Unemployment Insurance Bill: hearings

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Employment and Labour

19 March 2001
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

19 March 2001

Chairperson: Mr M Manie

Documents handed out:
Unemployment Insurance Bill [B3-2001]
Labour Department Presentation
Labour Department’s UIF Economic Plan
Black Sash submission
South African Domestic Services an Allied Workers Union submission
Women on the Farm Project submission
Commission on Gender Equality submission
Catholic Bishops' Conference submission
Federation of Unions of South Africa submission
South African Council of Churches submission
Payroll Authors Group submission
Congress of South African Trade Unions (COSATU) submission

The Department of Labour still maintains that the inclusion of domestic workers in the Bill is not possible at present due to the inability of Government to conceive of administrative mechanisms to include domestic workers within the scope of the Bill. Black Sash, South African Domestic Services and Allied Workers, Women on the Farm Project, the Commission on Gender Equality, the Catholic Bishops' Conference, the Federation of Unions of South Africa, the South African Council of Churches and COSATU unanimously asked for the inclusion of domestic workers and seasonal workers within the scope of the Bill.

With regard to the financial viability of the Unemployment Insurance Fund, the Department of Labour has commissioned an economic and statistical expert to develop an economic model for the Fund.

The meeting was interrupted when the Chairperson was requested by the South African Domestic Services and Allied Workers Union to present himself outside Parliament so that the
Union could hand over a memorandum to him.

The Payroll Authors Group asked that the drafting of the regulations for the proposed database should be in consultation with them so as to ensure that the database would be practical to implement as it was the heart of the process. Also definitions had to be consistent with other related legislation and it was suggested that schedule 2 of the Bill be scrapped and replaced with a simple scale of benefit payment related to earnings levels.

COSATU raised concern over the role of the state in financing and guaranteeing the Unemployment Insurance Fund. It was suggested that a two year transitional period be allowed to assess the impact of the reforms on the UIF based on actuarial evaluation. Also highlighted was the exclusion of public sector, domestic, seasonal and atypical workers.

Department of Labour presentation
Ms Mkontho, Commissioner of the Unemployment Insurance Fund (UIF), said they had previously been asked to consider the financial viability of the Fund and the impact of including high-income earners, government workers, domestic workers and seasonal workers within the scope of the Bill. The Department had commissioned an economic and statistical expert to devise an economic model for the Fund. This model had been given to international experts to consider as well as to the International Labour Organisation. Local expertise was also solicited.

The new Employer Management System, a database, should be operative in June this year. The Department has spent forty-two million rand since January 1999 on the system. It will be helpful to the Department in its administrative tasks. See attached document for the substance of this presentation.

Black Sash
Ms S Seria, Regional Advocacy Co-ordinator of Black Sash, referred to two investigations that were carried out previously in respect of domestic workers. A report was prepared by John Limbrick and Associates and presented to the then Department of Manpower in July 1993. The report recommended that domestic workers should, in principle, be included within the protection of the UIF and put forward a number of options as to how the administrative issues that were raised may be addressed.

In October 1996 the Task Team also submitted a report on unemployment insurance and related coverage issues endorsing the recommendations in the Limbrick report and again recommending that domestic workers be included in the framework of the Bill. These are comprehensive reports and further investigation is not necessary.

Ms Seria made the following recommendations:
 Domestic workers should be removed from the express exclusionary clause (section 3) and a proviso should be added that regulations would deal with the administrative matters relating to their inclusion.
 The regulations should be finalised within the time period of no more than one year.
See attached document for the substance of this presentation.

South African Domestic Services and Allied Workers Union
Ms H Stephens, the SADSAWU President, said that there was no need for any further research on domestic workers. Two reports had already been submitted to the Minister of Labour (Limbrick and Task Team Report). To say that there is a need for further investigations on domestic workers is an attempt to delay any concrete action on this issue.

The exclusion of domestic workers in the Bill is unconstitutional as it violates the right to social security. It also violates the right to be treated equally by any legislation. The exclusion also contravenes the Equality Act, which asserts that the State may not "unfairly discriminate against any person or group of persons". See attached document for the substance of this presentation.

Women on the Farm Project
Ms L Jantjies said that women play a vital role in agriculture. Seventy percent of the seasonal workforce comprises of women. These women work as seasonal workers for about four months in the year and thereafter they work as domestic workers. They experience double bind of no protection as seasonal workers and no protection in the off season as domestic workers.

Women on the Farm Project propose that the Bill should clearly define seasonal workers and stipulate that these workers are entitled to claim their benefits. The Bill should also define and unambiguously state that all casual workers are entitled to UIF contribution form their employer. See attached document for the substance of this presentation.

Mr M Ramodike (ANC) referred to the Department’s statement that the Bill was the product of extensive research. He asked whether SADSAWU were at any stage consulted in this process of consultation. The Commissioner of the UIF, Mr S Mkonto, said that when the Bill was drafted and after the appointment of a task team to deal with investigations in to domestic workers, the Minister of Labour made a public announcement, inviting the stakeholders to make presentations and provide an input. This was made out to the public in general.

Ms Botha (DP) referred to the various constitutional issues that were raised in respect of the Bill. She asked the Department what was their response to the constitutional arguments that were raised in various presentations. Mr L Kettledas, the Deputy Director, Department of Labour, replied that the constitution does afford everyone the right to social security. The manner in which the clauses are drafted does not indicate exclusion. The Department had taken a pragmatic view on Grootboom’s judgement were the progressive realisation of socio-economic rights is endorsed.

Mr N Clellan (DP) said that the recommendations made by Black Sash to facilitate for the inclusion of domestic workers were interesting. He wanted to here the Department’s view on this idea. The Commissioner responded that this idea was in the Limbrick report. Investigations were done surrounding the possible involvement of the municipalities. The investigation indicated that the municipalities were not co-operative. The municipalities have their own administrative problems and the Department had to consider the municipalities’ capacity. The Limbrick report was inconclusive in this regard. The Report does propose many ways in which inclusion could extend to all employers and employees. However, the report does not illustrate how this would be done or how the Department could implement measures to ensure that the Department can manage the inclusion of domestic workers.

A DP member asked whether seasonal workers were included in the scope of the Bill. The Deputy Director replied that they were not included in the scope of the Bill.

Mr G Oliphant (ANC) said that although the Bill does not seem to entirely exclude domestic workers, the inclusion of such workers is delayed. The investigations as proposed in the Bill had been done before. He asked, "what is new this time"? He stated that if the intention of the drafters was to include domestic workers then this is not reflected in the Bill. There is a need for a provision in the Bill that includes domestic workers in the scope of the Bill, but which also indicates that mechanisms of such inclusion are being considered.

Commission on Gender Equality
Commissioner P Mbowane, Deputy Director: Parliamentary Office made the following recommendations on the Bill to the Committee:
 Immediate inclusion of Domestic and Seasonal Workers. Interim mechanisms are to be put in place while long-term mechanisms are developed within the period of one year.
 Maternity benefits to extend for four months with an optional extra two months at sixty percent.
 The State to be required to make contributions to the fund, to facilitate the stability, sustainability and growth of the fund and to ensure coverage for workers in the informal sector.
 Include mechanisms to cater for employees who terminate work contracts.
 Allow employees to determine most appropriate points for receiving payments.

Southern African Catholic Bishops’ Conference
Mr M Pophier, Parliamentary Liaison Office, said that they were concerned that employees who are employed for less than twenty-four hours a month by an employer, but who works for a number of people, will fall foul of section 3(1)(a) of the Bill. Furthermore the exclusion of domestic workers is a "serious and potentially unconstitutional omission". Mr Pophier also urged the Committee to re-consider the exclusion of public sector workers from the Bill. People who are paid out money in error, must be given adequate time to respond to the demands made, thus in section 35 (2) the thirty day limit should be increased to sixty days. A time limit should also be set on the time that the State has to discover and respond to payments made in error.
Federation of Unions of
South Africa
Ms G Humphries, Parliamentary Officer, said that FEDUSA was concerned on the role of Government in the UIF. The Bill does not clarify the role that Government can play in stabilising and extending the UIF. Government must play a broader role in providing the safety net for its citizens and an investigation should be done to establish whether Government could not act the role of guarantor of the Fund.

FEDUSA is also concerned over the extensive powers given to Government. Whilst the State will be represented in the Board, the Bill also gives much powers to the Director General and limited powers are given to the UIF Board.

Unemployment benefits should be extended to domestic and seasonal workers.

South African Council of Churches (SACC)
Rev M Damon, Co-ordinator of Public Policy Liaison Office, expressed concern about the following issues:
 The delayed inclusion of domestic and seasonal workers.
 The exclusion of public sector employees.
 The formulae for the calculation of benefits.
 The procedure for the recovery of benefits paid in error.
 The criteria for eligibility for unemployment, illness and dependant’s benefits.
 The powers and composition of the Board.
SACC proposes a specific substantive amendment to section 3, 13, 16, 19-23, 33, 35, 48, 49 and schedule 2.

Mr A Blaas (NNP) asked what was the international practice with regard to the public sector and unemployment insurance. Mr Mkontho replied that there are models in other countries that exclude government workers due to certain financial constraints but, according to the principle of solidarity, government workers are included in the coverage for unemployment insurance. Thus in terms of international practice government workers should be included.

The Chairperson said that the Bill excludes those seasonal employees that work for less than twenty-four hours a month. He asked the Department whether they considered those people who work for more than twenty-four hours a month but for different employers. The Commissioner merely replied that if seasonal workers that work for less than twenty-four hours a month were included, this would pose an enormous administrative burden to employers and the Department.

The Chairperson also said that the Department should note all the suggestions and recommendations that was made at the hearing.

Payroll Authors Group
The chairperson, Mr Manie (ANC), introduced the Payroll Authors Group (PAG) presenters Mr R Warren and Mr R Cooper. Mr Warren began by stating that PAG represented approximately 50 000 employers that used computerised payroll systems. Mr Warren stated that the regulations for the proposed database should be agreed to in consultation with PAG with a view to ensuring that the database would be a practical tool to institute for employers.

Mr Warren stated that in particular the definition of a contributor in the Unemployment Insurance Contributions Bill (UICB) should not differ from the one contained in the main UIB. Mr Warren went on to recommend that the definition of employee in the UIB should be amended to comply with the definition as set out in schedule 4 of the Income Tax Act. Mr Warren appealed for the threshold above which contributions are not payable to be clarified and that commission; dividends and piecework earnings should not be excluded from the schedule 4 definition of remuneration. Mr Warren stated further that an employee’s actual earnings and not the basic rate of pay should be used should be used to calculate benefits. In conclusion Mr Warren suggested that schedule 2 of the UIB be scrapped and be replaced with a simple scale of benefit payment related to earnings levels.

Mr N Coleman by way of introduction stated that this Bill was arguably one the most important pieces of legislation that would be considered by Parliament in the 2001 session. Mr Coleman stated that the Unemployment Insurance Fund (UIF) was limited in the scope of workers it covered and the level of benefits it offered. He stated that the UIF was designed as a short-term measure to manage the effects of temporary cyclical unemployment and not the crisis that
South Africa faces as a result of massive long-term structural unemployment. Mr Coleman stated further that the reform of the UIF was part of a much broader challenge of constructing a comprehensive social security system to cover the millions of South Africans that are not covered by the present system. Mr Coleman referred to the Nedlac negotiations of March 2000 where a number of issues were resolved but that the following issues had to be resolved by Parliament:
The role of the state in financing and guaranteeing the UIF
A two year transitional period to assess the impact of the reforms on the UIF based on actuarial evaluation
The inclusion of public sector, domestic, seasonal and atypical workers

Mr Coleman recommended that the UIB and UICB be merged into one Bill failing which the two should be considered simultaneously which would require the Treasury expediting the finalisation of the UICB. Mr Coleman stated that the recommended review based on a comprehensive actuarial evaluation be submitted to both Nedlac and Parliament. He stated further that the Committee should request Parliament to instruct the Treasury to present a proposal detailing the current debt and interest burden of the UIF and how the Treasury proposes to liquidate this. Mr Coleman went on to list COSATU’s core areas of support and concern that were laid out in detail in the submission handed out to all present.

In conclusion Mr Coleman stated that the submission, broadly speaking, outlined COSATU’s support for the important elements of the Bill as part of the process of transforming the labour market. Mr Coleman stated that COSATU had raised substantive concerns with elements of the Bill that should be addressed so that they could give their unconditional support to the Bill.

Mr Middleton (IFP) inquired as to how PAG arrived at the figure that they represented 50 000 employers. He also asked for clarity on the point of whether the drafters of the legislation could simply ignore the recommendations from the Nedlac meeting.

Mr Oliphant (ANC) stated that PAG had requested that the regulation of the database should be done in consultation with them. Mr Oliphant (ANC) inquired whether PAG were the only ones who could be consulted.

The chairperson, Mr Salie (ANC), inquired whether PAG would be able to demonstrate the negative effects that they had hinted at as regards the current reforms and the database and how the would combat these.

Mr Coleman (COSATU) stated as a point of clarification that the issue was not whether the agreements from the Nedlac meeting were accepted or not but rather that the new Bill does not fall into line with the agreements as they were accepted.

The chairperson stated that it was not appropriate to make this meeting another chamber of Nedlac and that these issues needed to be considered and clarified before further discussion was entertained.

Mr Cooper (PAG) stated the figure of 50 000 members was an estimate of the number of employers who used electronic payroll systems. He stated further that PAG had not meant to exclude any others from participation in the process of helping to ensure that the proposed database was practicably implementable.

The chairperson invited any of the interest parties present to make suggestions as a more relaxed procedure may lead to constructive contributions. The chairperson added that from the morning session the general feeling towards the Bill was that domestic and seasonal workers should be included and that the mechanics of the situation should be worked out later.

Mr Coleman (COSATU) stated that the submission and comments were not meant to be confrontational but rather they were meant to convey the import of the Bill to the future of the country.

The chairperson stated that they would be finalising the consideration of the Bill next week and that no general talk would be entertained but rather constructive reference to specific clauses that stakeholders felt should be amended coupled with a proposed plan of action. The chairperson summarised the main points of the two sessions as being that of the exclusion of Public Sector, domestic and seasonal workers and the states role in the sustainability and viability of the fund. Also highlighted by the chairperson was the technical administrative matter of setting up the database that he described as the heart of the process.

The chairperson thanked all present for their contributions and the meeting was adjourned.


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