An employer must pay the Unemployment Insurance Fund (UIF) for an employee who works more than 27 hours a month. The employer must register as a contributor to UIF and register all employees as beneficiaries. Upon registration, the employer will receive a contributor number and must use it when paying the contributions.
The employer deducts 1% from the employee’s salary, which is added to the employer’s 1% contribution and paid to the UIF. 2% is contributed towards the employee’s UIF.
Why must an employer pay UIF?
Compliance with the Unemployment Insurance Fund (UIF) is vital for an employer, as it provides short-term financial support to employees during ill, maternity leave and unemployment.
Key compliance obligations for employers
- UIF Registration: Businesses must register with the UIF and obtain a UIF reference number. This unique identifier is used in all interactions with the UIF, including submitting employee information, making contributions, and claiming benefits on behalf of employees. An employer must also register with the UIF, and it would receive a contributor number. This number is used when paying contributions, introducing new employees, and making employee claims.
- Compulsory Contributions: Employers are required to enrol their employees in UIF (Unemployment Insurance Fund) contributions. The employer and the employee are obligated to contribute monthly, determined by the employee’s earnings. The employer must precisely compute and remit these contributions to the UIF through the monthly Emp201 declaration submitted via the SARS e-filing platform.
- Declaring Employees: Employers are responsible for providing precise employee details to the UIF. This encompasses information such as employees’ names, ID numbers, earnings, and dates of employment. Ensuring timely and accurate submissions guarantees that UIF records remain current and accurate.
- Employee UIF Claims: When employees fulfil specific eligibility criteria, such as unemployment, illness, or maternity leave, they become eligible to claim UIF benefits. Employers play a vital role in assisting these claims by furnishing precise and prompt information to the UIF on behalf of the affected employees.
- Employer UIF Returns: Employers are required to provide monthly reports to the UIF outlining the contributions made for each employee. These reports encompass details such as the number of employees, their earnings, and the total UIF contributions. Consistent and precise reporting is imperative to ensure compliance with regulations.
- Keeping Record: Employers must retain precise records of UIF contributions, employee data, and pertinent documentation for at least five years. These records may undergo audits conducted by the Department of Labour, and failure to comply could lead to penalties.
What are the risks involved when an employer does not contribute to UIF?
Ensuring compliance with UIF regulations is crucial for South African businesses, not only as a legal requirement but also to safeguard employees’ well-being. Failure to meet UIF obligations can lead to penalties, legal repercussions, and company reputation damage.
Employers must stay informed about UIF rules and maintain accurate records to support the system, which provides financial assistance to employees during difficult times, promoting a more stable workforce. It’s the employer’s responsibility to pay over the UIF contributions for all employees, and failure to do so can result in personal liability for the outstanding amount. Non-payment is considered an offence, with the UIF imposing a 10% penalty on unpaid contributions and interest calculated by the finance committee.
Contact Invictus today for expert legal advice and guidance on mandatory labour compliances. For more information, contact our call centre at 086 173 7263 or email us at admin@invictusgroup.co.za.
