Unemployment Insurance Fund Contributions (UIF) is payable based on the Gross Basic Salary of each employee, in one of two ways:
- If your company is registered as an Employer with the South African Revenue Service (SARS) and deducts Employees Tax (PAYE) from your employee salaries, you are required to pay over the UIF component over to SARS on or before the 7th of each month as part of the EMP201 submission, or
- If you are not registered as an employer with SARS, you are required to pay over the UIF deductions directly to the Department of Labor.
The employee contributes 1% towards UIF and the employer contributes another 1% on behalf of the employee, resulting in a total UIF contribution of 2% being payable. This 2% is however not payable on the total gross salaries, but calculated based on a capped amount.
Based on the notice published in the Government Gazette no. 35715, dated 26 September 2012, the UIF earning limit increased from R149,736 to R178,464 p/annum and from R12,478 to R14,872 p/month.
This means that for an individual earning a gross salary in excess of R14,872 p/month, the UIF contribution will be capped at R148.72 (R14,872 x 1%).
This change will take effect from 1 October 2012.
The result is that for those of you that employed certain employees with a fixed net salary, their gross salaries will have to be adjusted upwards to provide for the higher UIF deduction.
The following table indicates the adjustments applicable on a salary calculation for an individual employed before 1 October 2012 under the premise that the net salary would amount to a fixed R20,000 p/month, and not based on a gross amount:
| Before 1 October 2012 | After 1 October 2012 | |
| Gross Salary |
24,566.35 |
24,600.56 |
| 1% UIF deduction |
(124.78) |
(148.72) |
| PAYE |
(4,441.57) |
(4,451.84) |
| Net Salary |
20,000.00 |
20,000.00 |
| Increase in Gross Salary |
R34.21 |
Not adjusting for the above mentioned changes, will result in the IRP5 reconciliation not reconciling and might result in penalties and interest levied by SARS.
An important factor to communicate to all other employees that are employed on a fixed Gross Salary, is that their net salaries will be less with R23.94 from end of October 2012, as a result of this UIF increase.
Please ensure that your payroll calculation for this contribution is updated accordingly.
Contact Calypso Accounting today if you need any assistance with the implementation or maintenance of a cost effective Payroll solution.
