Redesigning the South African unemployment insurance fund: selected key policy and legal perspectives

25 January 2013

This contribution examines selected issues from a policy and legal perspective. Against the background of the broader social security reform agenda in South Africa and the vision of a comprehensive social security system, the contribution covers five key areas, namely alignment with international standards; the need to develop synergies with the rest of the social security system and for institutional reform and alignment; addressing certain material deficiencies and inconsistencies in the UIF legislation (with reference to removing the restriction on certain contributors to benefit and redefining the range of dependants); re-aligning the current UIF benefit regime to focus on loss of employment; and improving the UIF benefit regime through the introduction of standardised measures and other reforms (with reference to the indexation of benefits, utilising a minimum wage arrangement as a basis for benefit enhancement, adjusting the contribution rate and developing a streamlined adjudication framework). It is argued that complying with relevant international standards will move South Africa closer to be in a position to ratify these instruments, in particular ILO Convention 102 of 1952 on minimum standards in social security. Ample opportunity exists to introduce streamlined approaches in among others the collection of contributions and shared benefit payment facilities and arrangements, and the harmonisation of benefits. However, particular considerations and substantive constraints define and circumscribe the extent and content of the alignment of the UIF that is currently considered. These relate in particular to the compensation function of the UIF; its role as a labour market instrument; and the need to recognise unemployment insurance as a separate risk category with a ringfenced contribution and benefit regime framework. It should also be considered to separate unemployment insurance benefits in the strict sense of the word (ie benefits accruing to a beneficiary as a result of loss of employment) from unemployment-related benefits such as sickness, maternity and adoption benefits.