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Provident Fund For Employees

Question

Kind assist with the query regarding provident funds below.

Our company employs around 400 people. They all earn a basic salary and receive a bonus at the end of the year.

The discussion regarding a provident fund for staff has been around for some time as an investment savings for staff which they can utilize when they retire.

As a company what is the Shari ruling regarding implementing a provident funds in our business. The contributions will be made by both the employer and employee and the option of a provident fund will not be forced upon anyone.

We further have a union body that many of our staff belong to and the provident fund is something that they are demanding as well.

Obviously the necessary checks are available to ensure the investments of the provident fund are halaal etc.

Please provide clarity regarding the Shari ruling around provident funds and if this is not allowed, what is the alternative that can be considered.

Answer

Our Darul Ifta does not approve the implementing of conventional provident funds in one’s business due to the element of Riba (interest), nor can we comment on any of the alternate retirement annuities being offered by unconventionally driven firms due to us being unapprised regarding their processes.

Muslim Employees:

1)    We have reached a conclusion that the best way to go about implementing a benefits program for your Muslim employees which will conform to Shari’ah standards would be as follows:

   ®          Firstly, in undertaking this venture, it would be advisable to avoid third party influence at every step which means that you would have to go about the entire process without the brokering of any associate or assistant outside your company. In this way, you will be reassuring the purity and legitimacy of your monetary dealings.

   ®         An investment scheme should be set up in which you would be going into a Muḍārabah contract (silent partnership) with the employee. The employee would be the silent partner, while you as the employer, will be doing all the administrative and related work. The investment should be in any Halaal business venture which will have to be personally administered by yourself. These could include buying and selling of gold or silver, land purchase and development, real estate, cattle schemes etc. The nature of the investment choice would obviously be determined by the amount that the employee is willing to invest monthly. 

   ®    Your employee will be a sleeping partner in this partnership (towards which you as the employer would also make a monthly contribution in the business venture). However, the employee will have to hand over all administrative responsibilities to you. This will result in a Muḍārabah contract that will incorporate an aspect of Shirkah as well. The Muḍārabah aspect (which is the dominant component) is on the basis that the employee would be the silent partner who is investing a sum of capital and the Shirkah aspect would be on the basis that you as the employer are also making a contribution towards the investment. In a Muḍārabah contract, if the financer/investor grants permission to the working partner to incorporate his capital with the working partner’s funds, then this results in a Shirkah also coming into effect. In spite of this (due to monthly contributions being equal from both sides), the majority of the returns accrued can be allotted to the employee (considering that this is an employee’s benefit program). The returns do not have to be equal, even though the monthly contribution of each partner is equal. 

   ®         An agreement will have to be signed stating that the partnership will terminate upon the termination of employment and that the returns of the investment will be a specified (pre-agreed) percentage of the profits and not of the capital, nor of the net worth of the investment. 

   ®         The returns will be paid out as a lump sum upon the termination of employment. In the event of death being the cause of the dissolution of employment, the returns will be paid to the estate of the employee. 

   ®         The agreement will have to emphatically state that if the investment dwindles then the employee would have to be bear the risk as well; considering that he is a partner of the investment. The losses, unlike the returns, will be pro rata of the capital input of each partner. Bearing in mind the spirit of co-operation, the prime investor (you) should however, be willing to pay out the employee on the loss of his capital as a kind gesture.

Non-Muslim Employees:

2)   Considering that the above-mentioned scheme may not be of interest to non-Muslim staff, an offer should be made to them that they independently take out individual retirement annuities with a broker of their choice (without you being involved in choosing a retirement annuity broker or even depositing contributions directly into the retirement annuity fund). A percentage of the monthly amount to be deposited into this fund will be supplemented to their salaries. In this way they will be saved from the extra trouble of moving funds to a different retirement annuity in the case of their employment termination from your business. The same can be adopted if you are approached to take out a medical insurance for your staff whereby you only supplement them the amount needed to be administered to the medical aid company (and they will take out the medical-aid with a broker of their choice). This amount will not be subtracted from their salaries nor yearly bonuses, rather it will be treated as a Tabarru’ (gift or donation) to your staff and can be given with the intention of Sadaqah. This method will be costly but may help you circumvent worker union issues.

3)    Alternatively, a fund can be set up through an unconventional firm, but you will have to emphatically state and ensure that the fund must operate by investing in Shari’ah-compliant business ventures only.

Checked and Approved By:

Mufti Muhammed Saeed Motara Saheb D.B.

References

[أَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا]-البقرة 275

  كتاب المضاربة

المضاربة: عقد على الشركة بمال من أحد الشريكين وعمل من الآخر ولا تصح المضاربة إلا بالمال الذي بيننا أن الشركة تصح به

ومن شرطها: أن يكون الربح بينهما مشاعا لا يستحق أحدهما منه دراهم مسماة ولا بد أن يكون المال مسلما إلى المضارب ولا بد لرب المال فيه

فإذا صحت المضاربة مطلقة جاز للمضارب أن يشتري ويبيع ويسافر ويبضع ويوكل وليس له أن يدفع المال مضاربة إلا أن يأذن له رب المال في ذلك

وإن خص له رب المال التصرف في بلد بعينه أو في سلعة بعينها لم يجز له أن يتجاوز ذلك

وكذلك إن وقت للمضاربة مدة بعينها جاز وبطل العقد بمضيها

وليس للمضارب أن يشتري أبا رب المال ولا ابنه ولا من يعتق عليه فإن اشتراهم كان مشتريا لنفسه دون المضاربة وإن كان في المال ربح فليس له أن يشتري من يعتق عله فإن اشتراهم ضمن مال المضاربة وإن لم يكن في المال ربح جاز أن يشتريهم فإن زادت قيمتهم عتق نصيبه منهم ولم يضمن لرب المال شيئا ويسعى المعتق لرب المال في قيمة نصيبه منه وإذا دفع المضارب المال مضاربة ولم يأذن له رب المال في ذلك لم يضمن بالدفع ولا بتصرف المضارب الثاني حتى يربح فإذا ربح ضمن المضارب الأول المال

وإذا دفع إليه المال مضاربة بالنصف فأذن له أن يدفعها مضاربة فدفعها بالثلث فإن كان رب المال قال له على أن رزق الله بيننا نصفان فلرب المال نصف الربح وللمضارب الثاني ثلث الربح وللأول السدس وإن قال على أن ما رزقك الله بيننا نصفان فللمضارب الثاني الثلث وما بقي بين رب المال والمضارب الأول نصفان فإن قال له على أن ما رزق الله فلي نصفه فدفع المال إلى آخر مضاربة بالنصف فللمضارب الثاني نصف الربح ولرب المال النصف ولا شيء للمضارب الأول فإن شرط للمضارب الثاني ثلثي الربح فلرب المال نصف الربح وللمضارب الثاني نصف الربح ويضمن الأول للمضارب الثاني سدس الربح من ماله

وإذا مات رب المال أو المضارب بطلت المضاربة وإن ارتد رب المال عن الإسلام ولحق بدار الحرب بطلت المضاربة

وإذا عزل رب المال المضارب ولم يعلم بعزله حتى اشترى وباع فتصرفه جائز وإن علم بعزله والمال عروض فله أن يبيعها ولا يمنعه العزل من ذلك ثم لا يجوز أن يشتري بثمنها شيئا آخر

وإن عزله ورأس المال دراهم أو دنانير قد نصت فليس له أن يتصرف فيه

وإذا افترقا وفي المال ديون وقد ربح المضارب فيه أجبره الحاكم على اقتضاء الديون وإن لم يكن له ربح لم يلزمه الاقتضاء ويقال له: وكل رب المال في الاقتضاء

وما هلك من مال المضاربة فهو من الربح دون رأس المال فإن زاد الهالك على الربح فلا ضمان على المضارب فيه وإن كانا قد اقتسما الربح والمضاربة بحالها ثم هلك المال أو بعضه ترادا الربح حتى يستوفي رب المال رأس المال فإن فضل بشيء كان بينهما وإن عجز عن رأس المال لم يضمن المضارب وإن كانا قد اقتسما الربح وفسخا المضاربة ثم عقداها فهلك المال لم يترادا الربح الأول

ويجوز للمضارب أن يبيع بالنقد والنسيئة ولا يزوج عبدا ولا أمة من مال المضاربة

(مختصر القدوري)

الْمَادَّةُ ( 1417 ) – ( إذَا خَلَطَ الْمُضَارِبُ مَالَ الْمُضَارَبَةِ بِمَالِهِ فَيُقْسَمُ الرِّبْحُ الْحَاصِلُ عَلَى مِقْدَارِ رَأْسَيْ الْمَالِ أَيْ أَنَّهُ يَأْخُذُ رِبْحَ رَأْسِ مَالِهِ وَيُقْسَمُ مَالُ الْمُضَارَبَةِ بَيْنَهُ وَبَيْنَ رَبِّ الْمَالِ عَلَى الْوَجْهِ الَّذِي شَرَطَاهُ ) إذَا خَلَطَ الْمُضَارِبُ مَالَ الْمُضَارَبَةِ بِمَالِهِ حَسْبَ الْمَادَّةِ الْآنِفَةِ بِنَاءً عَلَى التَّفْوِيضِ أَوْ الْإِذْنِ الصَّرِيحِ مِنْ رَبِّ الْمَالِ فَيُقْسَمُ الرِّبْحُ الْحَاصِلُ عَلَى مِقْدَارِ رَأْسَيْ الْمَالِ أَيْ أَنَّهُ يَأْخُذُ رِبْحَ رَأْسِ مَالِهِ خَاصَّةً ; لِأَنَّهُ رِبْحُ مَالِهِ وَيُقْسَمُ رِبْحُ مَالِ الْمُضَارَبَةِ بَيْنَهُ وَبَيْنَ رَبِّ الْمَالِ عَلَى الْوَجْهِ الَّذِي شَرَطَاهُ ( التَّتَارْخَانِيَّة فِي الْفَصْلِ الثَّانِي ) مَثَلًا لَوْ أَعْطَى رَبُّ الْمَالِ خَمْسِينَ دِينَارًا مُضَارَبَةً لِآخَرَ بِنِصْفِ الرِّبْحِ وَخَلَطَ الْمُضَارِبُ عَلَى الْوَجْهِ الْمُبَيَّنِ فِي هَذِهِ الْمَادَّةِ مَالَ الْمُضَارَبَةِ الْمَذْكُورِ بِمِائَةِ دِينَارٍ لَهُ وَرَبِحَ ثَلَاثِينَ فَتَكُونُ عِشْرُونَ دِينَارًا رِبْحَ رَأْسَ مَالِهِ وَتَكُونُ لِلْمُضَارِبِ خَاصَّةً وَتَكُونُ الْعَشَرَةُ دَنَانِيرُ الْبَاقِيَةُ رِبْحَ مَالِ الْمُضَارَبَةِ فَيَقْتَسِمُهَا مَعَ رَبِّ الْمَالِ مُنَاصَفَةً

(درر الحكام شرح مجلة الأحكام ج3ص475)

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