The Workers’ Rights Act 2019 (the “Act”) was published in the Government Gazette on 24 October 2019. This Act deals with several additions to labour regulations and importantly, Part VIII introduced the Portable Retirement Gratuity Fund (“PRGF”).

The PRGF was expected to commence on 1 January 2020 however the authorities have postponed the implementation date to 1 April 2020 to enable companies to ensure that systems (IT and payroll) can be timeously changed to accommodate the new arrangements.

The objective of the PRGF is “ to ensure that a worker who retires, benefits from the payment of a retirement gratuity for his length of service with the current employer at the date of coming into operation of the Fund as well as for his length of service with any future employer, contrary to the present retirement regime whereby the retirement gratuity is computed on his length of service with his last employer.”

Effectively, the scheme will operate as a defined contribution scheme.

Current Retirement Gratuity regulations

  1. An employer must pay a lump sum gratuity to a worker who has been in continuous employment for 12 months or more. The following are the three situations which trigger the payment of the gratuity:
    1. Where the worker has retired voluntarily at the age of 60;
    2. Where the worker has retired before the age of 60 on grounds of permanent incapacity to perform his or her work that has been certified by a government medical practitioner. For the worker to be eligible for the gratuity in this situation, they must have not less than ten years continuous employment with the same employer; and
    3. Where the worker has retired at the request of the employer either on or after attaining the retirement age.
  1. The gratuity is calculated based on 15 days’ remuneration for every period of 12 months’, or part thereof, of continuous employment with the employer.


New PRGF regulations

As stated above the objective is to provide for the payment of a gratuity to an employee at the time of his retirement or to his heirs if the employee is still in the service of an employer at the time of their death.

Certain exclusions have been listed including:

  • expatriate workers;
  • migrant workers;
  • employees earning a monthly basic salary of more than MUR200,000; and
  • employees whose retirement benefits are payable under a private pension scheme of the employer. In terms of the Act, an employer who has a private pension scheme is entitled to deduct the amount of the contributions made to PRGF from the contributions made to the private pension scheme.

Employers not having a private pension scheme will be required to make monthly contributions to the PRGF for their workers earning below MUR200,000 from April 2020.

During the initial discussions and when the public was requested to furnish comments, the contribution rate of 4.8% of the monthly remuneration of the employee was stated – for the purpose of PRGF, monthly remuneration is defined as the sum total of the monthly basic wage, any productivity and attendance bonus, and any payment for extra work performed .

However, the contribution rate has not yet been regulated and our sources indicate that the contribution rate may be lowered to 4.5% despite labour unions demanding much higher contribution rates.

The monthly contribution will be payable to the Mauritius Revenue Authority (‘MRA’) in arrears by the 20th of each month but the administration of this fund will be exercised by the Ministry of Social Security.

Contribution for past service

We understand that the Ministry of Labour may issue regulations providing for transitional measures to be adopted by companies given that in terms of the legislation, the employer also has to pay contributions for past years of service of the employee, where this contribution is calculated on the basis of the last monthly salary paid to the employee.

Clearly, payment now, of all arrear contributions for past service would place an immense burden on the cash flow of companies and therefore our understanding is that a moratorium will be granted where the employer may pay the past service contributions either:

  • to the MRA as a lump sum arrear payment; or

  • at the time of the termination of the employee after 1 April 2020, or

  • at any time before the termination of employment, retirement or death of the employee; or

  • directly to the employee at latest one month after his retirement; or

  • to the employee’s heirs within one month after his death.

In practice, where a shortfall exists between the value of the accumulated fund in an employee’s account at the PRGF and the sum representing 15 days’ final remuneration calculated at the time of the employee’s retirement or death, then the employee’s last employer is liable to make up for the shortfall for such period that the employee has been in employment of that employer.

Employers with a private pension scheme

While we are anticipating that guidelines will be published, one can assume that where the employer has a private pension fund, the contributions to that fund cannot be lower than those for PRGF.

Further, employers who wish to be exempted from PRGF, and thus not make monthly contributions, must submit a certificate from the Financial Services Commission to the Ministry of Labour, certifying that a private pension scheme operational.

  1. Companies must ensure that before April 2020 their payrolls can record, and deduct, the PRGF contribution percentages, when they are announced; and
  2. Companies must ensure that their monthly process flow now includes payment of the PRGF contributions to the MRA; and
  3. The contributions should be included in the monthly cash flow of the company. The gratuity can no longer be paid from working capital when the employee leaves service; and
  4. We do not recommend paying over lump sum arrear payments to the MRA immediately. We would however urge clients to calculate the arrear service gratuities for all current employees in order to identify the quantum of the liability to be paid in the future.