Do directors pay UIF?

By | December 21, 2023

Directors of private companies and members of close corporations are included in the definition of “employee” in the income tax act from 1 March 2002. This means that remuneration paid to directors is subject to tax, UIF and SDL

In terms of section 4 of the Unemployment Insurance Contributions Act, the Act applies to all employers and employees.  None of the exclusions in section 4 deals with your example.  Section 5 of the Act, in addition, also refers to every employer and employee – see also section 8.  The Notice issued by the Minister (determination of limit on amount of remuneration for purposes of determination of contribution) also refers to “… an employer to an employee …”

We submit that the contributions must be made in all instances (and in respect of the same person) where there is an employer and an employee.  An employee is a defined term (in the UIF Act) and must be read with remuneration in the Act – see below.  

“employee” means any natural person who receives any remuneration or to whom any remuneration accrues in respect of services rendered or to be rendered by that person, but excludes an independent contractor 

“remuneration” means “remuneration” as defined in paragraph 1 of the Fourth Schedule to the Income Tax Act, but does not include any amount paid or payable to an employee-

(a) by way of any pension, superannuation allowance or retiring allowance; 

(b) which constitutes an amount contemplated in paragraphs (a), (cA), (d), (e) or (eA) of the definition of “gross income” in section 1 of the Income Tax Act; or

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(c) by way of commission;

As director’s remuneration is included in the definition it will be subject to UIF.  

More Information on UIF

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