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Who Can Contribute?
- Every employer employing 15 or more employees.
- Every employee receiving pay from above employer.
- Every employer employing less than 15 employees but voluntary elects to contribute.
- Every employee receiving pay from above employer and who elects to make voluntary contribution.
Who Is An Employer?
Employer means an entity including
- an individual
- a statutory authority or organisation
- unincorporated partnership or body or
- a corporation that employs a person under a contract of service.
Where an employer consists of
- different departments
- has branches situated in the same place or in different places, all departments and branches will be treated as a single employer.
One or more related corporations will be treated as a single employer where;
- The total employees of the related corporations are greater than 15
- The operations of the related corporations have been conducted through, separate legal entities for the purpose of reducing the number of each of the separate entities’ employees below 15
Related corporations has the same meaning as that in the Companies Act 1997 so that where;
- The other company is its holding or subsidiary company; or
- More than 50% of the issued shares is held by the other corporation or member of that corporation
- Business is done in such a way that the separate business of each company cannot be easily identified that those various companies will be treated as a single employer for the purpose of the Act
Who Is An Employee?
- Employee means a person who is resident in PNG and: Who receives pay from his employer
- Employed or engaged for pay to provide labour or service
- Who receives pay from this employer
- For whom contributions are made
And includes persons employed by or through a contractor or agent. But does not include;
- Employees who are involved in primary production and employed by an employer who is in the business of growing or processing of cocoa, copra, oil palm, rubber, tea or coffee (exempted employees).
- Note that employees in this category whose employment may be seasonal so that there are intervals of unemployment, are generally not regarded as employees unless they have been employed for more then 24 months.
From What Income Can Contributions Be Deducted?
The contributions of an employee shall be deducted directly from the employees pay by the employer at the time of payment and paid to nasfund within 14 days of the date of deduction. Pay means remuneration of any kind including;
- gross salary
- leave entitlements
- commissions, etc…
- earned by the employee while on duty or on leave with pay
- paid or payable in cash to the employee
But does not include;
- overtime pay
- after salary sacrificing of allowances including housing, car and education packaging
- compensations, etc.
When Are The Contributions Required To Be Remitted?
- Within 14 days of the end of each month
- Within 14 days of the date of deduction
What Are The Rates of Contributions?
Pursuant to Sections 5 and 6 of the Superannuation Regulation 2002 the contributions will progressively increase over the years and settle at 8.4% for employers and 6% for employees in the following manner;
Employers rate of contribution
- 7% to 31st December 2004
- 7.7% from 1st January 2005 to 31st December 2007
- 8.4% from 1st January 2008 onwards
Employees rate of contribution
- 5% to 31st December 2004
- 5.5% from 1st January 2005 to 31st December 2007
- 6% from 1st January 2008 onward
Duty To Contribute
Every employer employing 15 or more employees has the duty to;
- Pay the employer portion of the contribution in respect of each of its employees continuously employed for 3 months or more
- Deduct from its employees pay the employee portion of the contribution
- Remit those contributions
Breach of Duty
A failure to perform the above duties amounts to an offence for which the employer may be prosecuted. If the company is found guilty and convicted of the offence, the following penalties will be imposed;
Failure to pay Employer Contribution;
- Fine not exceeding K100,000.00
- Imprisonment for a term not exceeding 2years
- Both of the above
Failure to Remit Contributions deducted;
- Fine not exceeding K500,000.00
- Imprisonment for a term not exceeding 15 years
- Both of the above
Note: where the offence continues after conviction, a default penalty fine of K5,000.00 a day will be imposed until the fine is paid
Matters To Note
Following matters relating to contributions must be noted;
- An employer cannot directly or indirectly reduce the salary, wages or other remuneration or benefits of an employee because of its liability to make the contributions
- The employer’s liability to make contributions is not affected by the basis on which the employee is paid. Be it daily, weekly, fortnightly or monthly
- If there is any provision in the contract of employment that allows the employer to make a contribution less then the prescribed rate then that provision is void and will not apply
- Both employers and employees may make additional contributions above the prescribed rate