What is the UIF?
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. The unemployment insurance system in South Africa is governed by the following legislation: • Unemployment Insurance Act, 2001 (the UI Act) • Unemployment Insurance Contributions Act, 2002 (the UIC Act) These Acts provide for the benefits, to which contributors are allowed, and the imposition and collection of the contributions to the UIF, respectively, and came into operation on 1 April 2002.How much do you need to pay?
- The amount of the contribution due by an employee, must be 1% of the remuneration paid by the employer to the employee. • The employer must pay a total contribution of 2% (1% contributed by the employee and 1% contributed by the employer) within the prescribed period. • A contribution shall not apply to so much of the remuneration paid or payable by an employer to an employee, as exceeds: o With effect from 1 October 2012 – R 14 872 per month (R 178 464 annually) o With effect from 1 June 2021 – R 17 712 per month (R 212 544 annually).
What does this mean?
- The increase is effective from June 2021 (in respect of salaries and wages paid for June 2021 onwards)
- The UIF will continue being calculated at 2% of the employee’s salary/wage (1% by employer and 1% by an employee)
- The Net salary/wage of employees earning up to R14 872 will not be affected.
- The Net salary/wage of employees earning more than R14 872 per month will be affected negatively, unless the employer makes a slight salary adjustment to account for the change in UIF amount.
- The maximum UIF deduction from employee salary/wage will be calculated at 1% of the amount up to R17 712, excess salary/wage is not taken into account for UIF calculation.
- The maximum effect of this change for an employee earning more than R14 872 is R28.40 (17 172 – 14 872 = 2 840 x 1%). The employer is responsible for the same amount as the employee.
What can employers do?
- Employers must advise their employees of the change and the effect it may have on their net pay
- Employers may also chose to adjust the earnings of employees from June such that the UIF change does not affect the net pay to the employees.
Who is it for?
- All employees, as well as their employers, are responsible for contributions to the UIF. However, an employee is excluded from contributing to the UIF if he or she–
- Is employed by the employer for less than 24 hours a month
- Receives remuneration under a contract of employment as contemplated in section 18(2) of the Skills Development Act, 1998 (Act No.97 of 1998)
- Is employed as an officer or employee in the national or provincial sphere of Government
- Entered the Republic for the purpose of carrying out a contract of service, apprenticeship or learnership within the Republic. If upon termination, the employer is required by law or by the contract of service, apprenticeship or learnership, or by any other agreement or undertaking, to send home that person, or if that person needs to leave the Republic
- Is the President, Deputy President, a Minister, Deputy Minister, a member of the National Assembly, a permanent delegate to the National Council of Provinces, a Premier, a member of an Executive Council or a member of a provincial legislature or
- Is a member of a municipal council, a traditional leader, a member of a provincial House of Traditional Leaders and a member of the Council of Traditional Leaders.