Unemployment Insurance Fund in South Africa- All You Need to Know
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.
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.
What steps must I take?
Any employer, who is registered with SARS for Employees’ Tax, also needs to register to pay UIF contributions. You can register once for all different tax types using the client information system.
The following employers must register at the UI Commissioner’s office for purposes of paying UIF contributions, an employer who:
- Doesn’t need to register with SARS for Employees’ Tax purposes
- Hasn’t voluntarily registered with SARS as an employer
- Pays or is liable to pay remuneration to an employee must contribute on a monthly basis to the UI Fund.
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:
- With effect from 1 October 2012 – R 14 872 per month (R 178 464 annually)
- With effect from 1 June 2021 – R 17 712 per month (R 212 544 annually).
Please note: As from 1 October 2012, the maximum earnings ceiling is R14 872 per month or R178 464 annually. For employees who earn more than this amount, the contribution is calculated using the maximum earnings ceiling amount. Therefore the maximum contribution which can be deducted, for employees who earn more than R14 872 per month, is R148.72 per month.
- Excess amounts shouldn’t be included as remuneration or as a leviable amount for the purposes of UIF contributions.
- The amounts deducted or withheld must be paid by the employer to SARS on a monthly basis, by completing the Monthly Employer Declaration (EMP201). The EMP201 is a payment declaration in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or Employment Tax Incentive (ETI), if applicable.
- A unique Payment Reference Number (PRN) will be pre-populated on the EMP201, and will be used to link the actual payment with the relevant EMP201 payment declaration.
How and when should it be paid?
It must be paid within seven days after the end of the month during which the amount was deducted. If the last day for payment falls on a public holiday or weekend, the payment must be made on the last business day before the public holiday or weekend.
The following payment methods are available:
- Electronic payments through the internet (EFT)
- At a branch of one of the relevant approved banking institutions.
Chapter 17 of the Tax Administration Act, 2011 deals with offences committed under a Tax Act, which also applies to the UIC Act.
An offence is committed if a person:
- Fails to:
- Submit a return or document to SARS or
- Issue a document to a person as needed.
- Fails or neglects to:
- Register or let SARS know of a change in registered details or
- Keep records as needed.
- Submits a false certificate or statement.
- Refuses or neglects to take an oath or make a solemn declaration.
A person convicted of any of these offences may be liable to a fine or imprisonment for a period not more than two years.