Before the camel's back is broken: How Malawi provides succour to employers by jettisoning the payment of a severance allowance and pension benefits at the same time

Abstract

After the enactment of the Employment (the Employment Act), the legal position in Malawi was that an employee, who left the employment of the employer (for reasons other than his own resignation or misconduct) that had provided voluntary contractual pension benefits, was entitled to payment of both pension benefits and a severance allowance. The employer was liable for these payments. Hence, there was a double burden on the employers, who operated voluntary pension schemes for their employees, to statutorily pay severance allowances and contractually pay pension benefits upon the termination of employment. It is important to mention that prior to 2011 the provision of pension benefits was not mandatory in Malawi but voluntarily provided for by some employers in their employment contracts. Hence, I refer to voluntary contractual pension benefits to distinguish them from the current mandatory pension benefits entitlement under the Pension (the Pensions Act). There were numerous legal challenges by employers against this double financial burden, but the courts, including the Supreme Court of Appeal in Auction Holdings, consistently held that employees are entitled to be paid both a severance allowance and pension benefits upon termination of their employment by the employer, and that the employer is liable to pay these costs. This article discusses the problems surrounding the payment of a severance allowance and private pension benefits in Malawi. It starts by discussing the case law developments following the passage of the Employment Act and its subsequent amendments, which were repeatedly struck down by the courts. The article seeks to demonstrate the context which led to major pension and employment reforms in 2011 in the form of the Pension Act and the Employment Amendment (the Employment Amendment Act), which were concurrently enacted to specifically resolve the above problem. It examines the effects of these legislative reforms on Auction Holdings and later cases, and whether these legislative reforms undermined those judicial pronouncements. The article argues that the legal position that prevailed after 2000, when the Employment Act was enacted, no longer exists following the enactment of the Pension Act and the Employment Amendment Act. Further, it argues that Auction Holdings and its preceding cases are no longer good law at least on one legal proposition because the Pension Act and Employment Amendment Act undermined some aspect of Auction Holdings.