DRAFT UNEMPLOYMENT INSURANCE BILL
Submission to the Unemployment Insurance Board
Summary
The SACC strongly supports the draft Unemployment Insurance Bill and, in particular, the extension of benefits to domestic workers, the delinking of unemployment and maternity benefits, and the introduction of a progressive scale of benefits. However, we raise specific concerns about the provisions for the inclusion of domestic workers, the method of calculating benefits, the place designated for application for and collection of benefits, the rate of income replacement for low income workers, the procedure for recovery of benefits paid in error, the reporting requirements, and other technical matters. We propose specific substantive amendments to sections 1, 3, 4, 5, 8, 9, 14, 17, 20, 22, 23, 25, 27, 53, 70 and schedules 1 and 2.
1.0 Introduction
1.1 The South African Council of Churches (SACC) is the facilitating body for a fellowship of 25 Christian churches, together with one observer-member and associated para-church organisations. Founded in 1968, the SACC includes among its members Protestant, Catholic, and African Independent and Pentecostal churches, representing the majority of Christians in South Africa. SACC members are committed to expressing jointly, through proclamation and programmes, the united witness of the church in South Africa, especially in matters of national debate.
1.2 We welcome the draft Unemployment Insurance Bill (hereafter, "the Bill") as a valuable step toward greater social and economic justice for all South Africans. We concur with the Minister of Labour's assessment of the importance of unemployment insurance as a essential component of "the social safety net to mitigate the economic hardships of the unemployed." [Statement by the Minister of Labour, 2 March 2000] We are especially pleased that the Bill is intended to give effect to the Unemployment Insurance Task Team's recommendations concerning the extension of Unemployment Insurance Fund (UIF) benefits to all workers with minimal exclusions, the delinking of maternity and unemployment benefits (so that women do not need to draw down their unemployment benefits while they are on maternity leave), and the introduction of a progressive scale of benefits.
1.3 In spite of our strong support for the principles underlying the Bill, we are concerned that there are a number of inconsistencies, ambiguities, and errors in the draft that could thwart the realisation of these objectives. In particular, we wish to draw attention to the following issues:
- Inclusion of domestic workers
- Method of calculating benefits
- Place of application for and collection of benefits
- Graduation of benefits
- Recovery of benefits paid in error
- Unemployment benefits
- Illness benefits
- Dependants' benefits
- Reporting requirements
1.4 In the process of preparing our submission, we have consulted with a number of interested organisations, including the South African Domestic and Allied Workers Union, the Black Sash, the Human Rights Committee, and the SA Catholic Bishops' Conference Parliamentary Office. While we reserve the right to differ on some details, we support in principle the substantive recommendations made by the Black Sash and the Human Rights Committee in their submissions.
2.0 Inclusion of domestic workers
2.1 The SACC strongly endorses the extension of UIF benefits to domestic workers. However, since the bill treats domestic workers differently, at least in the short term, the Bill must include a clear definition of the term. We propose the incorporation of the definition used in the Basic Conditions of Employment Act.
2.2 The objective of extending coverage to domestic workers is contradicted by the explicit exclusion of domestic workers from the ambit of the Bill in section 3(1)(d). Although this section envisions the eventual incorporation of domestic workers following further investigation of the most appropriate manner of achieving this, it asserts that such a study "may be concluded within eighteen months from the date of promulgation of this Act".
2.3 A more clear--and, we believe, preferable--approach would be to provide for deferred inclusion of domestic workers rather than temporary exclusion. Moreover, in light of the constitutional problems associated with the exclusion of domestic workers and the extensive research that has already been undertaken regarding methods of extending UIF benefits to domestic workers (see appendices 1 and 2 to the Black Sash submission), that deferral should be for as brief a period as possible. We propose that the legislation apply to domestic workers one year from its date of promulgation.
2.4 There are a number of issues related to the inclusion of domestic workers that require careful consideration and creative solutions. These include:
- Many domestic workers will have been employed for years prior to their coverage by UIF; should all domestic workers be required to start from scratch to
- accumulate eligibility for benefits, or should previous years' employment be considered in calculating one's period of eligibility for benefits?
- Many domestic workers have multiple employers, but work a comparatively small number of hours per month for each; how can benefits most efficiently be extended to them?
- Some employers may feel burdened or intimidated by the new obligations placed on them by the Act; how can they be discouraged from dismissing their domestic workers in order to avoid these requirements?
2.5 Consequently, we recommend the following amendments:
- "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 driver of a motor vehicle; and
(c) a person who takes care of children, the aged, the sick, the frail or the disabled,
- (1) Subject to section 2 of schedule 2, this Act applies to all employers and employees, other than--
- a. ...;
b. ...; and
c. ... . [Delete subsection d.]
- 2. Deferral of application of Act to domestic workers
- (1) The application of this Act to domestic workers and their employers shall be deferred for one year from the date of promulgation of this Act to enable an appropriate body, appointed by the Minister, to investigate methods of including domestic workers under the coverage of this Act and to make recommendations to the Minister.
(2) The body contemplated in subsection (1) shall consider and make recommendations concerning,
- a. efficient collection of contributions from domestic workers and their employers;
b. the retrospective accumulation of days of benefit entitlement by domestic workers;
c. providing coverage to domestic workers who are employed for a total of twenty-four (24) hours or more a month, but not by a single employer;
d. discouraging employers from retrenching domestic workers as a strategy to evade UIF contributions; and
e. informing domestic workers and their employers of their rights and responsibilities in terms of this Act.
3.0 Method of calculating benefits
3.1 Section 5 (Calculation of benefits) contains a number of discrepancies and inconsistencies with other portions of the Bill. For example, section 5(1) purports to give a formula for calculating a contributing employee's monthly wage for the purposes of determining the benefits payable to that employee; in fact, this formula calculates the employee's daily wage. It also refers to a "prescribed maximum in terms of section 53" which does not appear in that section. Furthermore, while section 9(4)(b) requires the claims officer to calculate an applicant's unemployment benefits on a daily basis, calculation in other parts of this chapter (sections 13, 14(4), 16, 17(4), 19, 20(4), 22 and 23(4)) is on a weekly basis and schedule 1 requires calculation on a monthly basis.
3.2 The method of calculating benefits should be revised to enable it to be more consistently applied across the various sections. One approach (that we understand is more in keeping with current practice) would be to calculate benefits on a weekly basis, but make payment on a monthly basis. This would necessitate corrections to sections 5(1) and 9(4)(b), as well as clarifying additions to schedule 1.
3.3 We believe that the clarity of sections 4, 5, and 70 would be enhanced by the amendment and regrouping of certain clauses. Section 4(2), dealing with the scale of benefits, would be more appropriately placed in the next section (Calculation of benefits) rather than its present location (Right to benefits). Section 4(2)(b)(ii), to do with restrictions on the Minister's power to alter the scale of benefits in schedule 1, seems better placed in section 70 (Minister's power to add and change schedules and footnotes). Finally, it is not clear why section 4(2) says a contributor is entitled to an "approximate scale of benefits" rather than actual benefits determined by the scale in schedule 1 and the individual's rate of remuneration.
3.4 Consequently, we propose the following amendments:
- (1) The amount of benefits to which a contributor is entitled shall be determined in accordance with--
- a. the contributor's weekly rate of remuneration; and
b. the table of benefits contained in schedule 1.
- b. determine--
- i. the amount of benefits to be paid monthly in terms of sections 5(1), 5(1A) and 5(2); and
ii.the number of days of benefits to which the applicant is entitled in terms of sections 5(3), 5(4) and 5(5)
4.0 Place of application for and collection of benefits
4.1 Sections 9(1), 14(1), 17(1), 20(1) and 23(1) require an individual applying for benefits to submit her or his application at "the nearest employment office". Subsection (4) of each of these sections empowers the applicant's claims officer to stipulate the manner of payment, with the implication that it should be through the same office.
4.2 For many people, particularly in rural areas where transportation patterns may not always follow the most direct routes, proximity may not equate with convenience. Unless there is some compelling reason why the State needs to stipulate which employment office the applicant uses, it would be better to allow the applicant to select the office that is most convenient for her or him.
4.3 We urge the replacement of the words "the nearest" with the word "any" in sections 9(1), 14(1), 17(1), 20(1) and 23(1).
5.1 We support the introduction of a graduated scale of benefits that replaces a greater proportion of the income lost by low-waged people who lose their jobs. We believe that the scale of benefits contained in Table One of schedule 1 could be even more steeply graduated. At the very least, the income replacement rate for those in the lowest income bracket (up to R150/month) should not be less than the 60% promised by the Minister of Labour in his speech of 2 March 2000. Currently it is 58.6%.
5.2 We propose that this be reflected in amendments to section 70 (Minister's power to add and change schedules or footnotes) through the addition of a new section 70(2)(c):
- c. ensure that income replacement rate (IRR) for contributors in the lowest income bracket listed in Table One is no less than 60 percent.
6.0 Recovery of benefits paid in error
6.1 While we accept the need for the State to recover benefits paid in error, rectification of such an error should be pursued in a manner that creates a minimum of hardship for the recipient of the funds. Currently, section 27 permits the Commissioner to demand repayment within 30 days of amounts believed to be disbursed in error.
6.2 There are a number of problems with this approach. First, the Commissioner is not required to produce any evidence that the individual in question was ineligible to receive the funds or that she or he did, in fact, receive the funds. Proof of the latter is especially important to prevent the State from attempting to recover from an ostensible recipient funds that were actually pocketed by an official in the disbursement chain. Second, there is no deadline by which the State must recognise its error and notify the presumed recipient. Such a claim could be made five or ten years after the incident when the individual involved is less able to document a rebuttal to the State's claim. Finally, the 30 day repayment period may prove a burden in many cases and may also inhibit the recipient's ability to appeal.
6.3 Section 25(2), which allows the State to set off benefits against a debt arising from an earlier incident of erroneous payment of benefits, creates further problems. In practice, individuals are often confronted with prior erroneous payments only when they file new applications for benefits. Thus, the demand for payment comes at a time when the applicant is most vulnerable. The State's powers to reclaim benefits paid in error should be exercised independently of its obligation to provide benefits to contributors. No exception to the prohibition on the assignment, attachment or setting off of benefits should be made for the State.
6.4 We therefore recommend the following amendments:
- (1A) If the Commissioner determines that a person has been paid benefits in error or in excess of the person's entitlement, the Commissioner must, within three years of the date of the erroneous payment, make a written demand for repayment to that person.
(1B) A written demand contemplated in subsection (1A) must include--
- a. a statement of the amount paid in error;
b. an explanation of why the recipient was ineligible to receive the funds; and
c. evidence that the person to whom the demand is addressed actually received the funds.
7.1 Section 8(1)(a) stipulates that a contributor is eligible for unemployment benefits only if the contributor is unemployed due to termination of her or his contract by the employer. However, section 186 of the Labour Relations Act (No. 66 of 1995) defines "dismissal" to include failure to renew a fixed-term contract that the employee reasonably expected would be renewed [186(b)] and termination of a contract by an employee where the employer has made continued employment intolerable [186(e)]. It should be made clear that contributors who become unemployed for either of these reasons do not jeopardise their rights to benefits. We suggest therefore that section 8(1) be amended to read:
- a. Subject to section 6(b)(iv), the reason for the unemployment is the dismissal of the contributor, as defined by section 186 of the Labour Relations Act (No. 66 of 1995);
7.2 We concur with Black Sash's view that the exemption for "short time or temporary lay off" should not be relegated to a vague footnote to section 8(1)(a) and should be clearly defined. We also agree that the exemption should be limited to periods of two weeks or less. We believe that the simplest way to address this matter would be to amend section 8(1) so that contributors are eligible for benefits "for any period of unemployment lasting more than 14 days if--".
7.3 Whilst we agree that the Director-General should be empowered to penalise contributors who refuse available work, training, or vocational counselling, we believe that the provision for such penalties in section 10(2) should exclude situations where the contributor has good reason for rejecting such work, training, or counselling. We propose the adoption of language parallel to that of section 8(2)(b), so that penalties could only be applied "If the contributor refuses without good reason to accept available work ...".
7.4 Section 8(3) empowers a claims officer to stop a contributor's unemployment benefits if the contributor falls ill and the claims officer feels that such illness will prejudice the contributor's chance of securing employment. The principle underlying this provision seems to be that only those who are potentially employable are eligible for UIF benefits. If one becomes unemployable (or of limited employability) due to illness, then one must look to other programmes, such as disability grants, to provide a safety net.
7.5 Although this is an acceptable ideal, there is a danger that this clause will open up a gap between UIF benefits and disability benefits since a claims officer's assessment of the impact of a contributor's illness will not necessarily coincide with the assessment of a district surgeon or other health official asked to render an opinion for the purposes of processing an application for a disability grant. A stronger link should be drawn between the termination of UIF benefits and the commencement of disability benefits in order to prevent people from falling through this gap.
8.1 Part C of Chapter 2 provides for illness benefits. However, access to benefits in terms of this section should not be strictly limited to cases of illness, but should include periods of unemployment or limited employment due to incapacity for other medical reasons.
8.2 We propose that throughout this Part, the term "medical disability" be substituted for the term "illness". In addition, "medical disability" should be defined in section 1 as follows:
- "medical disability" means any temporary physical or mental incapacity that restricts or obstructs a person's ability to work as a result of illness, surgery or other medical procedure;
9.1 Section 22 makes provision for the payment of dependant's benefits only to the spouse or child of a deceased contributor. This is at odds with other recent legislation which acknowledges the equivalent rights of domestic partners other than spouses.
9.2 Section 27(2)(c)(i) of the Basic Conditions of Employment Act (No. 75 of 1997) makes provision for leave in the event of the death of an "employee's spouse or life partner". The Medical Schemes Act (No. 131 of 1998) defines "dependant" to include an individual's "spouse or partner". Similarly, the Promotion of Equality and Prevention of Unfair Discrimination Act (No. 4 of 2000) lists responsibility toward one's "spouse [or] partner" as aspects of its definition of family responsibility".
9.3 Consequently, we propose that section 22(1) be amended to read: "The surviving spouse or partner of a deceased contributor is entitled to the dependant's benefits ...".
10.1 This legislation is primarily designed to strengthen the socio-economic "safety net", especially for lower income people in employment. In order to facilitate assessment of the legislation's success in achieving this objective, it would be helpful to disaggregate data on the beneficiaries of the Bill.
10.2 We recommend the amendment of sections 53(2)(a) and (b) by inserting the phrase "in each of the income brackets indicated in Table One of schedule 1" so that both begin: "the total number of persons in each of the income brackets indicated in Table One of schedule 1 who received benefits ..."
11.1 In addition to the drafting errors noted above, there are a large number of cross-references that refer to sections of the Bill that are either non-existent or inappropriate. The following cross-references, at least, should be checked: reference to section 26(2) in section 28(1)(d); references to sections 35(2) and 39 in section 31(1); reference to section 39(1) in section 31(2)(d); reference to section 41 in section 31(4); reference to subsection 6 in section 40(4)(a); and references in section 67(1).
11.2 Section 11 is presumably misnamed "Meaning of period of unemployment under this Part" instead of "Meaning of period of illness [medical disability] under this Part".
11.3 In section 12(1), the conjunction between conditions in the a, b, c series make invites uncertainty about whether more than one condition must be fulfilled. We presume that an applicant would be entitled to benefits if she or he met conditions a or b, and also c. If so, clause c should become part of the main clause: [c.] and application is made ...
11.4 Section 54 (Procedure when using regulations) is misnumbered. It should be section 55.
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