South Africa’s Ministry of Finance has launched a public consultation on proposals for a temporary reduction in employers’ and employees’ contributions to the Unemployment Insurance Fund (UIF), while benefits will remain unchanged.
The 2015 Budget contained a proposal to reduce the remuneration threshold against which unemployment contributions are calculated from the current monthly amount of ZAR14,872 (USD1,260) to ZAR1,000.
Given the challenging economic environment that has led to downward revisions in economic growth, it is considered that a reduction in unemployment insurance contributions will provide significant support to households and employers.
If implemented, both employers and employees will be required to pay a maximum of ZAR10 each per month, down from the current maximum of ZAR148.72. The reduction is proposed to take effect on April 1, 2015, and would be reconsidered for the next fiscal year, shortly before April 1, 2016.
The measure will provide about ZAR15bn in relief to employees and employers. The contributions reduction would draw down on the UIF’s accumulated surplus, which currently stands at more than ZAR72bn, and is therefore expected to boost the economy without requiring the Government to issue additional debt.
The Ministry has invited public comments to be submitted by March 20, 2015.
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