2 June 2006

Labour Minister Membathisi Mdladlana has today (Friday) announced a second increase, in as many months, in the maximum earning levels of benefits of the Unemployment Insurance Fund (UIF).

On a yearly basis, the UIF sets out maximum rate of earnings or remuneration ceiling for its benefits that provides a limit for the two percent contributions. This is then used to calculate the income replacement rate (IRR) for each claim for benefits.

All workers who earn above the maximum level will only contribute up to the maximum and when they become unemployed will then receive benefits at the rate of their contribution.

Announcing the increase the Minister said the adjustment would be by 12% with effect from 1 July 2006. The current increase came hardly a year following a huge increase by 24% in October of last year.

Explaining the two major increases coming not far apart from each other, Minister Mdladlana explained that this was due to the fact that there was no increase in 2004. The last increase before October was in 2003 by 9%.

In monetary terms it means that the monthly level of remuneration for determining maximum contributions and benefits will be increased from the current R10 966,00 per month to R11 662,00 with effect from 1 July 2006.

According to the latest increase, contribution payable will as from 1 July 2006, be calculated on R139 944,00 of annual earnings or on R11 662,00 of monthly earnings or on R2 691,23 of weekly earnings.

“It simply means that as the Labour Department, between October 2005 and July 2006, we have managed to put an extra R2 826,00 in the salary ceiling. This can only make the fund more attractive to both the low and high income earners,” added the Minister.

The Minister concluded by explaining that by adjusting the annual contributory earnings, there was also a corresponding increase in benefits to workers. This step further highlights the importance that the fund places on improving the lives of the workers.

The latest increase has already been published in the Government Gazette.

Enquiries:
Kgomotso Sebetso
Cell: 073 269 9870

Mokgadi Pela
Cell: 082 808 2168

Issued by: Department of Labour
2 June 2006

30 June 2006

Employers will be required to ensure that they comply with the announced increase in the maximum earnings level, which comes into effect tomorrow, 1 July 2006.

Earlier this month, Minister of Labour, Membathisi Mdladlana announced an increase in the remuneration ceiling to a level of R11 662.00 per month or R139 944.00 per annum or R2 691.23 per week to be effective as of 1 July 2006. The department has warned employers that failure to comply with these provisions of the Act constituted an offence, which was punishable in terms of the Act. The offender shall be liable to a fine or imprisonment, or to both a fine and imprisonment.

The UIF on a yearly basis sets a maximum earnings ceiling, in terms of which benefits are paid and contributions are payable.

All workers who earn above the maximum level will only contribute up to the maximum and when they become unemployed will then receive benefits at the rate of their contribution. The maximum earning level is benchmarked at the level of what an artisan is currently earning. It was also aimed at keeping pace with the inflation rate.

Between October 2005 and July 2006, the Fund had managed to put an extra R2 826.00 in the salary ceiling. This could only make the Fund more attractive to both the low and high income earners. By adjusting the annual contributory earnings, there was also a corresponding increase in benefits to workers. This step further highlights the importance that the fund places on improving the lives of the workers.

The 1 July increase was published in the Government Gazette on 2 June 2006.

Enquiries:
Kgomotso Sebetso
Cell: 073 2699 870

Mokgadi Pela
Cell: 082 808 2168

Issued by: Department of Labour
30 June 2006
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