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A PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR

A PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR. Budget, Strategic Plan and Annual Performance Plan of the Unemployment Insurance Fund. 2013.05.02-03. PART A. Strategic Plan and Annual Performance Plan of the Unemployment Insurance Fund. CONTENTS. PART A

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A PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR

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  1. A PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR Budget, Strategic Plan and Annual Performance Plan of the Unemployment Insurance Fund 2013.05.02-03

  2. PART A Strategic Plan and Annual Performance Plan of the Unemployment Insurance Fund Strategic Plan of the Unemployment Insurance Fund

  3. CONTENTS • PART A • Vision, Mission and Legislative Mandates, Footprint • Summary of the five year Strategic Plan 2011/12- 2015/16 • Performance Report against the 2012-13 Annual Performance Plan • Annual Performance Plan 2013-14 • PART B • MTEF Budget 2013/14– 2015/16

  4. Vision The Unemployment Insurance Fund strives to contribute to the alleviation of poverty in South Africa by providing effective short term unemployment insurance to all workers who qualify for unemployment and related benefits Annual Performance Plan Unemployment Insurance Fund

  5. Mission The central purpose and role of the Unemployment Insurance Fund is defined as: • Rendering an effective accessible service to all stakeholders • Being a sustainable organisation with sufficient reserves • Administering the Fund professionally Annual Performance Plan Unemployment Insurance Fund

  6. Legislative Mandates Unemployment Insurance Act, 2001 as amended • The Unemployment Insurance Fund (UIF) was established in terms of section 4(1) of the Unemployment Insurance Act, 2001 (Act 63 of 2001) as amended • The Act empowers the UIF to register all employers and employees in South Africa Strategic & Annual Performance Plan Unemployment Insurance Fund

  7. Legislative Mandates Unemployment Insurance Contributions Act, 2002 • Section 8 of the Act empowers the SARS Commissioner to collect monthly contributions from both employers and workers who are required to register as employers in terms of the fourth schedule to the Income Tax Act and who are liable for the payment of the skills development levy in terms of the Skills Development Act, 1999 (Act 9 of 1999). • Section 9 of the Act empowers the Unemployment Insurance Commissioner to collect contributions from all those employers who are not required to register as employers in terms of the fourth schedule to the Income Tax Act and who are not liable for the payment of the skills development levy in terms of the Skills Development Act, 1999 (Act 9 of 1999). • These contributions are utilised to pay benefits and any other expenditure reasonably incurred relating to the application of this Act. Strategic & Annual Performance Plan Unemployment Insurance Fund

  8. UIF Footprint 9 Department of Labour Provincial Offices 125 Labour centres that members of the public can access for UIF benefits. These Labour centres further service more than 820 visiting points within their geographical points. The Fund has increased the number of sites at which decentralised processing of claims could take place from 57 to 84.

  9. UIF Footprint

  10. UIF Strategic Plan 2011/12 – 2015/16 UIF Strategic Plan 2011/12 – 2015/16 STRATEGI OBJECTIVES • A five year strategic plan of the Unemployment Insurance Fund was approved by the Minister of Labour in September 2010. • The Strategic Plan outlines five strategic outcome oriented goals of the UIF for the five year period • Improve collection of revenue from employers • Improve payments of benefits to beneficiaries of the Fund • Participate in government initiatives of creating and sustaining decent employment • Effective administration of the Fund’s operations Annual Performance Plan Unemployment Insurance Fund

  11. UIF Strategic Plan2011/12 – 2015/16 • In order to achieve its strategic outcome oriented goals, the UIF will pursue five strategic objectives: • Fund Poverty Alleviation Schemes • Improve Governance • Strengthen the institutional capacity of the Fund • Encourage Compliance through enhanced service delivery • Improve Stakeholder Relations Annual Performance Plan Unemployment Insurance Fund

  12. Link between Service Delivery Outcomes & Strategic Goals

  13. PERFORMANCE REPORT AGAINST THE 2012-13 ANNUAL PERFORMANCE PLAN Annual Performance Report Unemployment Insurance Fund

  14. Summary of Performance Annual Performance Report Unemployment Insurance Fund

  15. Strategic objective 1: Fund Poverty Alleviation Schemes • No training initiatives were approved during the 2012/13 financial year. • Two initiatives approved in 2011/12 we implemented during the year. • MICT SETA is training 1000 UIF beneficiaries on ICT related disciplines • MQA is providing Artisan training to 2500 UIF beneficiaries. • 109% of mandated Social Responsible Investments invested by March 2013. • Total investment Portfolio as at 31 March 2013 is R81.35 billion. Annual target for 31 March 2013 is R3.254billion (80%). Actual SRI invested was R3.561 billion • 15,52% increase in funding for Productivity SA Turnaround Solutions compared to prior year against a target of 10% • The Funding for Turnaround Solutions has increased from R 34,778,000 in 2011/12 to R 40,174,000 in 2012/13 financial year

  16. Strategic objective 2: Improve Governance • All Board and sub-committee meetings were held as scheduled in the year planner and there was 100% compliance to the Charters against a target of 80% • 9 Audits were undertaken at provincial offices and 13 at Head Office. 91% of reports were signed off by management . • Management currently implementing corrective actions on all findings of the audits. • Compliance to legislation is being monitored and reports presented to UI Board, FAC, MC and National Treasury on a quarterly basis. • Quarter 4 Risk Appetite Framework monitored and Report was signed off by the UI Commissioner. • Management action plans to mitigate identified risks are monitored regularly.. • Phase two of the automated fraud detection system implemented .It entails the analysis of Closed Entities, Persal vs. UI database, Bank Account Exceptions, Duplicate Entities, Multiple Employers, Data Verification • 92% of cases received or detected were finalised by financial year end against a target of 90%.

  17. Strategic objective 3: Strengthen the Institutional Capacity of the Fund • 72 % of planned training interventions were implemented by end of quarter 4 against a target of 80% • 67% Senior Management Services cadres consists of women as at 31 March 2013 against a target of 50% • 3% representation of people with disability as at 31 March 2013 against a target of 5% • 4.3% vacancy rate at the end of March 2013 against a target of 5% • The implementation plan for the IT strategy was presented to the EXCO and approved. The Plan is currently being implemented at the Fund.

  18. Strategic objective 4: Encourage Compliance through enhanced service delivery • 86% of claims were finalised within five weeks of application as reflected in the Fund’s operational system (SIYAYA) against a target of 82,5%. • 84% increase in number of employers accredited to use the uFiling Virtual Office against a target of 80%. • A total of 5023 employers were accredited to utilise the ufiling Virtual office by March 2013 when compared to 2732 in March 2012. • 18.45% increase in usage of ufiling system by employers to submit information and pay contributions against a target of 25%. • Increase from 35868 at the beginning of financial year to 42 487 by the end of March 2013. • 4% increase in the number of new employer registrations by March 2013 against a target of 5%. • Increase from 1,408,205 to 1,465,218 at the end of March2013 • 8,06% increase in revenue collected. • Increased from R12,4 billion collected at end of March 2012 to R13,4 billion collected by the end of March 2013.

  19. Strategic objective 4: Encourage Compliance through enhanced service delivery • Collected 19,45% of outstanding overpayment balance against a target of 20%. • Recovered R64,2 million of the overpayment balance of R330,1 million.

  20. Strategic objective 5: Improve Stakeholder Relations • 9 Communication campaigns conducted by March 2013 and Quarterly reports on effectiveness of the campaigns submitted to UI Board. • Reports were presented to the UI Board on a quarterly basis • The Fund’s communications campaigns had a collective reach of more than 20 million. • Campaigns were undertaken on: • National and Community Newspapers • Television • Radio • Online • Various Magazines • 3 MOUs were entered into with: • VIP Payroll • Transport Education Training Authority • Companies Intellectual Property Commission. • Focus of these MOUs is to work together in improving compliance to UI legislation.

  21. Corrective Action on Areas of Poor Performance • During the financial year, the Fund was developing a Labour Activation Framework that will guide all job creation initiatives of the UIF. The Framework sets out the types of programmes to be embarked upon once approved. It is being implemented from 2013/14. • Long term nature of some of the training programs resulted in fewer training programs being implemented during the financial years. In the 2013/14 Workplace Skills Plan overlaps between long term and short term training have been avoided. • The Fund was targeting the implementation of the new organisational structure to absorb people with disabilities. Delays in obtaining concurrence for the structure has delayed the implementation. The new structure will create new vacancies that will assist with the Fund’s strategy of employing people with disabilities.

  22. Corrective Action on Areas of Poor Performance • There were new enhancements on the uFiling system in order to implement the virtual claims portal. This has resulted in a few employers opting to utilise the system during the development phase. Development of the virtual claims portal is completed and marketing strategy for the systems has been developed and being implemented. • Poor compliance from employers contribute to the lower than anticipated in employer registration growth. We have formed relationships with strategic partners who will assist in efforts to improve compliance. • There has been a reduction at the rate of growth of recoveries when compared to prior years. A large portion of beneficiaries who owe the Fund are unemployed. Payment arrangements are made with these beneficiaries hence the slow growth in recoveries on overpayments debts.

  23. Financial Performance Highlights 2012/13

  24. ANNUAL PERFORMANCE PLAN 2013-14 Strategic & Annual Performance Plan Unemployment Insurance Fund

  25. Strategic objective 1: Fund Poverty Alleviation Schemes . Strategic & Annual Performance Plan Unemployment Insurance Fund

  26. Strategic objective 1: Fund Poverty Alleviation Schemes . Strategic & Annual Performance Plan Unemployment Insurance Fund

  27. Strategic objective 2: Improve Governance . Strategic & Annual Performance Plan Unemployment Insurance Fund

  28. Strategic objective 2: Improve Governance . Strategic & Annual Performance Plan Unemployment Insurance Fund

  29. Strategic objective 3: Strengthen the Institutional Capacity of the Fund . Strategic & Annual Performance Plan Unemployment Insurance Fund

  30. Strategic objective 3: Strengthen the Institutional Capacity of the Fund . Strategic & Annual Performance Plan Unemployment Insurance Fund

  31. Strategic objective 4: Encourage Compliance through enhanced service delivery . Strategic & Annual Performance Plan Unemployment Insurance Fund

  32. Strategic objective 4: Encourage Compliance through enhanced service delivery . Strategic & Annual Performance Plan Unemployment Insurance Fund

  33. Strategic objective 4: Encourage Compliance through enhanced service delivery . Strategic & Annual Performance Plan Unemployment Insurance Fund

  34. Strategic objective 5: Improve Stakeholder Relations . Strategic & Annual Performance Plan Unemployment Insurance Fund

  35. Strategic objective 5: Improve Stakeholder Relations . Strategic & Annual Performance Plan Unemployment Insurance Fund

  36. PART B MTEF BUDGET 2013 of the Unemployment Insurance Fund Strategic Plan of the Unemployment Insurance Fund

  37. Materiality Framework BACKGROUND • The Fund’s materiality framework is based on best practice. This suggests that the materiality figure be set at between 0.25% and 1% of turnover or between 5% and 10% of the net surplus. • The materiality figure of the Fund for the 2013/2014 is based on its revenue (turnover). • It is set at R65 million and this is 0.47% of the R13.9 billion turnover projected for 2013/14.

  38. Background to the Budget • The Fund’s practice is to limit administration (which includes personnel costs) expenditure to 12% - 15% of the total income. For 2011/2012 administration expenditure comprised 6.2% of the total income. • The Fund strives to limit administration expenditure below 15% of contributions; for 2011/2012 administration expenditure comprised 9.42% of contributions received. • For the 2012/13 Revised budget, administration expenditure amounted to 8.52% of total income and 11.37% of contributions • For the 2013/14 proposed budget, administration expenditure comprise 8.70% of total income and 11.79% of contributions.

  39. Contributions • The budget for 2012/13 was R12,8 billion. This figure was revised upwards to R13.394 billion in the revised budget 2012/13 . Provision was made for the revised budget for the ceiling increase effective 1 October 2012. • The Fund’s links its revenue contributions with the Gross Domestic Product (GDP) and Consumer Price Index (CPI). An actuarial exercise was performed to determine the best relationship between the various factors to arrive at the estimated contributions for the MTEF period. • The proposed budget for 2013/14 has been set contributions at R13,9 billion.

  40. Other Income • The budgeted other income for the 2012/13 year was set at R178 million. This figure has been revised slightly up to R184 million. • The increase for 2013/14 is 5.3% (CPI) as indicated in the National Treasury guidelines at R193 million. • Other income comprise various sundry receipts and interest payments

  41. Investment Income • The budget for 2012/13 was set at R4 billion. It was increased slightly to R4.3 billion in the revised budget and in the 2013/14 budget it is set at R4.7 billion • The Fund is conservative in its approach to budgeting for return on investments as withdrawals are made at intervals for the IDC bond applications and also to other poverty alleviation schemes funding

  42. Reserves • The results of the Actuarial valuation indicated that the Fund needs to set aside R2.7 billion in reserves for 2013/14. • The Budget for Reserves was revised to R1.8 billion from the original R1.25 billion during 2012/13.

  43. Benefits • The original budget for 2012/13 was R7.0 billion and was retained in the revised budget. Even though the run rate was lower, provision was made for anticipated increase resulting from the earnings ceiling increase. • The 2013/14 proposed budget for benefit payments is R7.5 billion representing an increase of 7.24% compared to the revised budget of 2012/13. • Improvement in benefits as per the proposed amendments to the UI Act will only be factored into the budget once the Bill has been recommended to Parliament and implementation is certain.

  44. Job Creation Schemes • The budget for the layoff scheme has been scaled down due to the expenditure incurred to date on the scheme. Since inception only 1% of the overall amount of R1.2 billion was utilized. The strategy has therefore been revised to go out and inform employers about the benefit of participating in the scheme as an option to retrenchments. • The Lay-off schemes and social plan funding budget for 2012/13 was approved at R400 million, the revised budget was revised down to R105 million, the proposed budget for 2013/14 amounts to R120m. The R1,2 billion for the schemes has been spread over the MTEF period. • The budget for the training of the unemployed was kept at R210 million on the revised budget. An increase has been factored in for the coming years as the budget has been set at R400 million for the 2013/14 proposed budget – the increases in the outer years are based on the anticipated increase in numbers due to the finalisation of the Labour Activation Framework

  45. Administration Costs • Administration cost is expected to increase in 2013/14 due to amended strategic goals and other related objectives of the Fund which includes the implementation of the UI Amendment Bill.

  46. Personnel Expenditure • In the 2012/13 original budget the Fund provided R746 million. The revised budget for 2012/13 was set at R777 million and the budget for 2013/14 at R826 million. These increases reflect the normal wage increments • The savings are used to offset salary increases arising from the salary negotiations agreement that would not have been provided for due to delayed guidelines from National Treasury • The Fund will be implementing a new structure at Head Office and additional costs have been provided for in 2013/14 original budget and this has been carried through to the remainder of the MTEF period.

  47. Summary of BudgetMTEF 2013/14 – 2015/16 Strategic Plan of the Unemployment Insurance Fund

  48. The BUDGET IN SUMMARY In conclusion the Fund has budgeted as follows for the 2013/14 Financial Year: • Total income: R18.93 billion • Administration cost including staff cost and capital expenditure: R1.647 billion • UI Benefits: R7.568 billion • Technical Reserves: R2.755 billion • Unemployment alleviation schemes: R520 million

  49. Thank You…

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