Guide to UIF, TERS and other forms of relief
9 April 2020
Since President Ramaphosa addressed the nation and announced COVID-19 a national disaster on the 15th of March 2020, uncertainty, concern and fear was spread amongst South African employers and the workforce.
Much confusion has arisen with the introduction of the Covid-19 temporary employee/employer relief scheme (C19 TERS), previously referred to as a “National Disaster Benefit”, in terms of a directive that was gazetted on 26 March 2020.
But C19 TERS is not the only UIF relief option available in the case of temporary layoffs. Many employers have already laid off their employees without pay and submitted claims under theUIF ‘Reduced working time’ option.
[NOTE: It seems as if the confusion has by and large been caused by a more recent Easy-Aid Guide for Employers released by the Department of Labour. The Guide seems to confuse C19 TERS document requirements with the documents required for the UIF ‘Reduced working time’ option.
So, what is the difference between these two options?
OPTION 1: COVID-19 TEMPORARY EMPLOYEE / EMPLOYER RELIEF SCHEME (C19TERS) OPTION
This scheme is intended to provide emergency relief to enable employers to pay employees that are temporarily laid off due to the Covid-19 crisis. The directive appears in the Government Gazette (No.43161) on 26 March 2020, sets the C19TERS out the basis of the scheme as follows:
“Should an employer as a direct result of Covid-19 pandemic close its operations for a 3 (three) months or lesser period and suffer financial distress, the Company shall qualify for a Covid19 Temporary Relie Benefit.”
When can the Employer apply for TERS?
➢Should the employer close its operation (or part of their operation) for three months or for a lesser period and suffer financial distress caused by COVID-19,the Company shall qualify for the benefit
➢The benefit is delinked from the UIF’s normal benefit. The rule will apply: the employee will accumulate 1 day for every 4 days worked
➢The benefit only pays for the cost of salary for employees during the temporary closure
➢The salary benefit will be capped at R17712.00 per month. The employee’s benefit is calculated in terms of the income replacement rate sliding scale (38% for the higher income earners and- up to 60% for the lower-income earners) as per the UI (Act). For instance, if an employee earns R30,000.00 per month, the employee will only be allowed to claim benefits on the capped amount of R17,712.00 (as if he/she earns R17,712.00). The understanding is that the maximum benefit for a high-income earner would be 38 % of R17 712 a month, which amounts to about R6 730 a month.
➢Should the employee’s income determined by the income replacement sliding scale fall below the minimum wage of the sector, the employee will be paid a replacement income equal to the minimum wage of the sector.
➢The directive shall commence immediately from the date of publication (25 March 2020)
➢The directive remains in operation for a period of three months or until the directive is withdrawn by the minister.
Who qualifies for C19 TERS?
➢The Company must be registered for UIF
➢The Company must comply with the application procedure
➢The Company’s closure must be directly linked to the COVID-19 pandemic
Application procedure for Temporary Employer/Employee Relief Scheme(TERS) in 3 easy steps:
Employers shall apply by reporting their closure of business via email to firstname.lastname@example.org. An automated response will be received outlying the procedure and required documentation.
2. Submission Process
Submit/transmit all documents as required in Step 1 to UIF via dedicated mailbox: Covid19UIFclaims@labour.gov.za.The documents will include the following:
➢Letter of Authority, on an official company letterhead granting permission to an individual specified to lodge a claim on behalf of the Company
➢MOA (completion of the agreement between UIF, Bargaining Council (If applicable) and employer (if more than 10 employees)
➢Prescribed template that will require critical information from the employer
➢Evidence/payroll as proof of last three months employee(s) salary(ies)
➢Confirmation of bank account details in the form of certified latest bank statement
➢All documents submitted will be subject to verification
➢NB: If the spreadsheet is complete; valid and accurate, it will be dumped into an automated calculator to produce the benefit amount due to the beneficiaries and the total amount to be transferred to the employer or bargaining council or whichever method agreed.
Conclusion of the MOA between parties. Payment will only be affected after MOA sign off between the Fund and the employer or Bargaining Council(if applicable).
The UIF will provide a dedicated line that will assist all employers/employees/Bargaining Councils on COVID 19 TERS. The contact number is 012 337 1997
OPTION 2: TEMPORARY LAY-OFF OPTIONS
The ‘reduced working time’ option is available to employees who have to work a short time. This benefit was introduced fairly recently (2018) in the following terms: “A contributor employed in any sector who loses his or her income due to reduced working time, despite being employed, is entitled to benefits if the contributor’s total income falls below the benefit level that the contributor would have received if he or she had become wholly unemployed, subject to that contributor having enough credits.”
Although not expressly stated, this scheme should also be available to employees that are on temporary lay-off without pay during the COVID-19 crisis. The following documents need to be submitted:
2 UI 2.1 (application form)
3 UI 2.8 (bank form to by stamped officially by the applicant’s bank)
4 Letter from employer confirming reduced work time (or lay-off) is due to the Coronavirus
5 Copy of the applicant’s ID document
Frequently asked questions:
1. Can an employer apply for both benefits?
The Department of Employment and Labour encourages employers to apply through TERS to avoid multiple individual claims. Should an employer be unsuccessful in its application to TERS for assistance, employees can apply for the Reduced Work Time Benefit under the UIF. The UIF has also made a special Illness Benefit available to employees who are quarantined due to COVID-19. The Department of Employment & Labour published the attached directive and TERS easy aid guide for employers which provides important information on the rules of the scheme and application process. Although indications are that the C19 TERS is likely to receive priority and seems to be preferred by the Department of Labour and Employment, the ‘reduced working time’ option is still available to employers and employees.
2. Should an employee take annual leave instead of unpaid special leave?
All employees in South Africa are entitled to leave provisions as set out in the Basic Conditions of Employment Act (BCEA)– and during the lockdown period, an employee may be requested by the employer to take annual leave from his/ her annual leave credits.
While the BCEA allows employers to determine the time that employees can take their annual leave, the Department of Labour has asked employers not to force employees to use their annual leave but rather use one of the other packages provided by the government to ease the financial stress.
Employers may already have an arrangement in place that employees use their annual leave credits during the lock-down. It has the advantage of providing immediate financial relief during the lock-down. In such cases employers may decide to apply for the Covid-19 TERS relief. If the claim is successful, the leave granted can be formally reversed or partly reversed (see question 7) If the Covid-19 TERS benefit is not granted, it would be in order to maintain the original leave arrangement.
Employers can only be expected to do what is reasonable in the light of their unique circumstances and the resources they have available to them.
3. If the Company applies for the TERS benefit, can the employer pay the employee out of the normal salary account and later recon the payment to the payment received from UIF into the specific assigned bank account?
The process of TERS is set up in such a way that the UIF will process the application and once successful, pay the employee benefits into the assigned bank account (set up by the Company for the purpose of C9-TERS benefits). If the Company chooses to pay the employee out of the normal salaries bank account, it has to be mentioned in the agreement betweenthe UIF and the Company (or Bargaining Council if applicable) and the monthly reconciliation of accounts has to indicate this payment agreement. We further suggest that once the monies are paid into the assigned bank account and the monies (already paid to the employees) needs to be paid back into the normal company bank account, it is paid in amounts“per employee”. Alternatively, a proper recon should be kept on record.
4. If the Company can not pay the full salary, or the employee cannot productively work normal hours, can the Employer claim the rest via UIF or TERS?
The Department of Employment and Labour encourages employers to pay their employees as far as operationally possible.
Important in terms of clause 5.3 the Disaster Management Act: Amendment of Directive by the Minister of Employment and Labour, an employee may only receive Covid-19 benefits in terms of the Directive if the total of the benefit together with any additional payment by the
employer in any period is not more than the remuneration that the employee would ordinarily have received for working during that period.
If the employee works shorter working hours the employee must be informed by the employer of the temporary new working hours and remuneration. The employee must be provided with all the required documents in order to claim UIF under code 17 “reduced work hours”.
5. What happens if the employer has no alternative but to consider retrenchment?
What is the correct process?
TheCOVID- 19 pandemic does not until we are advised otherwise by our Government via new legislation or temporary regulations, allow for an employer to skip the retrenchment process set out in the Labour Relations Act and merely retrench employees without due process. It is imperative that the correct processes, rules, and regulations as set out in section 189 of the LRA are followed by employers if they are considering retrenchment. Failure to follow the process of retrenchment as per the LRA could lead to mass unfair dismissal claims against employers which would naturally further cripple the employer during this period.
A Senior Labour Law Specialist and part-time Sr. Commissioner in the CCMA advised that small organization’s that need to retrench can follow a “watered down” Section189 process due to the fact that the retrenchments are a “fait accompli” because of COVID-19 as well as practical difficulties to follow the normal consultation process during the period of lockdown.
The retrenchmen tprocess normally includes a consultation and joint consensus seeking exercise between the employer and the employee to consider all options to avoid retrenchment or at the very least mitigate the impact that the retrenchment will have on the employee.
Contact CLS should you wish to follow this route.
6. What if I have staff that is being paid weekly and I apply for TERS which will most likely only be paid out in 30 days?
We would suggest paying your employee’s an advance on their weekly salary and do a proper reconciliation regarding monies received from TERS and paid to the employee.
7. How do I pay over the TERS monies received to employees?
a) According to the MOA, the monies need to be paid to the employee with 2 (two) days of it reflecting in the dedicated Company bank account.
b) It is important to note that the monies must be paid directly into the employee’s bank account and not into the Company’s normal bank account.
c) The monies as received from TERS and payable to the employee, will not be processed through payroll and is not subject to normal statutory deductions.
8. Can the employees use their annual leave in order to get their normal remuneration and claim from TERS?
Although this is not clear within the current communication, it is suggested that the employer claim from TERS and then “fund” the short payment from the employee’s accumulated leave. The employee should have a choice in this. If the employee chooses not to utilize his/her annual leave, the short payment will be regarded as unpaid leave.
RELIEF EFFORTS BY SARS
The Minister of Finance has supplied comprehensive details to the tax measures as announced by the President of RSA on 23 March 2020 in his speech on the measures to be undertaken to combat the effects of COVID-19.
1.Employment tax incentive relief
The introduction of a tax subsidy to employers of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive (ETI). So,what this means we can claim R500 for employees earning below R6,500 even if they are not eligible anymore under ETI, from Apr 2020. This cannot be claimed if any returns are outstanding or if there is debt outstanding to SARS.ETI reimbursements would be processed monthly as opposed to twice a year. There is some uncertainty as to exactly how the set-off mechanism is intended to work and we look forward to additional clarity once the draft Bills are available.
2.Deferral of employee’s tax
Tax compliant businesses with an annual turnover of R50 million or less will be allowed to delay 20% of their employees’ tax liabilities over the next four months without penalties or interest. This is from April 2020 (i.e. the amount of PAYE that needs to paid beginning of May 2020).
3.Deferral of Provisional Tax payments for Small to medium sized businesses
Treasury & SARS proposes the following tax measures for tax compliant small to medium sized businesses, for a period of twelve months, beginning 1 April 2020 and ending on 31 March 2021.
➢The first provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15 percent of the estimated total tax liability,
➢While the second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65 percent of the estimated total tax liability.
➢Provisional with deferred payments will be required to pay the full taxliability when making the third provisional tax payment in order to avoid interest charges.
OTHER FUNDING PACKAGES THAT WILL BE ADMINISTERED BY SEFA (SMALL ENTERPRISE FINANCE AGENCY) TO SUPPORT SMMES
1. Business Growth Facility:
This is for a businessin the essential service industry to obtain capital funding. The funding will give local manufacturers and suppliers an opportunity to produce and strengthen their place in the market, which may lead to long term contracts post the COVID-19 pandemic.
2. SMME Relief Scheme:
The majority of SMMEs will experience severe reduction in demand and subsequent reduction in revenues due to the COVID 19 pandemic. As a result, it is important to ensure that SMMEs do not close completely and that they are supported with working capital to ensure that jobs are retained in the economy.
The facility will be a soft loan for 6 months from April 2020 at an interest rate of prime less 5% to a maximum of R500k per SMME. Each case will be evaluated on its own and only give the amount of loan that can be proved to be needed to cover overheads and salaries to keep the business.
➢Only for Businesses which are negatively affected due to the Coronavirus pandemic;
➢A company must be 100% owned by South African Citizens;
➢Employees must be 70% South Africans;
➢Priority will be given to businesses owned by Women, Youth, and People with Disabilities;
➢Be registered and compliant with SARS;
➢Be UIF compliant;
➢Registration on the National SMME Database (www.smmesa.gov.za)
➢Previously they said the Company must be 51% Black owned, but that has fallen away.
➢Proof that the business is negatively affected by COVID-19 pandemic;
➢Complete the simplified online application platform;
➢Company Statutory Documents;
➢Certified ID Copies of Directors;
➢6 months Bank Statements;
➢Latest Annual Financial Statements or Latest Management Accounts not older than three months from date of application (Statement of Financial Performance and Statement of Financial Position) –where applicable;
➢12 months Cash Flow Projections (with clear assumptions) –where applicable;
➢Copy of Lease Agreement or Proof ownership;
➢Facility Statements of Other Funders -where applicable; and
➢Detail breakdown on the application of funds including salaries, rent, etc.
3. Restructuring of Sefa Funded SMMEs
This is a payment moratorium/holiday that will be given to Sefa funded SMMEs for a period of a maximum of six months to reduce the instalment burden of loan obligations on clients during the COVID-19 period.
(Recognition is given to the following Organization’s whose information was used in compiling this document: LabourWise, Claasen Financial Services, SAIPA, Payspace, LabourGuide, Webber Wentzel Attorneys, Schoeman Law Inc, Department of Labour and Employment, Department of Small Business Development).