Origin, overview and purpose of the unemployment fund
Article supplied by Narike Kachelhoffer, Evimeria Accounting and Labour Assist
The unemployment fund came into existence on 1 April 2002. The fund is regulated by the Unemployment Insurance Act 2001 and the Unemployment Insurance Contributions Act 2002.
The fund provides temporary financial assistance for workers who, for specific reasons, can no longer earn an income in the economy from employment. The different scenarios in which a worker can claim unemployment insurance are controversial and are measured by the period that the worker did make a known contribution to the fund. Apart from the scenarios in which a worker can claim, there are also scenarios where the worker cannot claim, such as resignation.
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The application of the unemployment fund:
Although there are many controversial reasons why employers and employees do not always see eye to eye when it comes to the fund, one thing is certain – no employer may choose not to deduct it and no worker is exempt from making a contribution, given that in both cases the worker works more than 24 hours per month, earns a basic salary, is not an immigrant on contract, or is employed as a student. It is therefore a compulsory deduction, which must be declared and paid over to the unemployment fund.
The legal contribution obligation towards the unemployment fund:
The unemployment fund contribution is calculated at 1% of the worker’s earnings and 1% contribution from the employer on the worker’s earnings. So a 2% contribution calculated on earnings and which is very fair seen in the light that the payout that workers can receive is more than the contribution made.
The employer and the unemployment fund:
Apart from the obligation to deduct your workers’ 1% contribution from their earnings, this must be declared and paid over to the fund together with the business’s statutory declarations. The South African Income Tax Service is only a payment option in respect of the fund. This is not a declaration to the fund. Therefore, the declarations of contributions by the employer must be maintained monthly through the Unemployment Fund’s platform at www.uif.co.za.
The declarations regarding earnings in businesses (EMP501) are not a declaration and the declarations must still be made to the fund itself. Owners of businesses can be heavily fined if they neglect, or fail to make, the necessary deductions, declarations and payments to the fund.
The worker and the unemployment fund:
It’s not all workers employed by businesses who have to make a mandatory contribution. The following cases are exempt from the mandatory contributions:
- Students employed by businesses in relation to their studies (students who are employed and study completely independently are seen as normal workers)
- Workers who earn commission and no basic salary
- Workers on learning programs supported by the business
- Immigrant workers employed on contract
- Government agency employees e.g. municipal workers
- Workers who work less than 24 hours per month
Claiming from the unemployment fund:
Workers can claim from the fund in the following cases:
- Students employed by businesses in relation to their studies (students who are employed and study completely independently are seen as normal workers)
- Workers who earn commission and no basic salary
- Workers on learning programs supported by the business
- Immigrant workers employed on contract
- Government agency employees e.g. municipal workers
- Workers who work less than 24 hours per month
There is also a death benefit available to the survivors of a deceased worker who made contributions to the fund.
When can the worker not claim against the fund?
- Resignation
- Worker who deserts (when an employee is absent from the workplace without the intention of returning to work) associated with case studies
- If no contribution to the fund was deducted or made during the period of employment
- Temporary suspension pending a hearing
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