UIF contribution holiday shelved

Published May 9, 2015

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Businesses and employees who contribute to the Unemployment Insurance Fund (UIF) will not enjoy a “contribution holiday” this year, after the Minister of Finance, Nhlanhla Nene last week withdrew his plan to lower the remuneration ceiling against which contributions to the fund are calculated.

In his Budget speech in February, Nene proposed to reduce the remuneration ceiling from R14 872 to R1 000 a month for a year. This would have resulted in employees contributing R10 a month at most, instead of up to R149 a month, to the fund.

The Ministry of Finance said Nene’s decision to withdraw the proposal was taken after consultations with organised labour and business at the National Economic Development and Labour Council (Nedlac).

It said the proposal was aimed both at providing support to the economy, by allowing employees and employers to use the R15 billion that would otherwise have gone to the UIF, and reducing the rate of accumulation of the surplus in the fund.

The UIF has an accumulated surplus of more than R72 billion, which is well in excess of annual expenditure on benefits, the ministry says.

The UIF contribution that employers must deduct is one percent of an employee’s total earnings, excluding commission income. The employer also contributes one percent, so the total contribution is two percent.

The remuneration ceiling has been R178 464 a year, or R14 872 a month, since October 2012. Employees who earn more than this contribute at the ceiling. Therefore the maximum contribution that can be deducted is R148.72 a month.

The Ministry of Finance said Nene had decided that the UIF proposal will not be implemented in the 2015/16 tax year to allow more time for consultation at Nedlac and with other stakeholders.

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