether the employee is on commission only or base plus commission the employer must match the 5% deductions for pensions and remit to the pension plan.”

In other words, your employer is, not to put too fine a point on it, full of sewage.

So, now that you know your boss has, shall we say, misrepresented the facts, whether out of ignorance or intentionally, what are your options?

Since it is always best to avoid protracted conflicts, the pension officer suggested the first course of action would be to approach your employer to try to resolve the matter. Note that your boss will be required to pay what he should have paid into your plan and didn’t up to this point, which may be a considerable amount if this has been going on for a while.

If that fails, you should fill out a Non-Compliance Report, which can be found by clicking on this link to the National Pensions Office website.

You can submit the form to the office, which is located on the second floor of Midtown Plaza on Elgin Avenue, Monday-Friday from 9am-4pm. Once the report is submitted, the pension investigation unit will look into your complaint.

By the way, the pensions law provides for anyone who breaks the law to be liable on summary conviction to a fine of $5,000. I don’t know how often that fine is actually levied, but I do think it is worth a try to follow through with a complaint if your employer doesn’t comply with the law and pay the matching 5%.

This wasn’t part of your question but worth noting that your employer must also have a health insurance plan that you can join and be covered for that, too, and your employer must pay at least half of the premiums for the Standard Health Insurance.

Since your boss appears to be a bit slippery, you should perhaps make sure that he/she is actually paying this and if not, I would suggest a visit to the Health Insurance Commission as well.

The HIC is located in the Government Administration Building in George Town and its website is here.

Tags: Department of Labour and Pensions, Pensions Law

Category: Ask Auntie