Unemployment Insurance Bill: briefing

Meeting report

LABOUR PORTFOLIO COMMITTEE; SELECT COMMITTEE ON LABOUR AND PUBLIC ENTERPRISES: JOINT COMMITTEE
13 March 2001
UNEMPLOYMENT INSURANCE BILL: BRIEFING

Chairperson: Mr M Manie

Documents handed out:
Department of Labour Presentation on Unemployment Insurance Bill (included in the minutes)
NEDLAC Draft Report on the Unemployment Insurance Bill (See Appendix)
Unemployment Insurance Bill [B3-2001]

SUMMARY
The Department of Labour is convinced that the Unemployment Insurance Bill would improve and strengthen enforcement and compliance mechanisms of the current Act. The Committee was concerned about the exclusion of domestic workers and government workers from the coverage of the Unemployment Insurance Fund.

The Director of the Fund noted that the UIF is currently R110m in debt on its own overdraft and owed the Department of Labour more than R300m for salaries. The Department receives funds from donors and was supposed to receive extra funds from National Treasury, however, this has not materialised as yet.

MINUTES
Mr S Mkonto, Director of the Unemployment Insurance Fund: Department of Labour, presented the following information to the Committee:

This new Bill is a product of extensive research and an inclusive consultative process dating as far back as 1994. Stakeholders who participated were drawn from universities, labour, business, ILO, the public and other government departments.

Processes Informing the Draft Bill
 Minister of Labour’s Five Year Plan 1995
 Labour Market Commission Report
 Stakeholders Forum of 1996
 Report of the Ministerial Task -Team
 DoL’s Position Paper
 Second Stakeholders Forum 1998
 Public Representations
 Minister of Labour’s 15 Point Plan 1999
 Detailed input from ILO.
 Detailed input from National Treasury.

Object of Restructuring the Fund
To develop a new policy on Unemployment Insurance Coverage and the design of an institutional framework, to deal with both the administrative and legislative shortcomings of the fund.

Risk Profile of Contributors
The profile of contributors under the current legislation renders the fund un-viable due to the following factors;
 Low income base = Less Revenue
 High risk of Unemployment=High Benefit expenditure

Key Design Problems in the Current Legislation
Weak Enforcement and Compliance Measures
 The current legislation is difficult to enforce and makes very easy for employers and contributors to avoid compliance.
 Low penalties and fines (R20 to maximum of R100)
 Limit on debt recovery
 High reliance on the justice system

Discrimination
The present Act goes against the spirit of the current Constitution in that it discriminates against female contributors (e.g. the linking of period of access to maternity benefits with unemployment benefits and the total exclusion of domestic workers).

Entitlement to Benefits
Provisions of sections within the current Act have an effect of restricting access to all benefits, especially to the most vulnerable workers:
 One-third rule
 Thirteen weeks prescriptions

Brief Summary of the Provisions of the Bill
The Bill aims to address the short-comings of the current legislation and attempts to establish the balance between the need for expanding coverage and the need to remain financially viable and sustainable. This balance is achieved through the following approach:
 Broadening coverage to increase revenue (usage of the Principle of Solidarity)
 Strengthening of the compliance and enforcement mechanisms
 Affordable benefit regime
 Primacy of Actuarial input in decision-making

Chapter 1-Definitions, Purpose and Scope
Section 1,2&3 of this chapter dealt with the definitions, the object/purpose of this law and all aspects of coverage.
The Bill proposes the exclusion of the following categories of workers;
(a) Employees employed for less than 24 hours a month with a particular employer
(b) Employees who receive remuneration under the learnership agreement.
(c) Employers and employees in the national and provincial sphere of government.
(d) Persons who enter the Republic for the purpose of carrying out a contract of service.
(e) Domestic workers and their employers.

Chapter 2-Unemployment Insurance Fund
 Section 4-11 deals with the establishment and application of the Unemployment Insurance Fund, investment of money of the Fund as well as the raising of funds, loans and obtaining bank overdraft facilities.
 The Bill further proposes the appointment of an actuary and an annual actuarial review of the Fund and compliance with the dictates of the PFMA in terms of reporting.

Chapter 3-Claiming Benefits
 The Bill establishes rights to all types of benefits, Calculation of benefits, the duration of entitlement and procedures for dealing with disputes relating to payment and non-payments of benefits.
 The Bill further proposes the de-linking of maternity benefits with other benefits and restricts benefits to a maximum of four-year credits.
 The Bill proposes the introduction of a graduated benefit schedule ranging from 60% for lower paid to 29.5% for higher paid employees (income redistribution).
 The Bill proposes the suspension of a contributor’s right to benefits for a period of up to five years for certain misconduct.

Chapter 4-Enforcement
Section 38-42 proposes a stringent compliance and enforcement regime similar to that contained under the Basic Conditions of Employment Act. It gives greater powers, to the labour court and recommends the levying of heavy penalties and fines for non-compliance

Chapter 5 - Commissioner and Claims Officers
 Sections 43-45 propose the appointment of the Unemployment Insurance Commissioner, his/her duties and the delegation of powers to the Commissioner.
 Section 46 proposes the appointment of Claims Officers to assist the Commissioner to process applications of claims made in terms of this Act.

Chapter 6 -Governance
Section 47-53 proposes the establishment of the Unemployment Insurance Board. It defines its role and functions, its constitution, remuneration of board members and the appointment of claims officers.

Chapter 7 - Regulations and Notices
 Section 54 deals with the powers of the Minister in issuing regulations and notices.
 Section 55 defines the procedures to be followed by the Minister when issuing regulations and notices.

Chapter 8-General Provisions
 Section 56-72 deals with the general provisions and covers the following areas;
 Information to be supplied by employers, the creation and maintenance of a contributor database.
 Recovery of losses, disclosures, exemptions from tax, evidence and general prohibited conduct.
 Jurisdiction of the Labour Court, delegation by the Minister as well as transitional arrangements.

Schedule One
 Schedule one deals with transitional arrangements from the current Act to the new Act.
 It further proposes that the current UIF Board continue to exist until the Minister establishes a new Board.
 The schedule also proposes that all matters that were not finalised at promulgation of the new Act should be dealt with and finalised in accordance with the current Act.
 This schedule also proposes that employers should provide details of their employees within seven days of the commencement of the new Act as prescribed in section 56(2)

Schedule Two
Schedule two proposes a mathematical formula for calculation of contributor’s entitlement.

Schedule Three
 Schedule three gives an example of the scale of benefits to which a contributor may be entitled at various salary levels.
 Column one is the monthly salary, column two is the income replacement ratio percentage and column three gives the monthly replacement income.

Discussion
Ms E Thabethe (ANC) asked why employers and employees in the national and provincial spheres of government were excluded from coverage in the Bill.

The Director replied that the present legislation also excluded government employers and employees. Government is faced with serious fiscal problems. If Government employers and employees were included in the coverage of the Unemployment Insurance Bill, then this would require more money being forwarded to the Department. Furthermore, the retrenchment packages of civil servants are deemed to be favorable.

Ms Thabethe asked if any progress had been made about the implementation report on farm workers. She believed that the prescribed eighteen-month investigation in to domestic workers was not necessary. They were the most vulnerable employees and hence they required to be covered by the Act.

The Director replied that there was still a high rate of non-compliance within the farming community. The investigation on domestic workers was not an attempt to avoid or delay the matter. It is an exercise to find ways in which domestic workers could be included in the legislation.

Mr N Middleton (IFP) asked whether the exclusion of "learnership agreements" applied to apprenticeships.

The Legal Advisor for the Department of Labour replied that apprenticeships would not be excluded.

Mr Middleton referred to Clause 18(2) of the Bill. He asked if contributors could be punished if they refused to accept employment that was entirely out of their own working context.

The Legal Advisor replied that if a contributor willfully keeps himself from being employed, then this would obviously not constitute a good reason for being jobless.

Mr S Rasmeni (ANC) asked whether the Department had done research around the inclusion of small businesses.

The Director replied that small businesses have not been investigated. However, the compliance and enforcement mechanisms would affect small businesses. The State would have to create an environment to help employers in small businesses to comply with the legislation.

Mr S Mshudulu (ANC) asked the Director to provide clarity on whether the Departments funds were enough or not. The director stated that there was a short fall in the Department’s funds. Furthermore, the UIF was R110m in debt on its own overdraft and owed the Department of Labour more than R300m for salaries. However, there was no contributor that was not paid unemployment benefit. Due to the nature of the current legislative framework the Department does not know whom they are covering until after they have entered the floodgates. The Department receives funds from donors and was supposed to receive extra funds from National Treasury, however, this has not materialised as yet.

Mr G Oliphant (ANC) said that the previous Government had also undertaken an eighteen-month investigation on domestic workers. The findings of the investigation were inconclusive. Nothing had really been done in respect of including domestic workers in the Unemployment Insurance Fund. This Bill also proposes an eighteen-month investigation. Could it be that government is incapable of resolving this problem?

The Director replied that Government has applied its mind to the problem of domestic workers. Also, Cabinet would not have approved the Bill if the Department’s arguments were not convincing. The Department is, however, engaging with the ILO about domestic workers.

A DP member asked whether any projected costing had been done for the development of the database.

The Director replied that the cost of the database was a huge challenge. New systems would not be put in place. The systems that already exist would be built upon. The Department has already begun work on the development of the database.

Ms Thabethe asked if the Minister of Labour refuses to accept the recommendations of the Unemployment Insurance Board, to whom would they be able to refer. The Legal Advisor replied that the Board is not an Executive Board but an advisory Board. To give the Board the power to appeal would be giving the Board an executive right.

The Chairperson said that the Department needed to seriously re-consider the situation of domestic workers and government workers. Domestic workers should not be excluded from the coverage of the Fund but rather included with certain conditions.

The meeting was adjourned.

APPENDIX 1

THE DRAFT REPORT OF THE NATIONAL ECONOMIC DEVELOPMENT AND LABOUR COUNCIL ON THE UNEMPLOYMENT INSURANCE BILL AND UNEMPLOYMENT INSURANCE CONTRIBUTIONS BILL
8 September 2000

1.         BACKGROUND
1.1.      The Ministry of Labour’s ‘Programme of Action 1994 - 1998’ outlines the need for labour legislation in South Africa to be reformed. Included in this reform process was the need to review aspects of the Unemployment Insurance Act, 1966.

1.2.      The Comprehensive Labour Market Commission was established at the beginning of 1995 to investigate the development of a comprehensive labour market policy on unemployment insurance. In the report of the Commission, it was recognised that the Unemployment Insurance Fund (UIF), which was designed to deal with frictional or short-term unemployment, provided inadequate support and narrow coverage. Furthermore, due to shortcomings in the administrative system established by the Act and insufficient funds, the Commission recommended that the UIF be restructured.

1.3.      A three-person task team was established by the Minister in June 1996. The task team was commissioned to make recommendations in respect of national policy. The task team recommended the development of a new policy framework.

1.4.      The report of the task team, which was concluded in December 1996, was presented to the Unemployment Insurance Board after being presented to the Minister.

1.5.      Government drafted a position paper in response to the task team report which was released in September 1997 and published in the Government Gazette on 5 February 1999 for public comment. This initiated the drafting of the unemployment insurance bill (UIB).

1.6.      During the drafting of the bill, government engaged in on-going consultations with the Board. The public comments were also considered during this process.

1.7.      The drafting of the bill was concluded in early 1999 and the Board forwarded the draft bill to the Minister for consideration.

1.8.      The Minister revised certain provisions in the draft bill and tabled it in Cabinet for approval.

1.9.      The UIB was published in the Government Gazette for public comment on 2 March 2000.

2.         PROCESS IN NEDLAC
2.1.      The Minister submitted the UIB to Nedlac on 2 March 2000 for consideration.

2.2.      A negotiating committee was established under the auspices of the Labour Market Chamber.

2.3.      The negotiating committee comprised representatives from business, government and labour.

2.4.      The negotiating committee first met on 29 March 2000. At this meeting business and labour stated that the unemployment insurance contributions bill (UICB) should be negotiated in conjunction with the UIB as they were mutually dependent.

2.5.      At the meeting on 3 May 2000, Government clarified that the UICB would be tabled for negotiation.

2.6.      A workshop on financing unemployment insurance was held on 13 May 2000 in an attempt to develop a common understanding on the affordability of benefits provided for in the UIB and various costing scenarios. It was agreed that the Department of Labour would request an actuarial assessment of income and expenditure under the Bills from the ILO. The report of the ILO was made available to the committee of Nedlac in the week of 28 August 2000.

2.7.      The Executive Council at its meeting on 19 May 2000 mandated its decision-making authority to the Management Committee to ratify the Nedlac report on the bill.

2.8.      Negotiations were held on the following dates:

2.5.1.    17 April 2000
2.5.2.    3 May 2000
2.5.3.    9 May 2000
2.5.4.    11 May 2000
2.5.5.    28 August 2000
2.5.6.    30 August 2000

3.         AGREEMENTS ON UNEMPLOYMENT INSURANCE BILL
3.1.      The UIB is supported by Nedlac subject to the:

3.1.1.    Amendments captured below.

3.1.2.    Amendments to the UICB as captured in point 4. of this report.

3.1.3.    Reservations recorded in point 5. of this report.

3.2.      It is noted that the agreements reached during the negotiations may require technical amendments during the legal drafting of the bills.

3.3.      Where applicable [[        ] = deletion; bold = insertion].

CHAPTER ONE: INTERPRETATION, PURPOSE AND APPLICATION OF THIS ACT
It is agreed that:

1.         The definition of "domestic worker" provided for in the Basic Conditions of Employment Act, 1997, will be inserted in clause 1, as follows:

" ‘domestic worker’ means an employee who performs domestic work in the home of his or her employer and includes—

(a)        a gardener;

(b)        a person employed by a household as a driver of a motor vehicle; and

(c)        a person who takes care of children, the aged, the sick, the frail or the disabled; but does not include a farm worker;".

2.         The definition of ‘employee’ in clause 1 will be amended as follows:

" ‘employee’ means an employee as defined in the Labour Relations Act 66 of 1995 and includes an employee as defined in the Fourth Schedule to the Income Tax Act, other than a person contemplated in paragraphs (c) or (d) of that definition;".

3.         A definition for "remuneration" will be inserted in clause 1 as follows:

" ‘remuneration’ means remuneration as defined in the Fourth Schedule to the Income Tax Act, including any amount contemplated in paragraph (vii) of the exclusions to that definition, but excluding any amount paid or payable to an employee—

(a)        by way of any pension, superannuation allowance or retiring allowance;

(b)        which constitutes an amount contemplated in paragraphs (a),(d),(e),(eA) or (f) of the definition of "gross income" in section 1 of the Income Tax Act;

(c)        by way of commission or as a dividend; or

(d)        where such amount is based on the quantity or output of work done, unless the amount is part of the employee’s minimum compensation in terms of any law, collective agreement or contract of employment;".
           
4.         Clause 3(2) will be inserted as follows:

"Domestic and Seasonal Workers

(a)        Subject to section 3(2)(b) domestic and seasonal workers and their employers are excluded from the application of this Act.

(b)        There shall be an investigation undertaken by an appropriate body designated or appointed by the Minister, which will seek to investigate methods and make recommendations to the Minister in regard to including the above categories of employees under coverage of this Act; this investigation should be concluded within eighteen months from the promulgation of this Act; and the Minister must consult the Board on the outcome of the investigation.".

CHAPTER TWO: CLAIMING BENEFITS

Part A: Right To Benefits

It is agreed that:

1.         Clause 4(2) will be revised to provide for a mathematical formula for calculating benefit and contribution rates.

2.         The renumbered clause 6(1)(a)(iv) will be amended as follows:

"any retrenchment, gratuity, severance pay or similar payment received, from whatever source, as a result of that contributor’s unemployment with that employer, except that the contributor shall be entitled to receive benefits, once such retrenchment, gratuity, severance pay, or similar payment has been exhausted at a rate equal to the usual remuneration of that contributor, which rate shall be determined from a certificate of service issued under section 42 of the Basic Conditions of Employment Act no. 75 of 1997, whilst that contributor was employed with that employer.".

Part B: Unemployment Benefits

It is agreed that:

1.         Clause 8(1) will be amended as follows:

"Subject to section 6, an unemployed contributor is entitled to unemployment benefits contemplated in section 4(1)(a) for any period of unemployment lasting more than 14 days, if—".

2.         Clause 8(1)(a) will be amended as follows:

"[Subject to section 6(1)(b)(iv),] the reason for the unemployment is the termination of the contributor’s contract of employment by the employer of that contributor, or employment is terminated due to the fixed term contract of that contributor;".

3.         Clause 9(5) will be replaced with the following:

"If the claims officer is not satisfied that the application complies with the provisions of this Chapter, the claims officer must advise the applicant in writing that the application is defective and the reasons why it is defective.".

4.         Clause 10(2) will be amended as follows:

"If the contributor refuses to accept available work, or undergo training and vocational counselling, without good reason, the claims officer may impose a penalty up to a maximum of thirteen weeks during which no benefits may be paid to the contributor.".

Part C: Illness Benefits

It is agreed that:

1.         The heading of clause 11 will be amended as follows:

"Meaning of period of [unemployment] illness under this Part".

2.         Clause 11 will be amended as follows:

For the purposes of this Part, period of illness is determined from the date the employee no longer works as a result of the illness or receives less than fifty percent of the normal remuneration from the employer as a result of the illness.".

3.         Clause 12(2)(a) will be amended as follows:

"if the contributor has not exhausted all illness benefits claimable in terms of the Basic Conditions of Employment Act, 1997 (Act 75 of 1997), collective agreement or contract of employment;".

4.         Clause 13(2) will be replaced with the following:

"Subject to subsection 13(1), the contributor will be paid the difference, if any, between any sick leave paid to that contributor in terms of any law, collective agreement or contract of employment in each week of the period specified in section 11, and the maximum weekly benefit payable in terms of subsection 4(2).".

5.         Clause 14(5) will be replaced with the following:

"If the claims officer is not satisfied that the application complies with the provisions of this Chapter, the claims officer must advise the applicant in writing that the application is defective and the reasons why it is defective.".

6.         Clause 15 will be amended as follows:

"The Director General must pay the benefits determined by the claims officer in terms of section 14(4)(b) to the contributor or any other person authorised by the claims officer, at an employment office contemplated in section 10(1).".

Part D: Maternity Benefits

It is agreed that:

1.         Clause 16(3) will be replaced with the following:

"Subject to subsection 16(2), the contributor will be paid the difference, if any, between any maternity benefit paid to that contributor in terms of any law, collective agreement or contract of employment in each week of the period specified in section 11, and the maximum weekly benefit payable in terms of subsection 4(2).".

2.         Clause 16(4) will be amended as follows:

"For the purposes of this section the period of [pregnancy or confinement] maternity leave is deemed to be [16 weeks] four months."

3.         Clause 17(1) will be amended as follows:

"Subject to section 17(2), [A]application [must] should be made in the prescribed form at least eight weeks before confinement at the nearest employment office.".

4.         Clause 17(2) will be amended as follows:

"The application must be made within six months after the date of the confinement except that on good cause shown the Commissioner may accept an application made after the six month time limit has expired.".

5.         Clause 17(4)(c) will be deleted. Therefore, the existing clause 17(4)(d) will become clause 17(4)(c).

6.         Clause 17(5) will be replaced with the following:

"If the claims officer is not satisfied that the application complies with the provisions of this Chapter, the claims officer must advise the applicant in writing that the application is defective and the reasons why it is defective.".

Part E: Adoption Benefits

It is agreed that

1.         Clause 19(1) will be amended as follows:

"Subject to section 6, only one contributor of the adopting parties is entitled to the adoption benefits contemplated in section 4(1)(d) in respect of each adopted child if—".

2.         The reference to subsection (2) will be deleted from clause 19(2).

3.         Clause 19(4) will be replaced with the following:

"Subject to subsection 16(2), the contributor will be paid the difference, if any, between any maternity benefit paid to that contributor in terms of any law, collective agreement or contract of employment in each week of the period specified in section 11, and the maximum weekly benefit payable in terms of subsection 4(2).".

4.         Clause 20(2) will be amended as follows:

"The application must be made within six months [of] after the court order which grants the application for adoption except that on good cause shown the Commissioner may accept an application made after the six month time limit has expired.".

5.         Clause 20(3) will be amended as follows:

"The [Commissioner] claims officer must investigate the application and, if necessary, request any further information regarding the period the applicant was not working in order to care for the adopted child."

6.         Clause 20(5) will be replaced with the following:

"If the claims officer is not satisfied that the application complies with the provisions of this Chapter, the claims officer must advise the applicant in writing that the application is defective and the reasons why it is defective."

Part F: Dependant’s Benefits

It is agreed that:

1.         Clause 22(1) will be amended as follows:

"The surviving spouse or a life partner of a deceased contributor is entitled to the dependant’s benefits contemplated in section 4(1)(e) if application is made—".

2.         Clause 22(3) will be amended as follows:

"Despite section 6 and subject to subsection 4 the weekly benefit payable to the dependant [may not be more than the usual remuneration the employer would have paid the deceased contributor taking into account any monies received by the dependant from whatever source, as a result] is the weekly unemployment benefit in terms of Part B of this Act, that would have been payable to the deceased contributor, as if the contributor was alive and fulfilled the requirements of section 8 from the date of the deceased contributor’s death.".

3.         Clause 22(4) should be amended as follows:

"Despite the provisions of Part B, [The weekly benefit only becomes payable to the dependant when the difference between the usual remuneration of the deceased contributor and] any monies received by the dependant from whatever source[,] as a result of the contributor’s death shall be deemed to be payments received in terms of section 6(1)(b)(iv) of this Act, and any benefits payable to dependants under Part F shall not form part of the deceased contributor’s estate [, represents more than fifty percent of the usual remuneration of the deceased contributor].".

4.         Clause 23(5) will be replaced with the following:

"If the claims officer is not satisfied that the application complies with the provisions of this Chapter, the claims officer must advise the applicant in writing that the application is defective and the reasons why it is defective."

Part G: General Provisions Relating to Claiming Benefits

It is agreed that:

1.         Clause 26 will be amended as follows:

"Benefits payable to contributors and dependants in terms of this Act are not subject to taxation in terms of the Income Tax Act, 1962 (Act No 58 of 1962)."

2.         Clause 28(1) will be amended as follows:

"After giving a contributor or a dependant an opportunity to make written representation, [T]the Commissioner may, on written notice with reasons provided, suspend a contributor or dependant for a period of up to five [twelve] years from receiving benefits in terms of this Act if satisfied that the contributor or dependant—".

3.         Clause 29 will be amended as follow:

"Subject to section 65 a [A] contributor who is aggrieved by a decision of the Commissioner to suspend such a contributor’s right to benefits or a claims officer relating to the payment or non-payment of benefits may refer the dispute for arbitration [resolution] to the CCMA in the prescribed manner.".

CHAPTER THREE: ENFORCEMENT

CHAPTER FOUR: COMMISSIONER AND CLAIM OFFICERS

CHAPTER FIVE: UNEMPLOYMENT INSURANCE BOARD

It is agreed that Clause 40 (2) will be amended as follows:

1.         " The members referred to in subsection 1(b) are –

(a)        four (4) [three (3)] voting members nominated by Nedlac and appointed by the Minister to represent organised labour;

(b)        four (4) [three (3)] voting members nominated by Nedlac and appointed by the Minister to represent organised business; and

(c) [(d)]four (4) [three (3)] voting members appointed by the Minister to represent the interests of the state.

2.         The existing subsection in Clause 40 (2)(c) will be removed.        

CHAPTER SIX: UNEMPLOYMENT INSURANCE FUND

CHAPTER SEVEN: REGULATIONS AND NOTICES

CHAPTER EIGHT: GENERAL

SCHEDULE 1: SCALE OF CONTRIBUTION’S ENTITLEMENT TO BENEFITS

It is agreed that the threshold for contributions and benefits will be R93 288 per annum.

SCHEDULE 2: TRANSITIONAL ARRANGEMENTS

4.         AGREEMENTS ON THE UNEMPLOYMENT INSURANCE CONTRIBUTIONS BILL (UICB)

4.1.      Nedlac parties have made limited recommendations regarding substantive changes to the Bill. The UICB is supported by Nedlac subject to the:

4.1.1.    Amendments captured below.

4.1.2.    Reservations recorded in point 5. of this report.

4.2.      It is noted that the agreements reached during the negotiations may require technical amendments during the legal drafting of the bills.

4.3.      Parties agreed that the proposed level of the contributions would remained unchanged at 2 %, as indicated under

4.4.      Where applicable [[        ] = deletion; bold = insertion].

AGREEMENTS

1.         It is agreed that the following changes to definitions in Chapter 1 should be made in order to correspond with the agreed changes to definitions in the Unemployment Insurance Bill.

1.1.      The definition of "employee" will be amended as follows:

" ‘employee’ means an employee as defined in the Labour Relations Act 66 of 1995 and includes an employee as defined in the Fourth Schedule to the Income Tax Act, other than a person contemplated in paragraphs (c) or (d) of that definition;".

1.2.      The definition of "domestic worker" provided for in the Basic Conditions of Employment Act, 1997, will be inserted as follows:

" ‘domestic worker’ means an employee who performs domestic work in the home of his or her employer and includes—

(a)        a gardener;

(b)        a person employed by a household as a driver of a motor vehicle; and

(c)        a person who takes care of children, the aged, the sick, the frail or the disabled; but does not include a farm worker;".

2.         It is agreed that a comprehensive actuarial valuation of the Fund will only be possible once more accurate information is available. To this effect, the following process was agreed:

2.1.      A statistical database would be established with the assistance of the International Labour Organisation and implemented at the onset of the new dispensation.

2.2.      A joint monitoring team would be established with representation from the Department of Labour, Department of Finance, South African Revenue Services and Unemployment Insurance Board.

2.3.      An actuarial valuation would be undertaken in 2002. The report, together with the actuarial valuation, should be tabled at the Unemployment Insurance Board.

2.4.      A review of the institutional framework would be undertaken in 2002.

2.5.      The contribution rate would remain at 2 % with the employer and employee each contributing 1 %. If an increase in the contribution rate was necessary it would be subject to negotiation.

3.         With regard to the financial situation of the fund, it is agreed that government would:

3.1.      Provide a grant to liquidate the current debt and interest burden of the fund.

3.2.      Stand as guarantor for the transitional period of two years and cover any shortfalls during that period, using the mechanism of the Medium Term Expenditure Framework.

4.         It is agreed that an additional clause 8 (7) will be inserted to clarify the procedure required where an employer has made a single payment under Section 8(6), but discovers during a financial year that there will be a shortfall in its contribution and therefore needs to make good the difference. The wording of this clause will be determined by the State Law Advisors.

5.         RESERVATIONS

It is noted that:

5.1.      Clause 3(1)(c) refers:

5.1.1.    Business and labour proposed that this clause be deleted from the bill so as to include public servants under coverage of the bill.

5.1.2.    Government maintained that national and provincial spheres of government and its employees should be excluded from coverage.

5.2.      Clause 3(1)(d) refers:

5.2.1.    Government and business proposed that this clause be replaced with the following:

"persons who enter the Republic for the purpose of carrying out a contract of service, apprenticeship or learnership within the Republic if upon the termination thereof the employer is required by law or by the contract of service, apprenticeship or learnership, as the case may be, or by any other agreement or undertaking, to repatriate that person, or that person is so required to leave the Republic.".

5.2.2.    Labour indicated a reservation on the proposed amendment for the following reasons:

(a)        It had concerns regarding the potential difficulties of creating a different category of employees in the labour market by excluding one category from the legislative framework. This might further segment the labour market and could be exploited by employers to employ slightly cheaper labour for whom they were not required to make contributions.

(b)        The clause impacted on equity and could be discriminatory.

5.3.      Clause 9(2) refers:

5.3.1.    Labour proposed that the period within which applications should be made after termination of a contract of employment should be extended to four years.

5.3.2.    Government stated that the Act currently provided a period of nine months for submitting applications. It supported the reduction of this period to six months for the following reasons:

(a)        The creation of a data base would significantly improve administrative efficiency.

(b)        Training would be provided for claims officers to increase administrative capacity.

(c)        Disputes over dismissals would constitute good cause for accepting late applications.

6.         CONCLUSION

            This report therefore concludes consideration of the issue in Nedlac. The report, the Unemployment Insurance Bill and the Unemployment Insurance Contributions Bill are hereby submitted to the Ministers of Labour and Finance in terms of section 8 of the Nedlac Act, No. 35 of 1994.