On 1 April 2002 two new Acts, namely the Unemployment Insurance Act, No. 63 of 2001 and the Unemployment Insurance Contributions Act, No. 4 of 2002, came into operation.
These two new Acts provide the framework for the new unemployment insurance system in South Africa. The Unemployment Insurance Contributions Act deals with the collection of contributions to fund the Unemployment Insurance Fund (UIF), while the Unemployment Insurance Act deals with the benefits to which contributors are entitled. The new legislation does not introduce the payment of unemployment insurance contributions for the first time in South Africa, as unemployment insurance was already introduced in 1946. What it does, however, is to extend the coverage of workers in the labour market. As an example, employees earning more than the current unemployment insurance annual income threshold (R97 188) will now also be included in the unemployment insurance system.
This statement does not deal with the Unemployment Insurance Act, as it is administered by the Department of Labour. It concentrates on the collection of the unemployment contributions as the bulk of the contributions will, however, be collected by SARS in future.
COLLECTION OF CONTRIBUTIONS
In terms of the Unemployment Insurance Contributions Act employers who are liable to register with SARS for the payment of employees' tax (PAYE) or the Skills Development Levy (SDL) must pay the unemployment insurance contributions in respect of all their employees to SARS. Those employers who are not liable to register with SARS for PAYE or SDL purposes must continue to pay their contributions in respect of their employees to the Unemployment Insurance Commissioner.
The following employers and employees are excluded from the payment of unemployment insurance contributions:
Domestic and seasonal workers are also excluded at this stage.
AMOUNT OF CONTRIBUTIONS
The contributions payable by employers are calculated at two per cent of the remuneration payable to each of their employees during a month. Of that, one per cent must be deducted or withheld from the employee's remuneration whilst the employer must also contribute an amount equal to one per cent of the employee's remuneration. Employees and employers are therefore contributing in equal shares of one per cent each.
The two per cent contribution is only levied on the first R8 099 paid or payable to an employee during a month (annual equivalent of R97 188). Employees who earn more than R8 099 per month are therefore also liable for the payment of the unemployment insurance contributions with effect from 1 April 2002, but only in respect of R8 099 of their monthly salary.
Certain types of remuneration will be excluded from the unemployment insurance contributions such as commissions, pensions, annuities, leave gratuities on termination of service, retrenchment packages, restraint of trade payments and lump sum payments from pension, provident and retirement annuity funds.
TIME OF PAYMENT
Unemployment insurance contributions are payable on a monthly basis. Each payment must be made to SARS by the seventh of each month in respect of the preceding month. The first payments to SARS in respect of the month of April 2002 are, therefore, due by 7 May 2002. The monthly EMP 201 return for the payment of PAYE and SDL has been adjusted to make provision for unemployment insurance contributions. The returns for the month of April were already posted during March 2002 to all employers who are registered with SARS for PAYE or SDL.
The Unemployment Insurance Fund Commissioner also issued a notice to all employers on the 1st of March 2002 to inform employers of their duties.
METHOD OF PAYMENT
Payment of the unemployment insurance contributions can be made through the normal methods available for the payment of PAYE and SDL.
DUTY TO REGISTER
Those employers who have not received notices, but who are liable for registration for PAYE or SDL purposes, must approach their nearest SARS branch office to register for unemployment insurance contribution purposes.
SUBMISSION OF EMPLOYEE INFORMATION
All employers including those employers registered with SARS must furnish details of their employees to the Unemployment Insurance Fund Commissioner and not to SARS. Full details in this regard are available from the UIF Commissioner at telephone number (012) 337 1680 or the UIF website www.uif.gov.za.
Further information is available in the "EMP10 Guidelines for Employees' Tax and Skills Development Levy", Volume 43 (for the 2003 tax year) which is available on the SARS website www.sars.gov.za under "Income Tax", "IT Tables". A further guideline to assist employers will be placed on SARS's website next week.
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE