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Finance Minister Nhlanhla Nene has called for public comment on government’s proposal of a temporary reduction in employers and employees’ contributions to the Unemployment Insurance Fund (UIF).
In his 2015 Budget Speech, the Minister proposed to reduce the remuneration threshold against which the contributions are calculated from the current monthly amount of R14 872 to R1 000.
“Given the challenging economic environment that has led to downward revisions in economic growth, a reduction in unemployment insurance contributions will provide significant support to households and employers,” the Department of Finance said in a statement on Thursday.
A reduction in contributions would also partially offset the impact of higher taxes and slow growth on employees and employers.
The reduction was proposed to take effect on April 1, and would be reconsidered for the next fiscal year, shortly before April 1, 2016. If implemented, both employers and employees would be required to pay a maximum of R10 each a month, down from the current maximum of R148.72.
The public had until March 20 to comment on the proposal.
Nene would also consult social partners within the National Economic Development and Labour Council (Nedlac). All comments received, including any proposals from the consultation process within Nedlac, would be considered before a final decision was made.
The Minister’s proposal would provide “much-needed support” to the economy, putting about R15-billion back into the pockets of workers and employers.
The proposed reduction in contributions would draw down on the UIF’s accumulated surplus, which currently stood at more than R72-billion. As this intervention would draw down on the accumulated surplus, it would stimulate the economy without requiring national government to issue additional debt.