The Regulation on Pensionable Wage was gazetted on 25 February 2021. The primary objective of the Regulation is to provide for the requirements related to Pensionable Wage for the purposes of calculating contributions to Maldives Retirement Pension Scheme (MRPS).
The most noteworthy provisions of the Regulation include the following:
Determination of Pensionable Wage
The Regulation provides that the Pensionable Wage of an employee is the basic salary as provided for in the employment contract. Contributions to the MRPS of each employee registered on the MRPS are to be as follows:
- 7% of basic salary (Pensionable Wage) as employer’s contribution
- 7% of basic salary (Pensionable Wage) as employee’s contribution
Employers are responsible to deduct the MRPS contributions from employees’ Pensionable Wage and deposit the amounts deducted into the MRPS.
Other Deductions from Pensionable Wage
The Regulation provides that the 7% contributed to the MRPS must be calculated after the following three types of deductions are deducted from the basic salary:
- Hourly pay deducted from the basic salary in accordance with the employment agreement
- Deductions for absenteeism deducted in accordance with the employment agreement
- Deductions for days of a month for which salary is not payable depending on the start date and end date of employment
Any other type of deductions from basic salary can only be deducted after calculating and deducting the employee’s contribution of 7% to the MRPS.
Requirements Related to Employment Agreement
Under section 12 of the Pension Act (Law Number 8/2009), employers were already obliged to expressly provide in the employment agreement the details of amounts deducted from basic salaries as contributions to the MRPS.
The Regulation now addresses the situation where employers fail to adhere to the requirements related to employment agreement under Pension Act . Under the Regulation, the Pensionable Wage for monthly contributions of MRPS will be the monthly salary and allowances (not the basic salary) where:
- the employer fails to expressly state the Pensionable Wage in the employment agreement;
- the employer fails to expressly state how the pension contribution are to be deducted from basic salary in the employment agreement; or
- the employer has used a term different from ‘basic salary’ in the employment agreement.
Pensionable Wage of Waged Employees
Pensionable Wage of waged employees will be the basic salary of such employees.
The Pensionable Wage of waged employees will be the total daily/weekly/monthly wage and/or allowances calculated for the duration of the month where:
- the agreement with the waged employee does not state that the pension contributions are to be deducted from the basic salary; or
- there is no employment agreement in place with the waged employee,
Revision of Pensionable Wage
The authority to determine the definition of Pensionable Wage lies with the Board of Pension Office. Should the Board decide to make any revisions to the definition of Pensionable Wage, the Board is required to amend the Regulation on Pensionable Wage specifying the changes brought to the meaning of Pensionable Wage and the date of commencement of such amendment.
The Regulation is in force from 25 February 2021.