SOUTH AFRICA: INCREASE TO THE UNEMPLOYMENT INSURANCE FUND CONTRIBUTION CEILING
The Unemployment Insurance Fund (UIF) maximum contribution ceiling, which is used to calculate an employer’s and employee’s monthly contributions towards the UIF, has increased from ZAR 14 872 per month to ZAR 17 712 per month with effect from 1 June 2021.
This follows the Minister of Finance’s (Minister) Budget speech earlier this year and is in terms of a notice published in the Government Gazette on 28 May 2021.
In terms of section 5, read with section 6(1) of the Unemployment Insurance Contributions Act 4 of 2002, an employer and employee are each required to contribute 1% of an employee’s monthly remuneration to the UIF. The employee’s contribution must be deducted by her employer and paid over, together with the employer’s contribution, within seven days of the end of every month.
The Minister is permitted to periodically set the maximum contribution ceiling on which the 1% contributions are calculated. Any remuneration paid to an employee in excess of the prescribed contribution ceiling will not be included for the purposes of calculating the monthly contribution.
For example, if Y earns ZAR 60 000 per month, the monthly contribution of Y and her employer will be 1% of ZAR 17 712 each. Therefore, Y and her employer will each be liable to contribute ZAR 177.12 per month to the UIF.
It is notable that the contribution ceiling has not been amended in nine years (since 1 October 2012) and has only now been aligned with the benefits limit per employee that was implemented in 2017 (currently also ZAR 17 712 per month).
Employers should make sure to update their payroll systems and UIF contributions accordingly.