South Africa: Van Wyk’s impact on retirement fund benefits and risk cover

The Constitutional Court’s judgment in Van Wyk and Others v Minister of Employment and Labour places South Africa’s parental‑leave regime on a gender‑neutral basis.

While the case targets statutory parental leave and unemployment insurance benefits, it will inevitably influence, and have an impact on, retirement fund benefits and group risk arrangements, as employers, retirement funds and insurers align terminology, processes and costs to the new baseline.

In earlier articles in our series on Van Wyk and parental leave, we examined the judgment’s immediate impact on employers and employees (see Part 1) and the financial implications for employers who have historically offered enhanced parental leave benefits (see Part 2). In this article, we explore the implications on employee benefits with a particular focus on retirement funds and risk benefits.

Brief recap: what has changed (interim position)

The Constitutional Court confirmed that certain provisions of the Basic Conditions of Employment Act, 1997 (BCEA) and the Unemployment Insurance Act, 2001 are invalid and inconsistent with the Constitution to the extent that they unfairly discriminate between mothers and fathers, and among different categories of parents, in relation to the length of parental leave provided for and applicable unemployment benefits.

The declaration of invalidity is suspended for 36 months from 3 October 2025 to allow Parliament to correct the constitutional defects. In the interim, the Court’s reading in order resets the BCEA’s leave entitlements as follows:

• The separate categories of parental leave (i.e maternity leave, paternity leave, commissioning parent leave and adoption leave) are consolidated into a single leave category, namely, parental leave.

• An employee who is a single parent or the only employed party in a parental relationship is entitled to at least four consecutive months’ unpaid parental leave.

• Where both parties in a parental relationship are employed, they are entitled to share four months and 10 days of parental leave.

Why this matters to retirement fund and risk benefits

Many employers require employees to join a nominated retirement fund, and, in parallel, participate in the employer’s group risk arrangements (commonly referred to as ‘unapproved’ risk benefits).

While retirement fund rules regulate the payment of employer and/or member (employee) contributions to the retirement fund during temporary absences – such as parental leave – a participating employer’s employment contract or leave policy may not necessarily align with the retirement fund’s rules (or vice versa), which may create contribution/premium shortfalls, lapses in risk benefit cover, section 13A of the Pension Funds Act,1956 (PFA) exposure, and disputes about who must pay what during unpaid or partially paid leave.

‘Approved’ risk benefits (death and/or permanent disability) are provided within the retirement fund. ‘Unapproved’ risk benefits (death, disability, critical illness and related cover) are insured directly by the employer through a policy of insurance issued to the employer by the insurer. While not linked to the retirement fund, many retirement funds are used as a premium-conduit for unapproved risk benefits.

Retirement fund rules vary. Some rules clearly stipulate that while retirement-funding contributions may be suspended during temporary absence, the portion necessary to maintain risk cover – regardless of whether the member is remunerated, must continue. Others confer a discretion on the employer to continue full or partial contributions; or require agreement between the employer and member in that regard.

This variability raises practical questions. If agreement is not reached, does risk cover continue, and if so, which cover – approved or unapproved? If contributions must continue while the member is unpaid, who bears the obligation to pay – the employer or the member? If the member is responsible, how are payments practically made, and can the retirement fund pursue the employer for non‑payment under section 13A of the PFA?

Act now: targeted steps to reduce potential legal and operational risk

Employers should carefully review the rules of the retirement funds in which they participate, including any applicable special rules, to determine whether contributions must continue during unpaid or partially paid parental leave. This includes understanding:

• What the contributions cover: retirement funding, approved risk benefits, unapproved risk benefits, and/ or fund expenses.

• Who is legally responsible for payment during the leave period: the employer, the member, or both.

• Consequences of non-payment and whether the cover will be suspended.

Similarly, where group risk arrangements are in place, employers should consult the relevant insurance policies to assess the terms and conditions that apply during unpaid or partially paid parental leave, if any.

Where the retirement fund rules or policies allow a choice to maintain, reduce, or suspend contributions or premiums, the following must be clearly documented and communicated to employees:

• The available options and who may exercise the choice.

• The default position if no choice is made.

• The timelines for making the choice.

• The consequences of non-payment or late payment, including any waiting periods, exclusions, or insurability requirements that may be triggered due to the leave.

Alignment across documents

It is important for employers to ensure that retirement fund rules (including special rules, where applicable), insurance policies, schedules, HR policies, employment contracts and related documents are consistent to avoid possible gaps and conflicts.

Update language and documents: shift from labels to neutrality

In light of the Van Wyk judgment, terminology such as ‘maternity’ leave and ‘paternity leave’, as used in retirement fund rules, employer contracts, policies, and other related documents, should be reconsidered. Where applicable, these terms should be updated to reduce interpretive risk, promote consistent administration and mitigate potential unfair discrimination claims.

Conclusion

The Van Wyk judgment does not rewrite employer contracts, policies or retirement fund rules overnight, but it does establish a new baseline that employers and other relevant stakeholders should consider, and where necessary, implement.

The interim regime requires employers to reconcile parental leave entitlements with contribution obligations, policy terms and administrative processes across retirement funds and group risk arrangements. 

Taking stock now – by clarifying who pays what, when and for which benefits; aligning definitions and eligibility criteria; and embedding gender neutral drafting – will help prevent cover lapses, and mitigate against employee and interpretive disputes and potential unfair discrimination claims.

Deirdre Phillips is a partner in Bowmans’ Johannesburg office and a leading employee benefits expert with significant knowledge and experience in all aspects relating to pension law, medical schemes law and employee benefits.