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Article | Global News Briefs

Mauritius: Law brings benefit entitlements, mandatory retirement funding

Retirement|Health and Benefits|Total Rewards
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By Michael Brough | January 31, 2020

New central gratuity fund established. Employers should review the cost and policy implications of the fund and other new benefits.

Employer Action Code: Act

The Workers' Rights Act (WRA) has replaced the Employment Rights Act of 2008 (ERA, the primary law governing employment relationships), introducing significant changes to working time, compensation, leave, retirement, termination and other matters. Arguably the most substantial changes require that the employer-paid lump sum gratuity at retirement be based on service with all employers (from January 1, 2020) rather than only service with the final employer, and that employers pre-fund the gratuity via pay-related contributions to a new central fund rather than the current unfunded option.

Key details

Notable provisions introduced by the WRA (effective October 24, 2019, unless otherwise noted) include:

WRA coverage

  • All employees earning up to MUR 600,000 a year are covered by the WRA (previously up to MUR 360,000 under the ERA). As with the ERA, certain significant WRA provisions also apply to employees earning above the ceiling (e.g., severance, family leave).

Retirement gratuity calculation and the Portable Retirement Gratuity Fund (PRGF)

  • The mandatory minimum gratuity will still be payable to employees at retirement (age 60 or by agreement) or upon death or permanent disability; however, the minimum amount will reflect service with all employers from January 1, 2020 (including pre-2020 service with the January 1, 2020 employer). Under the ERA, only service with the employee’s final employer at retirement was considered. Employers may still meet the gratuity requirement via the provision of a qualifying retirement plan.
  • The existing defined benefit gratuity formula (15 days’ pay times years of service) will be retained and applied separately to service with each employer. Pay will continue to be based on the greater of the employee’s final month’s earnings or average monthly earnings over the prior 12 months, including commissions (up to MUR 1.2 million) and any other regular payments.   
  • The new PRGF will be a state-administered fund with individual defined contribution accounts for all nonexempt employees in the private sector. Exempt employees include those earning above MUR 200,000 a month, those covered by a qualifying company retirement plan and non-citizens.
  • Employers must contribute monthly (starting April 2020, retroactive to January 1, 2020) to individual PRGF accounts for all nonexempt employees at a percentage of monthly pay (expected to be 4.5% when published). As of January 1, 2020, employers will also be required to make contributions to cover employees’ past service since date of hire. The regulations may provide transitional measures to address any financing issues for small employers.
  • When an employee separates from his or her employer (voluntarily or involuntarily), the value of the employee’s PRGF accumulated account balance in respect of service with the employer is compared with the calculated retirement gratuity amount for that service.
    • If the PRGF balance is less than the gratuity, the employer must make a top-up contribution to the PRGF.
    • If it is greater, the employer may use the surplus to meet unpaid ongoing or past service PRGF contributions.
  • The benefit ultimately paid out (upon retirement, death or permanent disability) is the PRGF account balance.

Working time

  • Overtime is now defined as daily working time in excess of a “normal” workday (i.e., nine hours for a five-day workweek). Previously, work was only considered overtime when in excess of 90 hours over a two-week period.
  • The maximum workday (inclusive of overtime) is 12 hours (previously undefined).
  • Staff with children under age four may request a flexible work schedule, and employers must grant such requests unless there are reasonable business grounds to refuse.

Employer-paid leave

  • Under a new “vacation leave” entitlement, employees will be eligible for 30 days’ paid leave after every five consecutive years of service beginning from October 24, 2019. This would be in addition to the minimum of paid annual leave of 20 days. The vacation leave can be taken all at once or as multiple periods, but unused vacation leave will not accumulate. Calculation of service for the subsequent five-year period commences only once staff members have used all their current vacation leave entitlement.
  • Female employees are eligible for 14 weeks of paid adoption leave after one year of service. All male employees are entitled to five days of paid paternity leave irrespective of length of service (previously one year of service was required).
  • Staff are now entitled to paid leave for a variety of life events, including their first marriage (six days), the marriage of a child (three days) and the death of an immediate family member (three days).

Compensation

  • The mandatory end-of-year bonus (payable to workers in employment as of December 31) is now also payable in the event of dismissal for any reason or upon resignation (with eight months of service). In addition, earnings used in calculating the bonus amount (one-twelfth of the employee’s total cash compensation — both fixed and variable — during the calendar year) now also includes commissions (previously excluded).
  • A Wage Guarantee Fund Account has been created (within the existing Workfare Fund) to pay workers’ wages due or unpaid PRGF contributions in the event of employer bankruptcy (up to MUR 50,000 per employee). The existing Workfare Fund provides retraining and unemployment benefits, and is funded by employer and employee contributions of 1.0% of pay (payable by each).

Termination

  • Companies with 15 or more employees and annual revenue exceeding MUR 25 million are now subject to information and consultation requirements before implementing temporary or permanent reductions in force (RIF). Prior to initiating a RIF, management must notify the union or employee representatives and negotiate possible means to avoid a RIF (e.g., retirements, reducing working time or redeploying staff). If no agreement is reached, the company must provide 30 days’ written notice of the RIF and its reasons to a new body: the Redundancy Board. If RIF grounds are deemed unjust, the board may order reinstatement and/or payment of severance equal to three months’ pay per year of service.
  • Written mutual agreements to address disputes relating to termination or the nonpayment of wages are now valid only if the employee had received advice from a relevant independent advisor (i.e., a qualified lawyer, a union official or an officer of the Ministry of Labor). Previously, such advice wasn’t required.

Fixed-term and part-time contracts

  • Whereas the prior act had no specific provisions on fixed-term and part-time employment contracts, the WRA restricts the use of fixed-term agreements to specific instances where the nature of the work involved requires it (such as seasonal work and specific projects) and provides that part-time employees should be treated no less favorably than comparable full-time workers (pro rata to hours of work, as appropriate).

Employer implications

The extension of the gratuity to service with all employers will increase company costs. The required PRGF contributions will add to overall retirement savings (as of 2017, total assets in funded pension plans equaled only 4.7% of GDP according to World Bank data), but they will also affect companies’ cash planning. That aside, the WRA includes many significant enhancements and protections to the provisions of the prior ERA. Given the wide-ranging changes introduced by the WRA, employers should review their policies and processes to ensure they remain compliant with the new requirements. Additional guidance from the authorities is expected on the organization and administration of the PRGF as well other elements of WRA that may be unclear.

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