What do you reflect on the employee’s UI-19 if they signed a mutual separation agreement?
A mutual separation agreement envisages the termination of employment by mutual consent between the employer and the employee. We have discussed Mutual Separation Agreements in previous articles and have included a link to the article below for your convenience:
A mutual separation agreement is neither a resignation nor a dismissal which has brought about the question of “What do you reflect on the UI-19 form”? In today's article, we will elaborate on what you should reflect on the employee’s UI-19 form if you terminated the employment using a mutual separation agreement.
Section 16(1)(a) of the Unemployment Insurance Act 63 of 2001 (the “UIA”) provides that a contributor is entitled to claim unemployment benefits only for the reason of:
Unemployment due to termination of a fixed-term contract,
Dismissal, or
Insolvency
The termination of employment in terms of a mutual separation agreement does not constitute a dismissal and the UI-19 form does not have an option to select a mutual separation agreement as the reason for termination.
So which option do you select on the UI-19?
Our advice would either be to contact your bookkeeper / SARS for a directive or to select reason number 16 on the UI-19 form which is a “voluntary severance package”. This will require the employer to complete a UI 2.11 which confirms it was not a resignation and to declare which party initiated the termination.
UIF forms can be downloaded from the Department of Labour website below:
We have also attached the following forms hereto for your convenience:
UI-19 declaration
UI 2.11
What if an employee asks you to reflect something different on the UI-19?
It is a criminal offence to misrepresent the reason for termination on a UI-19 form.
Section 64(1) of the UIA stipulates that it is a criminal offence for employers to misrepresent the nature of the reason for termination in order to assist the employee in qualifying for the fund benefits.
In the case of Swanepoel v KPMG Services (Pty) Ltd (J494/19) [2021] ZALCJHB 457 Swanepoel was terminated in terms of a mutual separation agreement as a means to avoid a potential disciplinary process for his poor work performance. His employer, KPMG, recorded “involuntary resignation” as the reason for termination on his UI19 form, whereupon Swanepoel approached the Labour Court to compel KPMG to amend the reason for termination on his UI19 form to ‘retrenchment’, to enable him to claim unemployment benefits.
The court made it clear that it cannot compel an employer to commit a criminal offence by way of such misrepresentation and that KPMG’s recordal of “involuntary resignation” of Swanepoel’s UI19 also constituted false entry and, consequently, a criminal act in terms of section 64. This decision not only serves as a caution to employees seeking to enjoy unemployment insurance benefits consequent to termination of employment in terms of a mutual separation agreement but also to employers against misrepresenting the true reason for termination.
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