The South African Ministry of Finance has launched a public consultation on proposals for a temporary reduction in employer’s and employees’ contributions to UIF (Unemployment Insurance fund), while their benefits remain unchanged.
The 2015 Budget has already been rolled out and it contained a proposal to reduce the remuneration threshold against which unemployment contributions are calculated from the monthly amount of R14 872 to R1 000.
In connection with the challenging economic environment that has led to a decrease in economic growth, it is considered that a reduction in UIF contributions wil provide “significant” support to households and employers.
If it is implemented, both employers and employees will be required to pay a maximum or R10 each per month down from the current maximum of R149.72. This reduction is proposed to come into effect on 1 April 2014 and it would be reconsidered or the next financial year, shortly before 1 April 2016.
The measure will provide roughly R15bn in relief to employees and employers. The reduction in contributions will draw down on the UIF’s accumulated surplus, which is currently more than R72bn and it is expected to boost the economy without requiring the Government to issue additional debt.
The Ministry has invested public comments to be submitted by 20 March 2015.
