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Treasury drops its proposal to reduce for a year contributions to UIF

Finance Minister Nhlanhla Nene has dropped a proposal to reduce, for the period of a year, contributions to the Unemployment Insurance Fund (UIF) after consultation with business and labour, the Treasury said on Thursday.

The decision was taken after detailed engagements within the National Economic Development and Labour Council (Nedlac). In his February budget speech, Nene had proposed a reduction of the earnings threshold against which the 2% UIF levy is calculated for a year, something which would have reduced the maximum contribution for both employees and employers to R10 per month, as opposed to R149. All benefits would have remained unchanged.

The intention of the proposal was to draw down the accumulating R72bn surplus in the fund and stimulate job and economic growth. The Treasury said on Thursday that after considering concerns and public comments on the issue, "it became apparent that proceeding to implement the revised threshold as originally planned in the 2015 Budget could lead to unintended consequences".

The UIF Amendment Bill, which, among other things, will seek to extend the period of payment of UIF benefits from 9 months to 12 months, may still be tabled in June.