Unemployment Insurance Claim Costs Increase yet Expected To Level Out

The Unemployment Insurance Fund (UIF) is still suffering from spiralling claims as result of the global recession but UIF Commissioner Boas Seruwe is expecting that as the economy stabilises so the number of claims will drop. The UIF is administered by the Department of Labour on behalf of the State and is subject to the oversight of Parliament’s Labour Portfolio Committee. The Fund was established in terms of the enabling Unemployment Insurance Act, to protect employees and domestic workers who lose their jobs.

The UIF Commissioner and a number of labour and business representatives serving on the UIF Board recently reported on its activities to the Parliamentary Labour Portfolio Committee. In spite of the recession, the UIF currently has 1.28 million employers registered compared with 1.23 million during the 2008/9 financial year. The commercial sector had grown from 657 859 employers in the last financial year to 689 905 in the financial year ended March 2010 which represents an increase of 4.8%. During the same period employers in the domestic and taxi sectors increased by 2.6 and 11.8 % respectively. There were almost 8 million employees and workers registered with the UIF at the end of the 2009/10 financial year. This figure had risen from 7.6 million to 7.75 million.

Claims against the UIF during the financial year totalled 801 110, an increase of 27.7 percent over 2008/9. The costs of these claims were R5.7 billion in the financial year up by a staggering 48 percent. There were 779 000 approved claims in 2009/10 compared with 610 000 in 2008/9, an increase of 27.7 percent. It is evident that the total costs of the benefit payments had risen sharply as result of higher income earners losing their jobs.

Monthly payments to beneficiaries reached a peak of just more than R500 million in July 2010, up from about R450 million in June and R400 million in May. Seruwe said that the peak coincided with the 2010 FIFA World Cup as employment in the construction sector declined sharply with 22 000 jobs having been shed. He expected that the number of claims may level out in the months to come.

The UIF contribution income was about R900 million a month and return on investment was about R350 million, totalling an income at about R1.25 billion. There is a reasonable gap between inflows and outflows, despite the costs of claims increasing. The Public Investment Corporation managed the UIF investments, which were held in various government bonds, including Eskom and Transnet bonds.

Pieter Rautenbach