New rules around financial relief for employees in South Africa – here’s everything you need to know

One of the key measures that government is using to financially support employers and employees during the coronavirus lockdown is the Temporary Employee/Employer Relief Scheme (TERS).

On Wednesday (8 April), government published a revised directive that will regulate these benefits. These benefits will also be subject to the terms of a new memorandum of agreement which is expected to be published soon.

Below, Talita Laubscher a partner in the Employment & Benefits Practice at law firm Bowmans, outlined what the new directive means, what is expected to be contained in the revised memorandum of agreement, and how the TERS works.

Who can claim?

  • Contributors, i.e. employers and employees who contribute to the Unemployment Insurance Fund (UIF);
  • The employer must have closed its operations, or part of its operations, as a direct result of the Covid-19 pandemic, for a period of three months or less;
  • The size of the employer’s workforce does not matter, although special provisions of the Memorandum of Agreement apply to employers with fewer than 10 employees;
  • The employee must have been in the employer’s employ on 27 March 2020, and must have suffered, or will suffer, a loss of income as a result of the closure;
  • The benefit may only cover the cost of salaries during the closure – it may not be used for other purposes.

What is the value of the benefit?

The benefit is determined with reference to a sliding scale and employees may get a percentage of their salary (between 38% and 60%).

For purposes of this calculation, the relevant salary amount is the maximum of R17,712 per month, per employee. Therefore:

  • If an employee’s salary is more than the maximum threshold amount of R17,712 – for example, R20,000 – the employee would not receive a percentage of R20,000, but would receive 38% of the threshold amount of R17,712. The maximum amount of the Covid-19 TERS monthly payment will therefore be R6,730.
  • If an employee’s salary is less than the threshold amount – for example R15,000 – the employee would receive a percentage of her/ his salary of R15,000. The exact percentage that they would receive, will be determined in accordance with the UIF calculator. The calculator is soon to be found on the UIF website.

The minimum amount of the benefit is R3,500 regardless of the minimum wage as prescribed by the applicable sectoral determination/ collective agreement.

Employers may supplement these benefits, but employees may not get their full salary plus the benefit. The maximum that an employee may accordingly receive (from the UIF and their employer) is 100% of her/ his salary.

What if the employer paid the employee? Can the employer still claim the benefit?

Yes. The employer may claim the benefit and may retain the value of the benefit already paid to the employee.

To avoid disputes, Bowmans recommends that the employee’s payslip reflects ‘TERS Benefit’ (in the event that the employee is paid the value of the benefit) or ‘Includes TERS Benefit’ (if the employee is paid an amount higher than the TERS benefit).

Who will pay the benefit?

If the employer has concluded a Memorandum of Agreement with the UIF, or if the employer has accepted the UIF’s standard terms and conditions, the value of the benefit in respect of the employer’s employees will be paid to the employer.

The employer must then pay over the benefit to the employees concerned (except where they have already been paid) within two days.

If the employer is a member of a bargaining council that has concluded a Memorandum of Agreement with the UIF, the UIF will pay the amount to the bargaining council, and the bargaining council will administer the payments to the employees.

Employees will therefore not be paid by the UIF directly, but by their employer or the applicable bargaining council. The only exception to this is where an employer employs fewer than 10 employees.

The UIF will first verify the supporting documents submitted by the employer and, within 10 business days of the employer submitting all of the required documents and information, will deposit the funds into the employer’s business account.

“Employers must pay their employees the benefit within two days of receiving payment from the UIF,” Bowmans said.

“If the employer has already paid their employees part or all of the benefit amount, the employer can recover those amounts from the funds deposited by the UIF and pay the balance – if applicable – to the employees within two days.

“Employers must submit proof of payment to the UIF within five days of the payment by the UIF and return any funds not used (including interest) to the UIF within 10 days of its business operations recommending.”

What must the employer do to claim?

The employer must apply by reporting the total or partial closure to the department.

The employer will receive an automatic response outlining the application process and the documents and information that is required. The required documents will include:

  • A letter of authority from the employer;
  • The signed Memorandum of Agreement, or electronic acceptance of the standard terms;
  • The UIF’s template which includes details of the employer, the period of closure, the list of employees and their dates of employment and ID numbers, the remuneration received by the employees;
  • Proof of remuneration to employees for the previous three months; and
  • Confirmation of employer bank account.

The UIF will pay benefit funds in relation to three separate time periods: first for the period of temporary closure for 30 days from the date of lockdown; second for any period of temporary closure during the following 30 days; and third, for any period of temporary closure during the balance of the Memorandum of Agreement.

The agreement is in force for three months from the date of confirmation by the UIF that it accepts the employer’s Covid-19 TERS application.

Read: More than a million jobs on the line because of Covid-19 lockdown: economist

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New rules around financial relief for employees in South Africa – here’s everything you need to know