South Africans will be putting some money back into their pockets via the Unemployment Insurance Fund (UIF) which has a R90-billion surplus. This was the word from Finance Minister, Nhanhla Nene in his 2015 National Budget speech.

UIF contributions may be reduced to just R10 per month for a year with benefits remaining unchanged.

The UIF gives short term relief to employees when they become unemployed or are unable to work due to reasons such as maternity or illness. It also provides benefits to the dependents of the contributor to the UIF. The UIF is governed by two Acts, namely:

The Unemployment Insurance Act, 2001 (UIA); and

The Unemployment Insurance Contributions Act, 2002 (UICA).

Section 5 of the UICA states that it is the duty of every employer and employee to contribute monthly to the UIF. Ordinarily, employees and employers pay 1% of the first R14 872 of an employee’s monthly salary, but now Nene has proposed that the remuneration threshold, against which contributions are calculated, be temporarily reduced to the amount of R1000 for the 2015/16 fiscal year.

This temporary reduction is proposed to come into effect from 1 April 2015 and to be revised before 1 April 2016. If the temporary reduction is implemented, both employers and employees will be asked to pay a maximum of R10 each per month towards the UIF. Currently, the maximum employer and employee contributions stand at R148.72 each.

The proposed reduction aims to provide temporary support to households and employees, in a fiscally sustainable manner. “By reducing unemployment insurance contributions for a limited period, government will partially off-set the impact of the higher taxes and slow growth on employees and employers,” said Nene. As mentioned above, the proposed temporary reduction will not change or reduce the unemployment benefits payable to beneficiaries and as such, employees will have the same benefits under the UIF at a reduced price.

Government is also in the process of considering improvements to unemployment insurance benefits which include extending the payments of benefits from eight months to twelve months, and extending the grace period to first claim UIF from six months to eighteen months.

The public will have until 20 March 2015 to comment on the proposed temporary reduction of UIF contributions and if implemented, employers and employees may breathe a sigh of relief to help overcome the financial burden of increased taxes and fuel levies.