Late salary payment, other obligations

Recruiting best employees is an exciting milestone for any organisation. One of the most important obligations when you hire employees is making sure you pay them correctly, on time and in compliance with government regulations.

Hearing that staff at Mzuzu City Council (MCC) had gone three months without receiving their salaries is disheartening. According to the MCC chief executive officer McLoud Kadam’manja, this was because the council failed to collect revenue.

For employees to be paid every month, it requires timely preparation of the payroll. A payroll is one of the most important financial components of a business and it can have a serious impact on the net incomes of the organisations. The most important feedback a payroll can show is whether or not the business is making profit. A precise payroll can determine that a business is losing more money than it is bringing in because it is spending too much on paying employees. Keeping employees in the dark for three or four months is something that should not be tolerated as it constitutes unfair labour practice.

Employers should continuously update their employees on salaries and remittances of statutory payments. Nevertheless, it is challenging to remit pension and other statutory payments when employees have not been paid their monthly salaries.

Despite that the pension assets have been growing in the past eight years, during the Pension Scheme Awareness Workshop held in October by NBM Capital Markets, a subsidiary of National Bank of Malawi, its chief executive officer Benson Jere expressed concern over non-remittance of pension funds by employers.  Section 61 of the Pension Act 2010 requires employers to remit to a trustee of a pension fund both employer and employee contributions within 14 days from the end of the month.

To realise continued growth of the assets, trustees should also ensure that proper arrangements are in place with the employer to receive all relevant information relating to contributions including information relating to temporary absences where contributions may not be payable for a period.

Disregarding that payroll preparation is a tedious and time consuming procedure, every organisation must have an accurate and consistent payroll to have better understanding of the cashflow.

On that note, it is sad to see some secondary school teachers who were recruited by government in April  decided to stage a strike due to unpaid salaries and hardship allowances.

It is very important to align staff establishment and manage the cash flow to ensure that the salaries and statutory payments are made on time. If an organisation’s cash flow is nebulous, it is wise not to continue hiring to fill vacant positions. Human resource managers should always work hand in hand with the finance department to check availability of funds to ensure that staff are paid on time.

It is sensible, therefore, that payroll preparation starts in good time and honour employee/employer contractual agreement. Failure to abide to the employment contractual agreements especially on the payment of salaries can largely damage an organisation’s reputation.

The tendency of diverting funds to other activities which affect timely payment of staff affects both organisation and staff performance as human resources remain the pivot on which other resources revolve and its performance determines the effectiveness and efficiency of the organisation.

Staff should be paid as specified in the contracts. It is not surprising that majority of employees incur charges and risk rent or mortgage payments not being made, which in turn affect their credit history. This should be a concern to the human resource managers who are entrusted with staff welfare, safety and protection.

The basic purpose of timely payment of salaries is to enhance the confidence or improve the employee’s attitude towards their job. Delay in remitting statutory payments is regrettable and management’s concerted efforts is required to ensure smooth operations of the business. If both the employees and employers contribute to the scheme, then it serves as a general area of joint interest and cooperation and therefore helps to foster better employment relations.