No UIF cut for taxpayers yet, says Nene

Finance Minister Nhlanhla Nene.
Finance Minister Nhlanhla Nene.
(GCIS)

Cape Town - Finance Minister Nhlanhla Nene has withdrawn a proposal to offer Unemployment Insurance Fund (UIF) relief this year that would have put about R15bn back into the pockets of workers and employers.

The ministry said in a statement that Nene's decision was taken after detailed engagements with the labour and business constituencies at National Economic Development and Labour Council (Nedlac).

Nene announced in his budget speech in February a proposal to lower the remuneration threshold against which UIF contributions are calculated from the current monthly amount of R14 872 to R1 000.

Temporary reprieve

Under the year-long proposal, both employers and employees would be required to pay a maximum of R10 each per month, down from the current maximum of R148.72.

The reduction was set provide significant support to households and employers amid a tough economic climate. According to the finance ministry, the proposal was set to put about R15bn back into the pockets of workers and employers.

The UIF currently has an accumulated surplus of more than R72bn, which is well in excess of annual expenditure on benefits. The UIF proposal was also intended to reduce the rate of accumulation of this surplus.

Concerns raised

The ministry said that during consultations concerns were raised about the need to implement the UIF amendments bill tabled in 2014, to extend benefits to workers who contribute towards the fund.

There was also concern about the need to speed up engagement over the broader social security reform process

"After carefully considering all of these concerns, and taking into account the 44 public comments received, it became apparent that proceeding to implement the revised threshold as originally planned in the 2015 Budget could lead to unintended consequences.

"The minister has decided that the UIF budget proposal will therefore not be implemented in the 2015/16 fiscal year, to allow more time for consultation at Nedlac and with other interested stakeholders," it stated.

The Unemployment Insurance Contributions Act of 2002 enables the minister of finance to adjust the contributions made by employers and employees.

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