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Compensation Fund New Assessment Model

Compensation Fund New Assessment Model

On 16 October 2018, the South African Department of Labour issued Government Notice No. 1105 regarding the implementation of the Compensation Fund’s New Assessment Model.

Currently the Compensation Fund assess employers on the basis of the industry they operate in, and are assigned a specific assessment class for the basis of determining their liability to the fund.

The existing 102 sub classes will be mapped into 6 new main classes.

The Compensation Fund is of the opinion that the new assessment model will minimise dispute and audit referrals, and will simplify the process of dealing with the fund.

New assessment classes and rates

Rating Class Description Assessment Rate
1 Agriculture, Forestry and Fishing, Mining and Quarrying and Construction  

2.11

2 Manufacturing, Transport, Storage and Communication  

1.44

3 Electricity, Gas and Water supply, Wholesale and Retail, Repair of Motor Vehicles and Motorcycles, and Personal and Household Goods, Hotels and Restaurants  

 

0.75

4 Financial Intermediation, Insurance, Real Estate and Business Services, Community, Social and Personal Services (excluding Security Services)  

 

0.28

5 Security Services 4.04
6 Households* 0.89

*The new main class 6 (workers employed by households) will be included as soon as the Compensation for Occupational Injuries and Diseases Amendment Bill is passed in Parliament.

 

Implementation of the New Model

The effective implementation date will be 1 April 2019 by “phasing-in” the new rates through discounts and loadings to employers, over a 3 year period. Employers will be allocated to a new rate, but receive a discount or loading to phase in the changes as follows:

Class 1: Agriculture, Forestry and Fishing, Mining and Quarrying and Construction

Sub-class Description Year 1 Year 2 Final Year
0111 Livestock Farming 2.09 2.14 2.11
0114 Tillage & Forestry 2.15 2.07 2.11
0116 Mixed Farming 3.03 3.20 2.11
0118 Sugar & Tea Farming 1.74 1.72 2.11
0300 Ocean Fishing 3.17 3.21 2.11
0400 Underground Mining 4.43 4.26 2.11
0411 Coal Mining 1.94 1.71 2.11
0420 Opencast Mining 1.45 1.27 2.11
0440 Quarrying & Crushing 3.75 3.72 2.11
0500 BLDG & Elec Construction 2.24 2.05 2.11
0501 General Services 1.81 1.71 2.11
0502 Rock Drill & Blasting 6.73 6.73 2.11
0505 Drilling & Boring 4.13 4.13 2.11
0512 Civil Construction 2.17 1.98 2.11
0521 Water Works 1.14 1.00 2.11
0530 Steel Construction & Erection 4.00 3.60 2.11
0531 Heavy Electric Maintenance 2.12 2.21 2.11
1210 Cement & Lime Manufacturing 1.30 1.29 2.11

 

Class 2: Manufacturing, Transport, Storage and Communication

Sub-class Description Year 1 Year 2 Final Year
0610 Fisheries 1.21 1.23 1.44
0612 Fruit Packing 1.13 1.11 1.44
0613 Fruit & Veg Processing 0.92 0.90 1.44
0621 Milling 1.45 1.67 1.44
0622 Bakery & Snack Manufacturing 1.37 1.50 1.44
0630 Food Manufacturing 1.08 1.25 1.44
0640 Drinks Manufacturing & Bottling 1.05 1.04 1.44
0641 Brewery 0.73 0.67 1.44
0642 Distillers & Winery 1.68 1.98 1.44
0650 Coffee, Tea & Tobacco 0.89 0.81 1.44
0700 Textile Manufacturing 1.26 1.38 1.44
0701 Cotton / Wool Manufacturing 2.11 2.11 1.44
0712 Plastic Product Manufacturing 0.96 1.10 1.44
0720 Material Product Manufacturing 0.67 0.63 1.44
0801 Sawmilling 3.26 3.55 1.44
0810 Woodworks 2.04 2.46 1.44
0811 Soft Wood Manufacturing 1.02 1.01 1.44
0900 Printing & Soft Paper 0.91 0.89 1.44
0910 Hard paper Manufacturing 1.59 1.70 1.44
1000 Pesticides & Explosives 0.97 0.91 1.44
1005 Fireworks 0.86 0.99 1.44
1020 Chemical & Plastic Manufacturing 1.03 1.16 1.44
1025 Grease Manufacturing 0.99 1.11 1.44
1030 Pharmaceuticals 0.66 0.58 1.44
1050 Rubber by Products 0.75 0.75 1.44
1052 Rubber Manufacturing 1.39 1.60 1.44
1100 Hides skin & Stripping 1.16 1.16 1.44
1105 Leather Works 0.78 0.78 .144
1200 Glass Manufacturing 1.01 1.11 1.44
1201 Glass Works 1.79 1.87 1.44
1211 Concrete Works 2.00 1.97 1.44
1220 Bricks & Tile Manufacturing 1.55 1.77 1.44
1230 Marble & Granite Manufacturing 2.31 2.31 1.44
1300 Iron & Steel Manufacturing 1.83 1.83 1.44
1301 Foundry Manufacturing 1.91 1.91 1.44
1331 Minor Steel Products 0.80 0.80 1.44
1340 Engineering 1.24 0.80 1.44
1350 Manufacturing Cable & Razor Blades 0.76 0.76 1.44
1360 Motorcar Assembly 0.31 0.31 1.44
1401 Chrome / Electroplate 1.49 1.49 1.44
1420 Tar, Asbestos, Bitumen 2.82 2.82 1.44
1701 Aerial Services 0.51 0.44 1.44
1710 Commute Transport 1.84 1.84 1.44
1711 Goods Transport 3.62 3.58 1.44
1715 Transnet 0.99 0.99 1.44
1720 Transport Agency 0.74 0.67 1.44
1722 Shipping 3.62 3.59 1.44
1723 Warehousing & Storage 1.50 1.85 1.44
1730 Broadcasting 0.56 0.44 1.44
1745 Telecommunication 0.60 0.50 1.44
1750 Postal Services 0.81 0.81 1.44

 

Class 3: Electricity, Gas and Water Supply; Wholesale and Retail; Repair of Motor Vehicles and Motorcycles and personal and household goods, hotels and restaurants

Sub-class Description Year 1 Year 2 Final Year
0600 Meat Products 2.34 2.83 0.75
0601 Dairy Products 0.92 1.11 0.75
1041 Petroleum 0.58 0.68 0.75
1361 Motorcar Garaging 0.62 0.62 0.75
1363 Auto Body Repairs 1.07 1.07 0.75
1400 Jewellery & Optometry 0.34 0.29 0.75
1511 Food Retail 0.71 0.83 0.75
1520 Clothing Retail 0.40 0.40 0.75
1532 Electrical Appliance 0.44 0.42 0.75
1540 Hardware, Textile etc. 0.58 0.66 0.75
1542 Builders Scrap & Metal 1.22 1.29 0.75
1550 General Dealer 0.53 0.55 0.75
1820 Power Station 0.59 0.59 0.75
1900 Hospitality Services 0.68 0.70 0.75

 

Class 4: Financial Intermediation, Insurance, Real Estate and Business Services and Community, Social and Personal Services (excluding Security Services)

Sub-class Description Year 1 Year 2 Final Year
1600 Finance 0.11 0.11 0.28
1800 Municipal Services 0.80 0.78 0.28
1910 Laundry 0.71 0.74 0.28
1920 Beauty & Hair salon 0.14 0.12 0.28
1940 Funeral Parlour 1.11 1.01 0.28
1960 Management Career Agent 0.41 0.45 0.28
1975 Correctional Services 0.64 0.64 0.28
2000 Entertainment 0.40 0.38 0.28
2010 Sports Clubs 0.45 0.45 0.28
2011 Circus 4.43 4.43 0.28
2020 Horse Stabling 2.00 2.00 0.28
2100 Medical Specialists 0.20 0.15 0.28
2110 Hospitals & Veterinary 0.53 0.46 0.28
2200 Consultants 0.26 0.24 0.28
2210 Admin Consultants 0.15 0.15 0.28
2300 Education Services 0.24 0.20 0.28
2320 Parks & Nature Reserves 1.19 1.28 0.28
2410 Organisations & Associations 0.40 0.34 0.28

 

Class 5: Security Services

Sub-class Description Year 1 Year 2 Final Year
1970 Security Services 4.04 4.04 4.04

 

Class 6: Households

Sub-class Description Year 1 Year 2 Final Year
NEW Households 0.89 0.89 0.89

 

Taking all of the above into consideration it is clear that some employers will benefit from the proposed new model by receiving discounted rates and others will be impacted negatively through loading.

 

Example for Class 4 Employers

Employer: ABC Bank (Sub-class 1600)

Assessment period: 1 March 2016 – 1 February 2017 (2017 Year of Assessment)

Earnings Rate Assessment Amount
Final Assessment: 2016 10,000,000 0.11 11000,00
Provisional Ass 2017 11,000,000 0.11 12100,00
Minus Provisional Ass 2016 9,000,000 0.11 (9900,00)
Total for 2017 Assessment year     13200,00

 

Assessment period: 1 March 2017 – 1 February 2018 (2018 Year of Assessment)

Earnings Rate Assessment Amount
Final Assessment: 2017 12,000,000 0.11 13200,00
Provisional Ass 2018 13,000,000 0.11 14300,00
Minus Provisional Ass 2017 11,000,000 0.11 (12100,00)
Total for 2018 Assessment year     15400,00

 

Assessment period: 1 March 2018 – 1 February 2019 (2019 Year of Assessment)

Earnings Rate Assessment Amount
Final Assessment: 2018 14,000,000 0.11 15400,00
Provisional Ass 2019 15,000,000 0.28 42000,00
Minus Provisional Ass 2018 13,000,000 0.11 (14300,00)
Total for 2018 Assessment year     43100,00

 

The above example is an indication of the impact loading will have on some employers, with an increase of roughly 30% over a period of 3 years.

ABOUT THE AUTHOR

Nidene Lourens has been with SEESA as Legal Advisor since 2012. She started at the SEESA Bloemfontein office and moved to SEESA Head Office in 2017. Nidene is currently the SEESA UIF & Compensation Commissioner Manager and holds three graduate degrees including a B.Com Law degree, B.Com Honours degree, and an LLB obtained in 2010.

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