Is it permissible for Muslim employers to deduct U.I.F (Unemployment Insurance Fund) contributions from the wages of their employees?

Answer

While compulsory UIF is not permissible, employers have no option since it is compulsorily imposed on them by the government. If the employer does not make the deduction, he will have to pay a heavy penalty. Although the deduction is Islamically not permissible, just as the vat tax and income tax impositions are not permissible, people have no choice but to pay.

Since the deduction is known at the very outset, the effective salary of the employee will be the amount after deduction. The employee is therefore not a party to the U.I.F. contract. As such, he may accept the accumulated benefit which in terms of the Shariah will be like a gift. If the contract was voluntarily, then it would not be permissible for the employee to use the benefit for himself. In that case its contribution to Sadqah would be incumbent.