Department on Unemployment Insurance Fund: briefing

Meeting report

LABOUR PORTFOLIO COMMITTEE
12 November 2002
DEPARTMENT ON UNEMPLOYMENT INSURANCE FUND: BRIEFING

Documents handed out:
Maternity Leave Report
Public Servants Report
Annual Report 2002
Committee Report on the visit to Chile

Chairperson: M. S Manie (ANC)

SUMMARY
The Committee adopted the report on the Unemployment Insurance Fund focussing on domestic workers, maternity leave and public servants. The Committee heard that the new law on Unemployment Insurance Fund would take effect on April 2003 but that this would only be possible if all role players moved speedily to implement the new measures.

MINUTES
The Chair informed the Committee that this was the last sitting for the year 2002 and that the Committee had dispensed with most of the programme for the year. He then tabled the Committee audit report for the 2002 activities and the programme for the year 2003. Please refer to document attached.

Mr. Mshudulu (ANC) moved the motion for the adoption of the two reports and was seconded by Mr. Olifant.

The Chair also tabled the report on the Committee’s visit to Chile and clarified that he was not opening debate on the same but that it was only for adoption by the Committee. He called on Mr. Olifant to briefly state what the visit was all about for the benefit of members who might not be aware of the development. (Please refer to document attached)

Mr. Olifant (ANC) said that South Africa shared a historical background with Chile and the Committee wished to exchange ideas on labour issues. Chile had a weaker labour system than South Africa but that there were clear areas of striking similarities. Like South Africa Chile experienced problems of implementation but that Chile had a weaker trade union movement.

Mr. Olifant (ANC) moved the motion for the adoption of the report and was seconded by Mr. Pillay (DP). The report was adopted accordingly.

Briefing by Mr. Shadrack S Mkhonto – from the Department
Mr. Mkhonto stated that the purpose of the Task Team was constituted to advise on administrative requirements for meeting the stipulation that domestic and seasonal workers be covered by Unemployment Insurance Fund at the latest by 1 April 2003. He observed that the challenges with regard to domestic and seasonal workers differ significantly in a number of respects. The Task Team decided to consider the two groups separately.

Mr. Mkhonto explained that the Team was drawn from a previous research that had been commissioned and international experience was also sought. He noted that the team was modelling to estimate approximate costs and possible impact on viability of the Fund’s performance. On Domestic Workers, Mr. Mkhonto noted that the administrative challenge was with regard to special features of employment relationship such as single, isolated, one-to-one, and multiple employers.

Mr. Mkhonto noted that on Seasonal Workers the first challenge was with regard to the definition and that more than three months with the same employer disqualified whilst less than three months with more than one employer qualified. He continued that taking these considerations into account, there appeared to be no reason for treating seasonal workers differently from ‘ordinary’ workers.

Mr. Mkhonto explained that the criteria used in considering appropriate mechanisms were the employer compliance, accessibility, simplicity, cost-benefit, and protection against fraud. He added that other factors were ease of coverage and the viability of collection. He pointed out that the preferred mechanisms was the direct deposit and direct payment with two provisos; namely that contributions payable on a three-monthly basis and in arrears.

Turning to the proposed Legislation, Mr. Mkhonto noted that should the task teams’ proposals be accepted, it would necessitate several changes to the Unemployment Insurance legislation. He explained that these changes were the inclusion of provisions in respect of loss of employment when a person was employed by more than one employer and that employers of domestic workers could pay contributions on a three-monthly basis, and in arrears.

Mr. Mkhonto continued that provision would be made to the effect that where a domestic worker lost their job because the employer dies, they should be entitled to claim benefits under the Act. It would be necessary to delete the definition of seasonal worker, and all references to seasonal workers and the inclusion of provision that labour brokers and temporary employment services were deemed to be employers and that they were jointly and severally liable with clients. The task team noted that if domestic and seasonal workers were to be covered by 1 April 2003, as specified in the Act, all players would have to move speedily.

Discussion
Mr. Clelland (DP) asked why the definition of a seasonal worker was being discarded yet these categories of workers were part of the labour force.

Mr. Mkhonto explained that section 3 provided for twelve months to lapse before the new definition applied to both domestic and seasonal workers. He pointed out that the definition had to go because it discriminated against a section of the work force.

The Chair added that the Act provided that anyone working for more than 24 hours per month would be eligible to the Unemployment Insurance Fund (UIF).

Mr. Clelland asked if the mechanisms for domestic workers were workable in view of the complexity of that implementation entail.

Mr. Mkhonto admitted that implementation would be a huge challenge but explained that this was a good start and it was important to set the mechanisms in motion and see where weaknesses emerge which call for redress.

Mr. Pillay (DP) asked what cross-subsidisation entails.

Mr. Mkhonto explained that cross-subsidisation would occur given that the legislation dealt with different levels of employees and workers hence the balance in contribution and payment.

Mr. Pillay asked if there were any monitoring mechanisms in place to ensure proper implementation of the new measures.

Mr. Mkhonto noted that his team of researchers had tried to explore every possible circumstance and indeed there were exceptional situations where implementation might be difficult to achieve but that these matters would be taken up as they arise.

Mr. Pillay noted that the new measures would give rise to an increase in labour disputes and wondered if the Department had worked towards strengthening the current dispute settlement structures to meet anticipated disputes.

Mr. Mkhonto replied that his team had already picked up some of the implementation problems in this regard and were currently consulting with the CCM to find a way around the obstacles.

Mr. Mkhonto regretted that there was no scope for a pilot project at present noting that the new measures would take effect in April 2003 and that therefore it was not possible to carry out an exploratory venture.

Mr. Rasmeni (ANC) welcomed the report noting that it was an important milestone in the country’s history since it made provision for people who were marginalised in society. He asked if there was provision to educate employers in the rural areas who might be unaware of the new development.

Mr. Mkhonto said that the new measures would be publicised and that employers would be asked to register for the scheme.

The Chair pointed out that the information component was of critical importance in that people would not assist with implementation if they did not understand the new measures. The Department would report to the Committee next year on progress made on the implementation process.

Mr. Mshudulu suggested that publicity with regard to the new development should be undertaken through labour centres since these were much closer to the people. The Department should look into the problem of the death of employers on farms and how the new measures would be implemented in these areas to avoid confusion.

Mr. Olifant also commended the team from the Department for a job well done and asked them to evaluate results and be in a position, as advised by the Chair, to report back on progress.

Mr.Ramodike (UDM) asked how the Department would go about addressing the problem of exploitation of domestic workers by their employers.

Mr. Mkhonto replied that there was a law in place to deal with issue pertaining to the exploitation of domestic workers.

Prince Zulu (IFP) agreed with Mr. Clelland that the challenge lay in the implementation of the new measures and wondered if the Department had considered instituting a pilot project before the effective date of April 2003.

Mr. Mkhonto regretted that there was no scope for a pilot project at present noting that the new measures would take effect in April 2003 and that therefore it was not possible to carry out an exploratory venture.

Maternity leave in terms of the UIF
Mr. Mkhonto noted that the purpose of this task was to investigate the constitutionality of the maternity provisions as contained in section 24 of the Unemployment Insurance Act (Act.63 of 2001) and to consult with relevant stakeholders. The approach used was to seek an extensive opinion from the state law advisor, the Office of Status of Women in the Presidency and the Gender Commission which was duly accomplished.

Mr. Mkhonto reported that the legal opinion solicited through the state attorney concluded that the provisions of section 24 were not discriminatory and that therefore no constitutional challenge could be envisaged. The Office of Status of Women in the Presidency and the Gender Commission accepted the position taken by the state law advisor but suggested that the issue be left open to further consultation and discussion.

Discussion
The Chair explained that the issue of maternity cover arose from concerns expressed during the public hearings and that it would be important to go back to them and report on the status of the issue as stated by the Department. He noted that whether the provision stands the constitutional test or not was the only basis to promulgate laws and that the issue of rights was crucial.

Mr. Moropa (ANC) pointed out that the Committee should not view the report from a commercial contractual basis but that this was more of a family relationship matter. He called on members to assist with the implementation rather than seek to question its contents.

The Chair agreed with Mr. Moropa that the matter went beyond the legislative framework and that it touched on a sensitive area in that this was a cadre of workers with the least protection and no forum to articulate their rights. He pointed out that in spite of the obvious challenge posed in implementation the Department required support to increase rapid compliance with time.

Mr. Mshudulu said that the ANC confirmed the political will to address issues related to women's empowerment and that it would be in order to take a further look into the issue of maternity.

Mr. Ramodike concurred with the Chair that it was not a matter of legal propriety only but that issues of basic rights were a concern the Committee could not ignore. He added that it was important to capture the national character of the matter in point.

The Chair said that the maternity issue would be taken up by the Committee to be discussed in broader sense and located it within the UIF provision in the course of its programme for 2003.

Breifing by Mr. Kenny Govender – Dept. of Public Service & Admin
Mr. Govender reported that the approach of the Department was to consider the structure of Public Service Benefits and possible options for coverage where-after appropriate recommendation would be made. He disclosed that a comparison was made between the public services and the UIF on pension benefits, sick/illness benefits, leave for occupational, injuries and diseases, maternity benefits, adoption Benefits and severance packages. He noted that research conducted by the Treasury found that Pension benefits provided in the Public Service were more favorable than those provided for in the private sector.

Mr. Govender observed that UIF Act 63 of 2001 also excluded casual workers employed by the state but that it was not the intention of the state to exclude these categories of workers from the coverage of the Unemployment Insurance Fund. He explained that Section 3(1)(c) explicitly excluded employers in the Provincial and National sphere of government and thus made it difficult to extend coverage to casual workers.

Mr. Govender recommended that, amendments be effected immediately to correct the unintended exclusion of casual workers brought about by Section 3(1)(c) and that in the interim the state should institute measures for redress. He also recommended that in the case of permanent state employees, that the current status must remain and that the bargaining council mechanisms could be explored to deal with issue of inclusion or non-inclusion.

Discussion
Mr. Clelland pointed out that the inclusion of public servants was meant to bring stability to the fund and wondered why this consideration was taken away.

Mr. Govender replied that the National Treasury haf offered a bailout at an additional cost of R 1 billion and that this caters for the stability to the fund.

The Chair sought for an explanation on what status quo the Department wished to be maintained.

Mr. Govender explained that the status quo he alluded to was that where employees who were currently enjoying benefits offered by the public service should be left with that facility.

Mr. Ramodike wondered why the tripartite process was not left to run its course before contemplation of legislation in this regard.

Mr. Govender agreed that the question of a constitutional challenge was a matter of bargaining process and that this could not be short-charged through the introduction of legislation.

The Chair admitted that these were clearly vexing issues and noted that the task team would definitely be called upon to make another representation to the committee in this regard.

The meeting was adjourned.