Government to blame for confusion over new UIF contribution and benefit rules

The Unemployment Insurance Fund (UIF) gives short-term relief to workers when they become unemployed or are unable to work because of maternity, adoption leave, or illness. It also provides relief to the dependants of a deceased contributor.

According to SARS, an employer must pay a total contribution of 2% (1% contributed by the employee and 1% contributed by the employer) within the prescribed period.

Earlier this year, Minister of Labour Mildred Oliphant announced an amendment to the “scale of benefits” described in the Unemployment Insurance Act.

Following this, there has been widespread confusion as to whether the change in benefits will lead to an increase in contributions payable by employees, says Arlene Leggat, Director at the South African Payroll Association.

While the amendments already came into effect on 1 April, the wording is somewhat misleading, according to Leggat.

“The announcement uses the term: ‘scale of benefits’. However, the figures mentioned are actually the limits of benefits to which UIF applicants are entitled, i.e. they can’t claim amounts above this ceiling.”

“The scale of benefits refers to brackets of income previously earned by a beneficiary and the corresponding percentage of that income they may claim at each level. These brackets might not even be affected, and the articulation of the change could have been clearer,” she said.

According to Leggat, UIF benefits have always been closely associated with UIF contributions, so its natural for payroll practitioners to assume that changes to the first will have a direct impact on the latter.

“To compound the confusion, changes to both have historically been implemented together on 1st April, and the updating of payroll systems is a given,” she said.

“Therefore, many practitioners were led to believe that contributions must be included when, in fact, payroll is not affected at all.”

Leggat highlighted that contributions fall within the ambit of the National Treasury and are governed by the Unemployment Insurance Contributions Act of 2002. Benefits, however, are distributed by the Department of Labour and are regulated by the Unemployment Insurance Act of 2001.

“Since each function is managed by a different Minister, an amendment by one Minister does not constitute an amendment by the other. By law, each Minister must announce any changes separately by way of government gazette.”

“Still, amendments by the Minister of Finance regarding UIF contributions must be made in consultation with the Minister of Labour and the UIF Commissioner, and vice versa. This suggests a high level of collaboration and correspondence between the two offices. Surely, at such close quarters, consideration should be given to communicating the status of each law in regards to the other.”

“In other words, the confusion should have been anticipated and addressed as part of the legislative roll-out,” she said.

Not so fast

According to Leggat, SAPA representatives have already contacted the UIF in an attempt to offer members an official response on the changes.

“Surprisingly, the UIF representatives with whom we corresponded assured us that the amendment was applicable to both contributions and benefits. But when pressed to provide a gazetted announcement by the Minister of Finance, they were unable to do so,” she said.

“Currently, the matter is under investigation with the UIF and we’ve received no further information.”

“It seems obvious that the source of confusion is a lack of coordination between the relevant lawmakers and their departments, and poor communication to the public in general.”

What should you do?

While the response by UIF representatives point to an inevitable change in UIF contributions, Leggat stressed that employers shouldn’t jump to any conclusions.

“Last year it was reported that the UIF had amassed a R99-billion surplus,” noted Leggat.

“Therefore, they might be in no hurry to increase contributions until they have to. SARS seems to confirm our thinking, with the existing limits still displayed on their UIF web page at the time of writing.”

“Next, obey the law. Until the Minister of Finance gazettes any changes to the UIF contribution structure in accordance with the Act, it should be business as usual. Do not update your payroll software’s tables or deduct higher contributions from employees because, without official notification, this could prove illegal.”

“SAPA will continue to pursue this matter and keep its members abreast of developments,” she said.

Read: How much you should be paying your domestic worker and gardener in South Africa

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