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- Employers and employees contribute to the fund, and employees who become unemployed, or their beneficiaries where this may be the case, may be entitled to benefits.
- Employers who are obligated to pay unemployment insurance must register with the UIF offices to ensure the payment of contributions.
- Employers must pay monthly UIF contributions within seven days after the end of the month.
- The relevant legislation sets strict requirements that must be adhered to, and any employer found to be in breach of this Act may be liable for a fine and/or imprisonment.
- The Unemployment Insurance Act provides a vital safety net for employees in South Africa.
The aim of the Unemployment Insurance Act, 2001 (Act 63 of 2001), as amended, is to establish an Unemployment Insurance Fund (UIF). Employers and employees contribute to the fund and employees who become unemployed, or their beneficiaries where this may be the case, may be entitled to benefits.
This system seeks to alleviate the harmful economic and social consequences of unemployment, which can have a major impact on individuals and families. Therefore, the Act, by way of a structured and collaborative approach, helps to create a network of support that can assist those in need.
Application of the Act
The Unemployment Insurance Act applies to all employers and employees; however, some categories are not included in the provisions of the Act, such as employees who work for an employer for less than 24 hours a month, members of parliament, cabinet ministers, deputy ministers, members of provincial executive councils, members of provincial legislators, and municipal councillors.
Employers who are obligated to pay unemployment insurance must register with the UIF offices to ensure the payment of contributions. An employer cannot exercise discretion as to whether or not to register for unemployment insurance.
Employers must pay monthly UIF contributions within seven days after the end of the month. To adhere to legislation, the contributions must therefore reach the UIF by the seventh of each month. This is essential to ensure that the UIF has sufficient funding to meet the requirements of unemployed employees. These contributions comprise 1% of the employee’s salary, which is deducted from their salary, and a further 1% contributed by the employer.
Employers’ responsibility
Employers play an important role in the implementation of legislation and must:
- Register for UIF:Registration must be completed as soon as the employee’s employment commences.
- Make monthly payments: This includes deducting 1% from the employee’s salary for their contribution along with a 1% contribution by the employer.
- Submit statements: Employers must submit a monthly UIF statement to the Department of Employment and Labour. This document contains information regarding UIF contributions for both the employer and employee in respect of each employee.
- Issue UI forms: Employees must receive these forms to enable them to claim UIF benefits in the event of unemployment or similar circumstances. The best example of this is the UI-19 form issued when an employee’s employment comes to an end and the person does not yet have a new job.
- Keep records: Employers must keep accurate records of UIF contributions, employee information, and relevant documentation. This documentation might be subject to audits by the Department of Employment and Labour, and a fine may be issued for non-compliance.
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Risk of non-compliance
The relevant legislation sets strict requirements that must be adhered to and any employer found to be in breach of this Act may be liable for a fine and/or imprisonment. These guidelines are in place to ensure a high level of compliance and to maintain the integrity of the UIF. It is essential for employers to take their responsibilities seriously to ensure the well-being of employees and their families.
The Unemployment Insurance Act provides a vital safety net for employees in South Africa. By promoting the active involvement of employers and employees, the Act creates a fund that not only supports individual workers but also contributes to stabilising the broader economy.
The LWO Employers Organisation assists employers to comply with labour law, and to use it to their advantage to protect their business. As a registered employers’ organisation with the Department of Employment and Labour, the LWO has the right to represent members at the Commission for Conciliation, Mediation and Arbitration (CCMA). Take note that this article is not legal advice – consult one of our legal advisors about any specific legal problem or matter. For more information, email Tiaan Botes at tiaan@lwo.co.za, info@lwo.co.za, or visit www.lwo.co.za.
