The Unemployment Insurance Bill imposes harsh penalties on defaulting employers
Barry Streek
The extensive revamping of the Unemployment Insurance Fund (UIF) will not only extend cover to domestic workers and seasonal workers, but is also aimed at putting the fund on a sounder financial basis and giving it a more representative board of control.
The Unemployment Insurance Bill, released by Minister of Labour Membathisi Mdladlana, also imposes much tougher penalties on employers who default on payments.
Defaulting employers will be liable for a penalty of 200% of the unpaid contributions plus interest at the ruling rate – and they will be held liable for the payment of benefits to the disadvantaged beneficiary.
Mdladlana points out that current litigation procedures ”impose scant fines on employers who fail to make their unemployment insurance contributions. In addition, the costs entailed in taking a defaulting employer to court are unduly high.” The Bill ”seeks to address the legacy of high levels of employer default and non-compliance”.
He also says the current system of contribution collection and payroll declarations by employers is ”inadequate and requires a complete overhaul”. To strengthen the collection of UIF benefits, it is proposed ”to bring the UIF collection regime under the ambit of the South African Revenue Services and its enabling legislation, the Income Tax Act”.
The new Bill gives greater protection to unemployed workers. For instance, benefits paid in terms of the Bill cannot be assigned, attached by a court order or set off against any debt.
It also reintroduces a benefit schedule which gives higher benefits to low-income groups – 60% – as opposed to 30% for middle- and high-income groups. Benefits will be limited to 238 days over any four- year period.
The UIF coverage for domestic workers will not be immediate. The Bill empowers the minister of labour to appoint ”an appropriate body” to investigate methods of incorporating domestic workers within 18 months of the new measure becoming law. The Bill also excludes workers who are employed for less than 24 hours a month – which means that those who work for more than three eight-hour days a month will now fall within the ambit of UIF legislation.
The current UIF annual income threshold of R93 288 will be raised, but the new maximum income has yet to be determined.
The proposed Bill also removes all discrimination on basis of gender, particularly in regard to maternity leave and adoption benefits.
Currently, legislation provides for the payment of 45% of the last wage for six months for maternity leave – as if it is an unemployment benefit.
Mdladlana comments: ”Given that it is obviously only women who apply for maternity benefits, this provision discriminates against women. The new legislation, therefore, proposes to eliminate this discrimination by separating maternity and unemployment benefits so that employees who go on maternity leave should do so without having to draw down their unemployment benefits.”
The Bill also proposes payment of benefits to women who have had miscarriages or stillborn babies. Discrimination in terms of gender for adoption benefits has been removed. The waiting period for a child to apply for dependant benefits once his or her parents lose their jobs has been reduced to six months instead of the current three years.
The effectiveness of the fund is to be streamlined through the establishment of an electronic database which will contain individual records for each contributor and eliminate paper-based operations, including the blue-card system. Mdladlana believes this will ”eliminate the potential for fraudulent claims because each claimant can be pre-qualified for benefits, even before he/she reports to the offices of the Unemployment Insurance Fund”.
Although the government accepts that its primary role is to provide ”a social safety net for the unemployed”, the fund should be able to finance its statutory obligations from income generated from contributions and any other sources available to it.
”Only in exceptional circumstances of high unemployment arising from economic restructuring can the state be expected to assist during that particular transition. In the event that state funding may have to be requested, the Bill sets out clear and onerous procedures and requirements for such funding from the fiscus.”
The Bill proposes annual actuarial assessments to determine the soundness of the fund’s finances and reserves to fund its legal commitments and to advise the minister of labour on available funding alternatives, excluding the government.
The minister will appoint an unemployment insurance commissioner and a board, which will advise him. The board will consist of 12 members nominated by the National Economic Development and Labour Council to represent organised labour, organised business, those organisations in its development chamber, and the interests of the state. All will be appointed by the minister.