Yolandi Esterhuizen, registered tax practitioner & Compliance Manager, Sage Africa & Middle East Photo: File
Yolandi Esterhuizen, registered tax practitioner & Compliance Manager, Sage Africa & Middle East Photo: File

Budget2021: Will the Finance Minister increase monthly UIF contribution limit

By Opinion Time of article published Feb 22, 2021

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The Temporary Employee/Employer Relief Scheme (TERS) has provided financial relief to South African workers when their employers were unable to pay them, or where employees were required to take compulsory leave during different phases of the Covid-19 lockdown in South Africa.

We hope the Finance Minister will address the financial implications in the upcoming Budget Speech.

When the Minister of Employment and Labour first announced the TERS scheme, the budget was R40-billion. However, employees and employers have claimed close to R60-billion in payments since March last year, excluding valid outstanding TERS claims and the extension of TERS from 16 October 2020 to 15 March 2021.

The UIF has also seen a sharp rise in claims for ‘reduced work time’ benefits because of employers implementing ‘reduced work time’ to accommodate Covid-19 safety measures in the workplace. What’s more, many South Africans lost their jobs permanently during the pandemic, resulting in increased volumes of normal UIF claims.

These numbers will only increase due to the economic state caused by the pandemic and lockdown. This leaves us with the burning question of where the funds will come from. The question is whether the Minister of Finance will consider an increase in the UIF contribution limit by taking the following facts into account:

The UIF contribution limit is currently R14 872 per month, which is used to calculate the maximum UIF contributions. Therefore, the maximum monthly contribution is R148.72 for both the employee and employer.

The UIF benefit limit is higher than that at R17 712 per month, which is used to calculate the UIF benefits payable to the employee.

It therefore makes sense to possibly increase the UIF contribution limit to R17 712 per month, resulting in a maximum monthly contribution of R177.12 for both the employee and employer.

Will the Minister of Finance increase the UIF contribution limit to align with the UIF benefit limit? Only time will tell.

Yolandi Esterhuizen, registered tax practitioner & Director: Product Compliance, Sage Africa & Middle East

*The views expressed here are not necessarily those of IOL or of title sites

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