Widows and orphans are being targeted by some companies that are trying to get rid of substantial liabilities they face in funding medical aid costs for pensioners.
From this year these liabilities have to be shown on company balance sheets, which could have dramatic effects on share prices. It is estimated these liabilities totalled R35 billion by the end of 1997.
And these liabilities are on the rise with soaring medical costs.
Already many companies have used surpluses in retirement funds to virtually bribe pensioners to accept higher pensions in return for the company not making any further medical aid contributions.
This week Personal Finance has established that a new move is afoot to literally throw orphans and widows overboard by unilaterally stopping company payments of medical aid contributions.
One of the first companies to attempt this was newspaper publisher Times Media Limited (TML), which publishes the Sunday Times.
TML gave notice to its orphan and widow pensioners last month that they were to be cut adrift. There was an outcry and a flood of complaints and threats from the South African Union of Journalists (SAUJ) to take the matter to the Council for Conciliation, Mediation and Arbitration (CCMA) and to court.
As a result TML withdrew its unilateral decision.
TML chief operating officer, Lawrence Clark, has told Ed Richardson, SAUJ chairman in Port Elizabeth that TML never had any contractual obligation to pay these contributions; and none of the terms and conditions of employment that apply to current staff placed an obligation on TML to pay the contributions.
Clark said TML was entirely within its rights to withdraw these benefits.
When approached by Personal Finance Clark refused to comment saying it was a "highly complex issue".
Peter Strasheim, an independent pension lawyer, says companies attempting to use this tactic to get rid of their liabilities may find it is not quite so easy.
Disputes about employee benefits are regulated by the Labour Relations Act (LRA).
"Any substantial changes to employment terms without consulting the people affected is called a unilateral change and is normally an unfair labour practice."
A unilateral change to benefits, whether they are part of an employment contract or not, can also raise an allegation of unfair conduct.
Strasheim says when employers grant a discretionary benefit, it would be wise for them to reserve their right to withdraw the benefit in a fair way on reasonable prior notice when they are unable to afford the costs of managing it, and to manage the consequences of such a decision in a sympathetic way.
The initial attack on medical liabilities by using retirement fund surpluses to bribe pensioners into forgoing their medical aid contribution benefits was dreamed up by a group at Old Mutual Actuaries and Consultants, who have since left to form a new company, Fifth Quadrant.
This week they denied having any part in devising the latest scheme and no one is saying where the idea originated.
Note:
In terms of the law, although a company may not need to provide funding for your medical aid membership, it cannot kick you off the medical aid fund.