Answer to a question from a reader

How will doing consulting work for the company that retrenched me affect my UIF claim?

The short answer

It depends how many hours you worked and whether you classify as a true independent contractor.

The whole question

Dear Athalie

I applied for retrenchment benefits online in July 2020. The assessor was eventually able to complete my claim on 30 March 2021. After I was retrenched, the company's head office needed me to train the person taking over my work. They paid me per hour for the consulting work. Now, the Department of Labour is asking for a UI-19 and salary schedule from the head office. 

How will this consulting work affect the UIF claim I made after I was retrenched? I'm not sure whether the head office loaded me as an employee on their system but I have no employment contract with them anymore. 

The long answer

Everyone who works more than 24 hours a month must pay UIF and employers are obliged to deduct 1% from wages and also contribute 1% themselves, monthly. People who are excluded from paying UIF are those working less than 40 hours a month for a specific employer and independent contractors.

Accordingly, the number of hours worked in a month for a specific employer is important for establishing whether UIF must be deducted or not.

There is an ongoing debate about who is a true independent contractor and who is actually an employee. Although the employer might say they only employ independent contractors in order to avoid complying with the Basic Conditions of Employment Act that protects the rights of employees, it may be that these independent contractors are actually employees.

The courts have come up with some basic rules to determine the status of an employee versus an independent contractor: an important criterion is that an employee performs the work as directed by the employer at times and locations determined by the employer, while the independent contractor is contracted to deliver an agreed number of services outside of the supervision of the employer.

It sounds as if you were regarded as an independent contractor working less than 24 hours a month by the head office company, and thus they would not have been obliged to deduct UIF from your pay. But if your employers should have deducted UIF and did not, they would be responsible for paying the outstanding amounts to UIF plus a 10% penalty.

When you submit a claim to UIF, the following documents are required:

  • A 13-digit bar-coded identity document or passport

  • Copies of your last six payslips

  • Form UI-2.8 for banking details

  • Information supplied by your employer (UI-19)

  • A service certificate from the employer

  • Proof of your banking details

Since your retrenchment claim was finally processed by UIF in March 2021, they would have had all this information already. If in assessing your claim they are now concerned about the consultant work you did for the head office company, they are entitled to ask for any supplementary information needed, such as the UI-19 form and salary schedule they are now requesting, to establish whether you were employed or not.

Perhaps you should contact the head office company and ask them if there is any reason to fear that your consulting work could affect your retrenchment benefit and ask them to get the information required to UIF speedily.

If your claim is approved, the claims officer must inform you what benefits you are entitled to, what you will be paid, and whether there are any conditions attached. If UIF decides that your claim is defective, the officer must inform you of this and the reasons for it.

If there is a dispute about the payment or non-payment of benefits, you can appeal to the Regional Appeals Committee within 90 days by completing the correct form. If you appealed and were not happy with the outcome, you can appeal to the National Appeals Committee, whose decision is final. Both the Regional and National Appeals Committees can confirm, change, cancel or replace a decision made by the UIF.

Wishing you the best,

Answered on May 5, 2021, 4:16 p.m.

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Please note. We are not lawyers or financial advisors. We do our best to make the answers accurate, but we cannot accept any legal liability if there are errors.