Unemployment Insurance Contributions Draft Bill: briefing

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Employment and Labour

23 May 2000
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Meeting Summary

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Meeting report

23 May 2000

Documents Handed Out;
Briefing - Department of Labour (attached to end of this minute)
Draft Unemployment Insurance Bill
Unemployment Insurance Contributions Bill
Position Paper - Unemployment Insurance and Related Coverage

The committee was briefed by the Department of Labour on the draft Unemployment Insurance Bill which is expected to be tabled in Parliament in August.

Unemployment Insurance Bill
Mr Shadrack Mkhonto, UIF Commissioner: Department of Labour, and Mr Uven Bunsee, Head of the Department's Legal Services, briefed the committee (See Appendix).

Mr Sithole (ANC) asked for the reasons for excluding public servants from the Unemployment Insurance Fund?

Mr Mkhonto stated the Department would have liked to include public servants as contributors to the Fund, but felt it was necessary for the Fund to be supported and sustained by the private sector. He said this approach was in line with the government's "micro-economic policy". Mr Bunsee added the decision to exclude public servants from the Fund was due to the financial impact that it would have on the State. It was estimated that State Expenditures would increase R750 million per annum if public servants contributed to the Fund. As an alternative, pubic servants are given the choice of being included but without any contribution from the State. Under this system, government employees are expected to contribute 2%of their annual salary, instead of 1%, as is the case for employees in the private sector.

A committee member argued that if government employees were given the choice of being included or excluded from UIF, the same right must be granted to employees in the private sector. He further questioned whether it was the government's intention to exclude government employees, since any reduction in the size of the public service would prove too costly for the State. He asked that the committee meet to discuss the Fund with NEDLAC.

Mr Middleton (IFP) asked if the Department was aware that affiliates of NEDLAC had asked that the amount of the benefits be increased, that the period to receive benefits be extended by six to twelve months, and that all benefits not be taxed. Mr Mkhonto refused to speak for NEDLAC, but admitted they were faced with many issues.

Mr Sithole (ANC) asked which levels of benefits would be taxed?

Mr Mkhonto responded their attempt in drafting the Unemployment Insurance Bill was to achieve a greater redistribution of financial resources to aid previously employed low wage earners. To that end, only those that receive an exceptionally large benefit would be taxed. Most Individuals that claim from the Fund earned between R2500 and R3000, and would thus fall within the tax bracket of untaxable benefits.

Mr Ndou (ANC) asked what mechanisms were in place to address fraud within the Fund?

Mr Mkhonto stated that the Department was looking into mechanisms to reduce fraud within the system. Currently, memorandums have been issued to claims officers to direct them on how to properly manage the funds, and reduce fraud. He added the Department would be relying on the Public Finance Management Act to act as a procedural manual to manage the Fund.

Mr Mphalala (ANC) asked how the Bill intended to include Domestic Workers?

Mr Mkhonto responded the Minister of Labour would conclude an investigation into this matter within eighteen months from the date of promulgation of this Act. He added it was the Department's intention to include domestic workers in the Bill, but that it was first necessary to establish an effective monitoring system so they could determine the amount of work each worker performed. He added the problem was exacerbated by domestic workers who were employed by five or six different individuals. He felt confident that a suitable mechanism would be found.

The Chair stated that the Department must instruct the committee as to how they could assist in making the Fund more effective, and how to improve the mechanisms that deal with fraud. The Chair added that the committee would continually be updated on NEDLAC's position.

The Unemployment Insurance Bill is expected to be tabled in Parliament in August.

The meeting was adjourned due to time constraints.

Appendix 1:

Chapter 1
Definitions, Purpose and Scope
Sections 1,2 & 3 of this chapter deals with the definitions, the object/purpose of this Bill and all aspects of coverage. In particular, the definitions of employer, employee and remuneration are now in line with the definitions in the Income Tax Act (1962) as amended.
· The Bill proposes the inclusion of high income earners and domestic workers but excludes the following:-
· those working less than 24 hrs per month
· Public Servants
· Employees employed in terms of a learnership agreement

Chapter 2
Claiming of Benefits
Section 4-28 proposes the establishment of rights to all types of benefits, calculation of benefits, the duration of entitlement and procedures for dealing with disputes relating to payment and non-payment of benefits.
· The Bill further proposes the de-linking of maternity benefits with other benefits.
· The Bill proposes the introduction of a graduated benefit schedule ranging from 38% for higher income groups to 60% for lower paid employees.
· The Bill further proposes the capping of benefit days at 238 days in any four year cycle and decreases the prescription period to six months for all types of benefits.
· The Bill proposes payment of benefits to beneficiaries who had miscarriages or stillborn babies.
· Discrimination in terms of gender for adoption has been removed
· The waiting period for a child to apply for dependents benefits has been reduced to six months instead of three years currently.
· The Bill places an obligation on the part of the claims officer to comply with the requirements of administrative justice
· Benefits paid in terms of this Bill cannot be assigned, attached by court order or set off against any debt, any benefits paid in error must be paid within 30 days
· The Bill further proposes that the benefits paid should be subjected to normal PAYE
· The Bill proposes the suspension of a contributor's right to benefit for up to 12 months if the contributor commits certain offences
· Section 29 proposes the use of CCMA procedures by the beneficiary for disputes related to the payment or non-payment of benefits

Chapter 3
Section 30-34 proposes a stringent compliance and enforcement regime similar to that contained under the BCEA. It gives greater powers to Labour Court and proposes the levying of heavy fines and penalties for non-compliance
· An employer who defaults on payment of contributions will be liable to a penalty of 200% of the unpaid contributions plus interest at the ruling rate.
· The Bill further proposes that such a defaulting employer be held liable for the payment of benefits to the disadvantaged beneficiary.
· The Bill further proposes that the DG may apply to the labour court for a compliance order to be made an order of the Labour Court.
· The provisions of the Income Tax Act relating to administration, objections recovery, etc., will apply, with regard to contributions paid or payable.

Chapters 4&5

· Section 35-37 deals with the designation of the UIC to administer the Fund and the appointment of claims officers to assist the UIC to process claims made in terms of the Bill.
· Section 38-44 proposes the establishment of the Unemployment Insurance Board, its role and functions.
· The Bill proposes the expansion of representation on UI Board to include NGO and state representatives.

Chapter 6
Financial Management
Section 45 and 46 deal with the establishment of the Fund and its application and excludes payment to schemes to combat unemployment.
· Section 47 deals with raising of funds by means of overdraft facilities at a financial institution by the DG.
· The Bill proposes a new financial year for the Fund commencing on 1 April each year and ends 31 March of the following year.
· The Bill further proposes that financial decisions must be informed by an actuarial input in the form of an actual actuarial report prepared by an Actuary.
· The DG is obliged to report the financial condition of the Fund should there be a surplus of deficit to the Minister.
· The bill proposes compliance with the PFMA with DG as the Accounting Officer and that the financials of the fund must be audited.

Chapter 7
Section 54 deals with the powers of the Minister to issue regulations and notices after consultation with the UI Board.
· Section 55 defines the procedures to be followed by the Minister when issuing regulations which involves announcement in the government gazette and a period of 1 month should be allowed for comments.
· The Bill proposes that any regulation affecting state revenue or expenditure may only be issued or amended with the concurrence of the Minister of Finance.

Chapter 8
General Provisions
Section 56-72 deals with general provisions and covers the following areas:-
creation and maintenance of a contributor database, recovery of losses, disclosures of information, offences, prohibited conduct and the jurisdiction of the Labour Court and other courts.
The Bill further proposes the appointment of agents and designation of agency offices to serve as employment offices.
The Bill gives the DG powers to borrow money for the Fund in terms of PFMA.
The Bill proposes that a report by the DG must be tabled in parliament by the Minister within 30 days of receipt by the Minister.


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