Size and scale of UIF benefit for Covid-19 is not yet clear

As the government braces for the huge economic fallout anticipated from the Covid-19 pandemic, it has said that it is not yet sure of how far the new disaster Unemployment Insurance Fund (UIF) benefit will go, and is still crunching the numbers.

The UIF is the key mechanism through which the government will provide income support to employees either temporarily or permanently laid off.

In addition to the normal UIF benefit for those who are unemployed or ill, and have exhausted their paid sick leave, the fund will compensate workers through a national disaster benefit on the UIF sliding scale at a level not less than the minimum wage.

The sliding scale for normal UIF benefits usually results in an employee receiving just less than half their salary for 12 months. With the minimum wage as the floor, employees who are laid off will receive R3,500 a month.

The fund’s temporary employer/employee scheme will also enable businesses to stay open while employees are shifted off the payroll at about 50% of their wage.

However, administration of the fund is notoriously poor with long delays between applying for benefits and receiving them. Speaking at a briefing in Pretoria on Tuesday, minister of labour and employment Thulas Nxesi said employers and bargaining councils will be used to distribute new UIF benefits.

Nxesi said the government would not put a number on the table as to the size of the national disaster benefit as it might unfairly raise expectations. “We do not want to talk about figures. We can’t announce something that we cannot fulfill. Our actuaries are busy looking at the numbers.” 

The UIF was anticipated at the time of the February budget to have R3.6bn in surplus contributions over the next three years. In addition, to this it also had about R60bn in investments with  the Public Investment Corporation (PIC). Both these numbers are completely out of date, as contributions to the fund will now change significantly and investments will have diminished considerably.

The biggest policy gap remains the informal sector, also the most vulnerable during a national shutdown. Only contributors to the fund who are, or have been, in formal employment will be able to access the UIF benefit. The UIF Act specifies that the fund can be used only to provide unemployment benefits.

Nxesi repeated President Cyril Ramaphosa’s statement on Monday evening that work is underway to find a mechanism or safety net to support informal-sector workers. These might include shelters for the homeless and facilities for self-isolation when people are unable to do so at home.