UIF Overview of Contributions
The main Act refers fleetingly to contributions to be deducted, but only by reference to the UIF Contributions Act. The imposition and payment of contributions by employers and employees is legislated by the Contributions Act, which is in turn administered by SARS.
The Contributions Act applies to all employees as defined in the main Act, but excludes the following employees:
- an employee who is employed by that employer for less than 24 hours per month.
- an employee who receives remuneration under a learnership agreement registered in terms of the Skills Development Act 1998.
- an employee (and employer) in the national and provincial spheres of government.
- an employee who is not a resident of South Africa, and has entered the Republic in terms of a contract of service which requires the employer to repatriate the employee at the end of the contract, or where the employee is required by law to leave South Africa on termination of employment.
The term employed in the first exclusion clause is not defined, so one must assume that this means work. One can also assume that the intention of this clause is that 3 days of 8 hours per day service will exclude the employee from contributions, whereas 3 days of 8 hours per day plus one hour won't.
The intention of the legislation in the second clause is to exclude learners who are not employed from contributing to UIF (and of course from benefits).
Even though the exclusion reads that all learners are excluded, contributions should be made for employed learners, and they are then entitled to benefits.
The term 'national and provincial spheres /government' is not defined.
Under the old UIF Act, an employee who contributed to the Government Pension Fund was determined to be part of the 'national and provincial spheres of government', and was exempt from UIF contributions.
Subject to confirmation, the concept is now defined by the fact that the employer is funded 80% by the government. In case of doubt, an employer can apply to the UIF Commissioner for a ruling.
The last exclusion is obvious and was probably put in place to ensure that foreign mineworkers became unemployed in their country of residence, and not in South Africa.
Note that even although the above categories of employees are excluded as contributors, they are still covered by the main UIF Act, and must comply with the requirements thereof.
Notably, the details of these employees must be included as part of the details which the employer supplies to the UIF Commissioner on a monthly basis to populate his database.
Remuneration on which the UIF contribution must be based
UIF Contributions must be based on remuneration as defined in the Fourth Schedule to the Income Tax Act, with the following special exclusions:
- pension, superannuation allowance or retiring allowance;
- payments to a labour broker in possession of an IT30 exemption certificate)
- amounts paid for loss of employment, such as retrenchment pay and payments for commutation of office
- voluntary awards in respect of relinquishment, termination, loss, repudiation, cancellation or variation of any office or employment
- one-time payments such as lump sum payments from pension, provident or retirement annuity funds.
- restraint of trade payments
As can be seen from the above, remuneration received in respect of 'ongoing employment services rendered (with the exception of commission), is used for the calculation of UIF contributions. Remuneration paid for 'non-employment' is excluded.
An employee who relies solely or mainly on commission for his livelihood will not be compensated for these earnings if he is unemployed.
Note that remuneration as defined in the Fourth Schedule of the Income Tax Act, includes only 50% of a travel allowance and public office allowance.
The new definition of remuneration is clearer and includes more items of remuneration than the previous, ill-defined amount on which the contribution was based.