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New Assessment Model for Compensation Fund

New Assessment Model for Compensation Fund

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 subclasses 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 Assessment 2017   

11,000,000

0.11

12100,00

Minus Provisional Assessment 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 Assessment 2018   

13,000,000

0.11

14300,00

Minus Provisional Assessment 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 Assessment 2019

15,000,000

0.28

42000,00

Minus Provisional Assessment 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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