Unemployment Insurance changes to favour non-resident workers without SA ID

South Africa’s Minister of Labour, Membathisi Mdladlana, recently issued a draft Unemployment Insurance Fund regulation which is intended to amend the definition of ‘identity document’ for UIF purposes.

Present practice is that several documents must be presented when claiming UIF benefits. One such requirement is the 13-digit-bar-coded South African identity document.

Vincent Ndzala, Tax Consultant at PricewaterhouseCoopers, says that this practice in the past has placed obstacles and hardship for foreign employees working in the country who did not have a South African identity document.

“In many cases, the Department of Labour does not accept any UIF application without the accompanying South African thirteen digit identity document. Any other forms of identity documents, such as passports or foreign identity documents, were often deemed unacceptable.”

We understand that there is an administrative process in place for these employees to be able to submit a claim to their local Department of Labour office, but that such a claim would need to be referred to the Head Office in Pretoria for approval, which we understand is a lengthy process with no guarantee that such an application will be approved. It seems, however, that such potential UIF claimants are not always made aware of this process and are instead in many cases advised by the local Department of Labour official that they are unable to make a claim.

In terms of the Unemployment Insurance Act, one specific instance where UIF contributions are not required to be paid over, is where an employee has entered South Africa for the purpose of carrying out a contract of service, apprenticeship or learnership within South Africa - and if upon its termination, the employer is required to repatriate that person, or that person is required to leave South Africa.

There are, however, many instances not falling into this exemption where foreign employees will have UIF contributions deducted from their salaries - for example, those who are employed permanently in South Africa, or are under a contract of service that does not require them to be repatriated to their home country on termination of their contract. Their employers are then obliged to deduct UIF contributions from remuneration paid to them, as well as make their own contributions in respect of these employees.

Ndzala says that many foreign employees working permanently in South Africa are out of pocket from contributions made towards the Unemployment Insurance Fund.  “They and their employers are obliged to contribute UIF – but any UIF claims are then often being rejected by the Department of Labour.

“The reason for the rejection of these foreign individual claims is failure to produce a South African identity document.  To have an SA ID, one needs to be a citizen or have been granted permanent resident status. As a result, these non-resident employees are not able to receive UIF benefits, and are instead being instructed to reclaim their UIF contributions from their South African employer – hardly the ideal solution when unemployed and in need of social assistance.”

Ndzala says that this practice of denying foreign employees their right to claim UIF benefits on the grounds of residency status directly conflicts with the underlying purpose of the Unemployment Insurance Act – being to alleviate the harmful economic and social effects of unemployment on those who have contributed and now need to claim.

“It infringess on the rights of foreign contributors to claim UIF in South Africa and appears to be an incorrect interpretation of the Unemployment Insurance Act which provides that a contributor has a right to benefits in terms of this legislation.”

Recognising the inequity to non-resident employees, the new draft regulations propose to amend the definition of ‘identity document’ as follows – “Identity document” means a 13-digit bar-coded RSA and non-RSA identity (card) document or a RSA bar-coded passport and includes valid foreign identity documents of spouses, life partners or dependant children of deceased contributions.

It is therefore proposed that the definition of ‘identity document’ will be expanded to include other forms of identity documents such as passports and foreign identity documents.   

Ndzala says this proposed amendment - being Notice 871 of 2009 - is most welcome. “It is aligned with the correct interpretation of the Unemployment Insurance Act and is in accordance with the intention of the legislature.”

If the proposed amendment is implemented, the position will be that permanent foreign employees or employees who are not required to be repatriated or returned to their home country on termination of their contract of service - and who are not in possession of a South African ID document- can now exercise their right to claim and be paid any UIF benefits to which they are entitled. “They will be able to exercise their UIF rights by producing other forms of non-RSA identity documentation” says Ndzala.