UIF to start spending its large cash pile

2013-07-28 14:01

The Unemployment Insurance Fund (UIF) is set for an overhaul that could see it fund all sorts of job-saving or job-creating projects and significantly boost its benefit payouts.

The Unemployment Insurance Amendment Bill was introduced to Parliament last week and the public can send comments until August?19.

Better benefits as well as an open-ended right to make investments in job-creating projects are being written into law so that it can start spending its unreasonably large cash pile.

The fund’s accumulated surplus recently ballooned way beyond expectations.

All employees in the country are supposed to be registered with the UIF – and contribute 1% of their net salaries every month.

Their employers match that contribution and it all adds up.

In 2010, the accumulated surplus was about R25?billion and was projected to reach R41.3?billion by March this year.

Instead, it has reached around R53.8?billion with good prospects for further rapid growth.

Treasury’s medium-term projections in this year’s budget review already took into consideration a draft of the bill, but still predicted massive surpluses that would push the fund to an accumulated surplus of R77?billion by 2016.

The new bill’s key amendment extends the fund’s mandate to financing “the retention of contributors in employment and the re-entry of contributors into the labour market”.

The projects funded by the fund, according to the bill, need to directly benefit contributors to the fund and not the unemployed in general.

For contributors, the major changes relate to expanding benefits.

Currently, benefits are limited to eight months, but that is set to become a full year.

The “income replacement rate” (IRR) that determines the size of the benefit for workers higher up the earnings scale is being increased from 38% to 45%, up to a maximum of R6?692.40 per month if you earned R178?464 per year or more.

Before October last year that maximum was R4?741.64.

The bill also, for the first time, allows the minister to raise the IRR for the lowest paid from the current 60%.

Between 500?000 and 600?000 people claim these unemployment benefits every year with another 100?000 claiming maternity benefits, which will now become vastly more generous.

The bill sets maternity benefits to a flat IRR of 66% up to a maximum of R9?815 per month for 17 to 32 weeks.

In the current act, miscarriages and stillbirths entitled a woman to only six weeks of benefits, but in the bill that also goes up to 32 weeks.

The rate at which employees earn “credits” is also increased from one day’s benefit for every six days worked to one every four days.

The current act stipulates that you have to be sick for a period of 14 days before you can start claiming illness benefits. That is being cut to seven days.

The time limit for UIF benefits after losing your job also gets extended from six months to 12 months.

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