If you have employees working 24 hours or more in a month, it is your responsibility as employer to register yourself and your employee/s with the UIF in order to avoid UIF arrears at a later stage.
When an employee becomes unemployed for whatever reason, or are unable to work due to illness, maternity or adoption leave, they can claim for a few months from the fund, if their previous employer contributed to the fund. If the employer did not contribute they are facing UIF arrears to be settled before the employee can claim any UIF.
The employer needs to contribute 1% of the employee’s salary and the employee also needs to contribute 1% of their salary. It is the responsibility of the employer to deduct the employee’s contribution and pay it over together with the employer’s contribution to the fund to avoid any UIF arrears. Always aim to be up to date with your payments!
Domestic employers and their workers are included in the Unemployment Insurance Act and Unemployment Insurance Contributions Act since the 1st of April 2003.
These acts apply to all employers and workers, with the exception to the following:
workers working less than 24 hours a month for an employer;
foreigners working on contract;
workers who get a monthly State (old age) pension; or
workers who only earn commission.
If you have a domestic worker working for you from before 1st of April 2003 and you did not pay UIF ever, you are liable to pay UIF from 1 April 2003.
If you as the employer did not pay UIF for a few years, you cannot deduct the 1% employee’s contribution now from the employee’s salary. You will have to pay your 1%, the employee’s 1% plus penalties and interests. Once the backlog has been settled you can now start paying over every month your and your employee’s contributions to the fund.
UIF ARREARS FOR DOMESTIC WORKERS!
What to do when you as an employer did not make UIF contributions and wants to settle the UIF arrears and paying from now on every month?
If you did not submit and pay over UIF since 1 April 2003, there are penalties (10% of the UIF amount due) and interest (which is calculated daily only by the finance department of the UIF, as there are fluctuations)
The process is as follows:
- Register yourself and your employee for UIF
- Get a UIF reference number
- Submit the information to the UIF for the periods you did not submit or pay UIF (Only one form per year is needed for backlog periods, thereafter you need to submit a form every month)
- Only after you have submitted the salary information for the backlog periods, the finance department of the UIF can calculate what the amount for interest will be.
- In the meanwhile you can calculate the penalties, here is an example:
Your domestic worker STARTED to work for you from 1 January 2010 (this is the actual start date) and earned R2000 per month from 1 January 2010 until 31 December 2010. Therefore for this period the 2% UIF contribution which you did not pay was R40 per month x 12 months = R480 UIF for the 12 month period. Plus 10% of R480 = R48. This R480+R48 = R528. You owe the UIF R528 for 2010. This amount is the actual UIF (R480) plus the 10% penalty (R48) = R528.
NOW your domestic worker got an increase on 1 January 2011. Her salary for the next 12 months was R2200 per month. The same process as above needs to be done for the next period (until she got another increase)
2011: Monthly salary R2200
UIF contribution per month R44
UIF contribution for period (in this case 12 months) R44 x 12 months = R528
10% penalty: R52.80
UIF + penalty (R528 + R52.80) = R580.80
Thus you owe the UIF R580.80 for the 2011 period
2010: You owe R528
2011: You owe R580.80
2012: You owe R600 (imaginary amount)
Total you owe the UIF: R1708.80
2013: Start to pay each month and submit salary information each month!
If your domestic worker got an increase every 6 months, you need to calculate the 6 month period as above.
- The next step is to start submitting and paying EVERY MONTH as soon as possible.
- As soon as the finance department of the UIF has calculated the penalties and interest, you can make the payment for the amount due.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)