If you are being retrenched, you need to take the following steps to protect your finances:
- Sign up with the unemployment insurance fund (UIF) by using our How to apply for UIF guide (see below);
- Contact all your credit providers immediately and ask about your credit life insurance. Most credit agreements – such as mortgage, vehicle finance, credit card, store cards and hire purchase – include credit insurance, which covers a portion of your debt repayments.
- Speak to your car and home insurer. Your policy may include cover that waives your insurance premiums for a period of time after being retrenched, which means you still have insurance in place even when you cannot afford the premiums. However, you need to notify the insurer rather than just leaving the debit order to bounce.
- Ask your financial adviser whether you have an added benefit on your retirement annuity and life insurance policy that waives your premium contributions for a certain period of time. In some cases, your premiums could be waived for up to a year, which means that you still have life cover in place even if you cannot meet the monthly repayments – again, you need to inform your insurer about the retrenchment.
- If you have an income protection policy, find out if it covers retrenchment. Some income protection policies will pay 75% of your taxable salary for a maximum of six months after retrenchment.
- Adjust your lifestyle sooner rather than later. It may take longer to find a new job than you expected. You need to make your benefits last as long as possible, so take care not to carry on as if nothing has happened. Start making adjustments to your monthly budget.
- You are allowed to take up to R500 000 tax-free from a combination of your retrenchment package and pension (assuming that you have not withdrawn from a retirement fund previously). While the retrenchment package itself is there to assist you with your day-to-day expenses, try not to use your retirement benefits for daily living because this could have a material effect on your future retirement benefit. Think of your retirement fund only as an emergency fund in case you are unable to find work after your UIF and severance package payments have run out.
It is important to note that in order to qualify for any of these benefits you need to have formal notification of retrenchment from your employer.
You cannot claim retrenchment cover if you have been dismissed from your employer or taken voluntary retrenchment. In addition, there are usually time limits before you can claim.
For example, in some cases you will not have cover if you are retrenched within 90 days of taking the cover or if you received a retirement notice up to three months before taking out the cover.
How to apply for UIF
If you’re going on maternity leave or have been retrenched you can claim from the government’s Unemployment Insurance Fund (UIF), which should help replace a portion of your income and tide you over until you can find another job or return to work after having a baby.
If you haven’t claimed from the UIF before or are unsure of the process, it would help to become informed about recent changes around how claims can be made and how much you qualify for.
“The UIF Bill was signed into an act in January this year, so we no longer refer to it as a bill; this means it has become law. However, the amendment act is not yet effective as this requires the promulgation of the implementation date.
The act will be implemented once the president promulgates the implementation date,” explains Makhosonke Buthelezi, director of communication and marketing at the department
The good news is that the
changes mostly favour the recipient. Here are some of the main benefits and
improvements in the amendment act:
1. Payment of the unemployment benefit will be for 12 months instead of the current eight months.
2. Maternity benefit will be paid at a flat rate of 66% instead of the current sliding scale of between 38%-60%.
3. The period within which to submit claims is increased from six months to 12 months for unemployment, maternity, illness, and adoption benefits. For the death benefit you can submit a claim within 18 months.
4. Public servants and people in learnerships are going to be able to contribute and claim from UIF.
5. Workers who work for reduced hours or a short time will be able to claim for the lost hours.
Claiming from the UIF has not been smooth sailing for all concerned. However the department of labour has engaged in several initiatives to improve its services. For instance – you can make a UIF claim online, in much the same way you can file your taxes online.
Internal changes have also been made. “We have started to increase bandwidth in some of the labour centres to enable faster processing of documents and this is going to be rolled out in other labour centres throughout the country,” says Buthelezi.
It’s not unheard of to receive your benefits weeks after filing. “At the moment claims submitted in Cape Town are approved in record times of two to three weeks if all documents are complete and correct. The DoL (department of labour) always quotes 35 working days. Some claims can take much longer if something goes wrong. Six-month delays are rare but do occur occasionally,” says Klaus Arnhard, founder of agency UIF-Hero.
However the department says it is looking into this following a number of workshops which resulted in a service delivery improvement plan. “The DoL has also reviewed claim turnaround times to make them shorter so clients can enjoy their benefits at the time they need them,” says Buthelezi.
WHY AGENCY INVOLVEMENT WILL BE REDUCED
One of the more contentious changes, however, has been the prohibition of the use of agencies to process claims on behalf of applicants. The department of labour’s past inefficiencies have resulted in an entire industry springing up to help applicants process claims, particularly maternity benefits. Agencies providing such services include UIF-Hero, Bunny Hop, UIF Services, and Little Monkey UIF Claims to mention a few. They typically charge a once-off fee ranging from R400 to R850. The new act says: “When processing application for benefits neither the fund nor any agency or person purporting to act on behalf of the applicant may charge a fee against the applicant.’’ But industry commentators argue that agencies were created to fulfil a need and to help with the complexities of making a claim. They add that using agencies creates jobs and results in successful claims that are usually processed in shorter periods of time.
But the bone of contention is that they are still charging for a service that is meant to be free. The department points out that no agencies are accredited by the UIF.
“The UIF discourages the use of agencies because our services are for free, and agencies do not get preferential treatment from the fund. The current act does not encourage nor prohibit the use of agencies. However, the new amendment act prohibits anyone from charging a fee for processing UIF claims, including agencies.”
Until the act is promulgated it’s still possible to hire an agency to act on your behalf, but once it comes into effect, agencies may have to offer different services and charge for their time instead of charging for processing the claim.WHY IT’S STILL DIFFICULT TO CLAIM
While much has been done to smooth the process of claiming from the UIF, it’s still a difficult process. Michael Bagraim, DA spokesperson for labour, points out that it’s not uncommon for the department of labour to lose paperwork and to ask people to come back again. “Where we are at the moment it’s a nightmare and we’re hoping to get to a stage where it becomes more user friendly,” he says.
However, he is optimistic. “I’m actually feeling quite positive and spoke at length with the new director of the UIF and he really wants to ensure that things happen. The nightmare continues but I’m hoping to see light at the end of the tunnel.”
Meanwhile, Arnhard points out that the problem could also be on the claimants’ side. “There are a number of reasons [why claims are not processed or rejected], but the most severe problem is the employment history.
“In our estimate, about 75% of employment histories are not complete,” he says.
Ultimately, it’s vital to ensure that you have all the correct paperwork for the department of labour to process your claim. If you’re unsure, you still have the ability to consult an expert.
“It’s all purely administrative. Legally, a person needs to qualify. Once that’s satisfied you need to prepare for long queues by getting information on time. That is the only way,” says Osborne Molatudi, partner at Hogan Lovells.