The new Unemployment Insurance Bill has the purpose of addressing a variety of problems currently being experienced within the labour social security system, by improving the social safety net to mitigate the effect of economic hardships of the unemployed. The objective of the Unemployment Insurance Fund (UIF) is the payment of benefits to unemployed contributors, being five statutory benefits, namely unemployment, maternity, illness, adoption and dependents’ benefits. The South African economy being characterised by extremely high levels of unemployment and prevalent job losses, needs an unemployment insurance dispensation that helps to ease the unemployment scourge.

FEDUSA as part of the Labour delegation in Nedlac, agreed to the proposed Bill on the following conditions:

· Government will stand in for the current UIF losses.
· Government will also stand in for the new UIF losses.
· That the UIF will be reconsidered after an initial two – year period.

However, when considering the 2001 Budget Review, only a slight increase in the budgetary allocation has been made. Namely for 2000 / 2001 R3604 million, and the medium term estimate for 2001 / 2002 is R3814 million, for 2002 / 2003 it is R4005 million.

It is in light of this agreement that FEDUSA are raising our concerns with the Unemployment Insurance Fund Bill as well as the Unemployment Insurance Contributions Bill.


The Unemployment Insurance Bill cannot be introduced in Parliament without simultaneously considering the Unemployment Insurance Contributions Bill. The two pieces of legislation should be dealt with jointly as the legislation is dependent on each other.

The Unemployment Insurance Bill establishes the Unemployment Insurance Fund and provides for the payment of illness, maternity, adoption and dependents benefits related to unemployment. The Unemployment Insurance Contributions Bill will have to determine the contributions and level of payment and is therefor crucial to effective deliberations on the Unemployment Insurance Bill.

Schedule 2 of the Unemployment Insurance Bill deals with the calculation of the contributors entitlement and Schedule 3 deals with the scale of the contributors entitlement to benefits. These schedules must be read in conjunction with the Draft Unemployment Insurance Contributions Bill. The method of calculating contributions would be unfair if the benefits are not calculated on the same definition as remuneration. For this purpose it is proposed that provision be made in the Unemployment Insurance Bill for a definition for remuneration and that such a definition should be the same as that contained in the Unemployment Insurance Contributions Bill. The Unemployment Contributions Bill deals with the collection of unemployment insurance contributions from employers and it is intended to consolidate collections under a single administration.


FEDUSA is in favour of a uniform scale of benefits as is presently the case and not a sliding scale as proposed in Schedule 3, Table 1, ranging from 58,6% to 29,5%. The inclusion of higher income groups, as UIF contributors will greatly benefit the Unemployment Insurance Fund. However, FEDUSA would like to raise concern with an unequal system of benefits. FEDUSA is of the opinion that this reduction in benefits would be discriminatory, especially with regards to the extent of the reduction. Should an employee earning R240 000 per annum become unemployed late in the tax year, he / she will only qualify for 30% of R132 000, i.e. R3300 per month. Benefits based on income replacement ranging from 60% for low – income earners to 40% for middle – income earners would be much more acceptable. The higher income groups are penalised for "receiving better wages" when they are also vulnerable to be exploited by employers or to become unemployed. As a worker, irrespective of what you are earning, you are vulnerable to become unemployed due to retrenchments, unfair labour practices or dismissals or economic hardships. Section 9(1) of the Constitution guarantees equal protection and benefits under law to everyone. A graduated benefit system where the income replacement ratio’s of the lowest paid workers are much higher than those of the higher income earners, once again results in severe discrimination against medium and higher income earners. FEDUSA would like to propose that the current scheme of 45% of income replacement remain in force.


FEDUSA welcomes the investigation to be undertaken to investigate the domestic and seasonal workers circumstances. We believe that the unemployment benefit should also be extended to these categories of vulnerable workers.

Extending access to unemployment benefits to vulnerable groups of workers including seasonal workers and domestic workers should be taken into the scope of the Unemployment Insurance Bill.

The need of extending unemployment insurance coverage beyond current levels dominates the amendments to current unemployment benefits legislation. However, the sustainability and cost effectiveness of the Unemployment Insurance Fund should be maintained without contributing to further strain on the fiscus.


In terms of Section 48 of the Unemployment Insurance Bill, the Unemployment Insurance Board has very little powers and functions and these functions are mainly advisory of nature. Government, the employees, employers and the community all have an interest in the Unemployment Insurance Fund and for this purpose it is proposed that the role and functions of the Board be changed to that of a watch dog with specific rights to obtain information, to monitor, to investigate and to report any irregularities to the Minister or to Parliament. For this purpose the size and composition of the Board should be reviewed and strengthened.

In so far as Section 49 (i)(a) of the Bill is concerned, FEDUSA does not believe that the chairperson should have a deliberating vote. It is our view that the Chairman should be appointed from amongst the Board Members and not by the Minister and should not have a deliberating vote.


FEDUSA furthermore believes that public servants should also be covered by the provisions of the Unemployment Contributions Bill as well as the Unemployment Insurance Bill. All provincial and national spheres of Government and its employees should be included in the scope of the coverage of the unemployment insurance legislation.

Nedlac has also expressed a reservation, viz. that Clause 3(1)(c) of the Bill should be deleted. The clause provides that the Act does not apply to employees and employers in the Provincial and National Spheres of Government. FEDUSA believe that clause 3(1)(c) discriminates against public servants by excluding them from the benefits of the Bill. The FEDUSA affiliate, the Public Servants Association of South Africa (PSA), wishes to voice its disapproval of this fact and requests that this matter be reconsidered.


FEDUSA would also like to propose a total overhaul of the administrative capacity of the Unemployment Insurance Fund via a modernisation of administration, record –
keeping and computerisation to ensure a competent collection agency. The FEDUSA concerns with the administrative capacity relate to the financial management of the Fund and the incidence of fraudulent claims.


FEDUSA supports the separation of the maternity benefits and unemployment benefits thereby eliminating gender discrimination.

· FEDUSA furthermore supports the intended inclusion of domestic and farm workers, as it is these workers who face the most brutal forms of exploitation and who are more vulnerable to financial security after employment.

· FEDUSA supports the inclusion of middle and high – income earners, as this will serve to assist these workers during periods of unemployment. The inclusion of these workers will also help in improving the financial sustainability of the Unemployment Insurance Fund.


FEDUSA is concerned on the role of Government in the Unemployment Insurance Fund. The Bill does not clarify the role which Government can play in stabilising and extending the Unemployment Insurance Fund. Government must play a broader role in providing the safety net for its citizens and an investigation should be done to establish whether Government can’t act the role of guarantor of the Fund.

· FEDUSA is furthermore also concerned over the extensive powers given to Government. Whilst the State will be represented in the Board, the Bill also gives much powers to the Director – General and limited powers are given to the Unemployment Insurance Fund Board.


FEDUSA appreciates the opportunity to respond to the Unemployment Insurance Bill. We believe that the Bill is aimed at protecting the unemployed workers of South Africa and at improving the social net.

FEDUSA hopes that the provisions of the Unemployment Insurance Fund Bill as well as the Unemployment Contributions Bill will translate into improvement of life for the beneficiaries.