South African companies must not adjust their payroll UIF contribution calculations this month following the news that the Minister of Labour has increased UIF benefits with effect from 1 April 2017. They instead must wait for the Minister of Finance to gazette the new contribution limits.
The Minister of Labour announced on 17 March that the limit has been increased to R212 539 a year, R17 712 per month, and R4 087 a week. However, this change does not affect the calculation of the contribution value. Under the Unemployment Insurance Contributions Act, the contribution value will only be adjusted when the Minister of Finance publishes the new limits
“For now, the contribution and benefit levels are out of lockstep, and companies should not base their payroll UIF contribution calculation on the new benefit limits,” says Rob Cooper, tax expert and Director of Legislation at Sage – one of South Africa’s leading providers of HR and payroll solutions.
“Developers of computerised payroll systems should not, at this stage, have changed the contribution level. Unfortunately, the legislation around the UIF is poorly understood in the marketplace, which has led to some confusion.”
Cooper says that he has drawn this issue to the attention of the South African Revenue Service (SARS) because it needs to be addressed urgently. Unless a notice in terms of the Contributions Act is published with the same limit value and effective date, the contribution and benefit limits will remain desynchronised.
Rob Cooper is a tax expert and Director of Legislation at Sage. Rob is currently conducting the 2017 Annual Payroll Tax Seminars in different cities around South Africa, where he discusses the 2017 Budget proposals.