INTRODUCTION
Whilst the country is still under lockdown following the announcement by the President to extend the lockdown to the end of April 2020, the effects on the country’s economy and labour markets are dire. Employment losses are rapidly increasing with many businesses remaining closed and employees suffering due to income loss or layoffs.
Government has continued to put measures in place in order to provide financial assistance to employers who have enforced certain workplace measures affecting their employees and businesses as a result of Covid-19. On 2 April 2020, the government published amendments to the lockdown regulations following the lockdown extension. In terms of the amended regulations, restrictions on certain business operations have been relaxed and a broader range of services have been listed as “essential”. The Department of Labour and Employment has also over the past few weeks, issued updated directives concerning the C19 TERS (“TERS”) relief scheme. What has become clear is that Covid-19 will be a part of our lives for months to come and the impact that it will have on the economy can hardly be overestimated.
TERS RELIEF
Businesses have of course acted quickly in response to the pandemic, by determining available options to safeguard the interest of their business and particularly, their employees in the long term. Many businesses have opted to use the “reduced work time” option, by requiring their employees who are unable to work due to Covid-19 to apply for accumulated paid annual leave or unpaid leave. Annual leave is accrued which means that at the beginning of a leave cycle, the number of days to which the employee is entitled starts at zero and increases as the leave cycle progresses. The current leave cycle would have commenced in January 2020 and thus employees who commenced work at the beginning of the year may not have sufficient accumulated annual leave days during this period and will therefore be forced to apply for unpaid leave. Many businesses are however willing to assist such employees with making applications to the Unemployment Insurance Fund for a reduced working time benefit or an application in terms of TERS.
Amended regulations now state that employers may also claim for TERS benefits for its employees who have been required to take annual leave during the lockdown period, as long as the benefits received are reconciled against the amount paid to the employee in respect of leave by proportionality crediting back the employees annual leave entitlement in future.
TERS provides that the UIF may assist employers with funding, in the form of an allowance, to mitigate the impact of a loss of income experienced by employees. The relief applies specifically where the employer has temporarily closed its operations, completely or partially, as a direct result of Covid-19 and is unable to pay salaries due to lockdown, has implemented reduced work time or where employees have been temporarily laid off or required to take annual leave during the lockdown period. In terms of the TERS relief regulations, "temporary lay -off" means “a reduction in work following a temporary closure of business operations, whether total or partial, due to Covid-19 pandemic for the period of the National Disaster”.
Employees may qualify for TERS benefit in the above circumstances provided that the sum of the partial payment from their employer and the UIF TERS benefit does not exceed their normal remuneration.
C19 TERS PROCESS AND ACCOUNTING OBLIGATIONS
The directive relating to TERS benefits provides that the application for the benefit must be in terms of a set procedure. Employers and bargaining councils can apply for the benefit by sending a blank email to covid19ters@labour.gov.za.
The employer/bargaining council will thereafter receive an automated response outlining the application process and documentation to be completed. The documentation to be submitted includes: a letter of authority; a signed memorandum of agreement (“MOA”) between the UIF, Bargaining council or employer (written or electronic confirmation of acceptance of the terms and conditions of the scheme will be adequate); the UIF’s prescribed template (which requires an employer to indicate their details, the period of closure, the list of employees and their dates of employment and ID numbers and the remuneration received by the employees); evidence/payroll as proof of the last three months of employees’ salaries and confirmation of bank account details in the form of certified latest bank statement.
It is understood that once the UIF has all the necessary documentation and same has been verified, an automated UIF calculator will calculate the TERS benefit amount due to employees and the total amount to be transferred to the employer. The question pertaining to whom the funds will be transferred is dependent on the agreement between the UIF and bargaining councils, employer associations or individual businesses. Employees will therefore not be paid relief funding directly by the UIF, except where a business has less than 10 employees.
Although it is no longer a requirement for a business to open a separate UIF bank account, it is advisable for employers to have a separate account assigned for the purpose of TERS benefits. It is also recommended that the employee’s pay slip clearly reflects the value of the TERS benefit paid to the employee and which may not be more or less than the TERS benefit received from the UIF for that employee. A pay slip should therefore clearly indicate the Rand value of any TERS benefit paid to the employee.
Employers must keep all their accounting records relating to the Memorandum of Agreement and the COVID-19 benefit for 5 years, and keep such records separate from business related accounting records. A proper audit trail of the UIF funds received and benefits paid to employees must also be kept by employees. Employers may not withdraw the funds paid by the UIF, or draw any cheques from the funds. The UIF may at is discretion, appoint an auditor or investigator to audit the employer’s implementation of the Memorandum of Agreement.
UIF TERS CALCULATION
alculation of payment of the TERS benefit is based on the employee’s last salary reflected on their pay slip, capped to the current ceiling of R 17 712.00. It is important to note the difference between “salary” and “remuneration”. Salary is the fixed amount an employee receives on a monthly basis, whilst remuneration consists of an employee’s salary, bonuses, incentives etc. TERS benefits apply to salaries only. Therefore, the salary to be determined should not for example, include bonuses.
The TERS benefit amount in respect of each employee is determined in line with the current sliding scale which ranges from 38% to 60%, which entails that the lower replacement rate will be used for “higher earners”. The maximum monthly TERS benefit amount “high earners” would therefore receive is 38% x R17 712.00 = R 6 730.56. This means that where an employee’s current monthly salary is for example R20 000.00, such an employer’s salary will be calculated on a replacement scale as if the employee earns a salary of R17 712.00. The new regulations have made the value of annual leave cashed in recoverable as a TERS benefit on the 38% to 60% sliding scale and always subject to the capped benefit amount of R17 712.00. Employees who earn less than the threshold amount, will be entitled to a benefit calculated in accordance with the UIF sliding scale calculator. Any benefit may, however, not be less than the minimum wage amount of R3 500.00.
OPTIONS AVAILABLE TO EMPLOYERS
In the event that a business can still, notwithstanding the temporary total or partial closure of its operations, afford to top-up a portion of employees’ salaries, the employer should carefully consider how the top up payment is to be made. The particular circumstances of the business and affected employees will guide a business to the most suitable payment option.
For example, some employers may wish to loan top-up payments to all or certain employees. In that event the employee’s salary slip for the applicable period will show the salary as a nil value. The employees will qualify for the maximum TERS sliding scale benefit amount because no part of the employees’ salary is being paid. The salary slip will reflect the TERS benefit amount paid to the employee and the value of any top-up loan advanced to the employee. The employee would have to agree to terms to repay the loan amount to the employer at a future time. A potential risk to such an arrangement for an employer is that the employee may default on the terms of repayment.
Employers who decide to give their employees loans must do a proper reconciliation regarding the benefit received from TERS and paid to the employee. A loan is an advance payment made to an employee, who is required to pay back the loaned amount.
Should an employer decide to top-up any shortfall between the TERS benefit received and the employee’s normal salary with a partial salary payment, the TERS benefit will be less (because UIF will deduct the top-up salary amount and calculate TERS on the difference between the normal salary and the top-up salary payment made) but the employer will not run the risk of employees defaulting on loan re-payments.
Whatever the structure of the top–up payment may be, employees may not receive their full salary plus the TERS benefit. The maximum that employees may receive (from the UIF and their employer) are their full normal salaries.
The Department of Employment and Labour encourages employers to retain employees and pay them as far as operationally possible. Whichever option an employer decides to implement, a proper reconciliation must always be done regarding the benefit received from TERS and any top-up amount paid to the employee, if any.
CONCLUSION
On 21 April 2020, the President announced additional socio-economic relief measures worth R500 billion in an effort to stabalise the economy and address the reduction in supply and demand and keep jobs.
We anticipate that should the lockdown be extended again, further regulations and/or directives will be published to provide further relief to workers and businesses alike as the long-term impact on businesses and labour markets will still reflect for a substantial period, even after the lockdown has been uplifted.
