By Peter Cottrell CA(SA)
There have been significant changes to the Temporary Employer / Employee Relief Scheme Benefit over the last few days.
Firstly, there have been significant changes to the regulations that have widened the scope of the scheme. There are three significant areas of change:
- Employees who are receiving reduced remuneration are now eligible for the scheme (there previously was a prohibition on receiving any remuneration); The scheme now also applies to employers who have partially closed (i.e. it does not require complete closure);
- The wording around “financial distress” of the employer has been removed; and
- The requirement for a separate bank account has been removed
The original intention of the scheme was to avoid the need for forms and in person contact during the lock-down and the broadening of the scheme is welcomed.
Secondly, employers who have submitted applications are receiving responses from the UIF Commissioner stating that there have been a huge number of applications received and that many of these have been rejected due to the documentation requirements not having been complied with. In part, this is due to the documentation having changed. However, UIF are also noting instances where employers are not complying with the very specific requirements for submission of data, stating that there is no manual process to validate information. The UIF system therefore cannot accept any deviation from the specified requirements. While this may be frustrating, it is going to be critical that we all comply with the letter of the requirements.
Employers are urged email firstname.lastname@example.org in order to get an updated information pack. The Department of labour web site should also be monitored for new developments http://www.labour.gov.za/easy-guide-for-employers-on-covid19
This communication will summarise the updated scheme, provide detail of the recent amendments and will address the updated application process.
SUMMARY OF THE UPDATED TERS SCHEME
The objective of the Temporary Employee / Employer Relief Scheme (“TERS”) is to address the hardship of employees who are temporarily laid off during the period of the lock down. Employees may be required to take leave which is not out of choice and government anticipates that employees may lose income. While government encourages employers to continue to pay employees, it recognises that this may not always be economically possible and has therefore created a special TERS benefit under the Unemployment Insurance Fund.
The TERS scheme will cover a period of up to three months. The benefits are de-linked from the UIF’s normal benefits meaning that rules around accumulation of credits for days worked do not apply. The amounts paid will be a percentage of an employee’s salary, according to a legislated sliding scale, from 38% (highest earners) to 60% (lowest earners). The sliding scale stops at R17,702 – workers earning more than this will only get the 38% maximum benefit, which is R6,730 a month. Employees will receive a minimum benefit of R3,500 per month irrespective of the sliding scale calculation.
The objective of the TERMS scheme is to avoid the need for forms and physical contact during the period of lock-down. In essence, the Employer acts as an agent for UIF, receiving funds and then disbursing to the affected employees within 5 days. The funds may only be used for the purposes of paying employees the benefits due to them and may not be used for any other purpose. Employers may receive the funds into their operational bank account, but will be required to keep records and to account for the receipt and disbursement of those funds.
Qualifying Criteria for Employers:
- The Employer must be registered with UIF;
- The Employer must comply with the application procedure for the financial relief scheme;
- The Employer’s temporary closure [full or partial] must be directly linked to the Covid-19 pandemic.
AMENDMENTS TO THE TERMS OF THE TERS SCHEME
The terms of the TERS scheme were updated per Government Gazette on 8 April 2020, with key amendments as follows:
- Employees who are receiving a reduced salary during the disaster now also qualify for the benefit:
- There was previously an exclusion on employees who were being paid some remuneration by the employer. That wording is now deleted and superseded with wording that places a maximum benefit where there is part payment by the employer.
- The amended wording is as follows: “Subject to the amount of the benefit contemplated in clause 3.6 [referring to the UIF benefit sliding scale], 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.”
- The implication is that the employees receiving reduced remuneration due to full or partial closure of their employer’s operations will also qualify for the TERS benefit, subject to restrictions on the maximum amount to be paid.
- The benefit is now expanded to Employers who are still in partial operation but where employees face reduction in work and consequential loss of income:
- The amended clause 3.1 identifying qualifying employers now reads as follows: “Should an employer as a result of the Covid-19 pandemic close its operations, or a part of its operations, for a 3 (three) months or lesser period affected employees shall qualify for a Covid-19 benefit.” [The amendment is underlined]
- Significantly, the following wording “and suffer financial distress” no longer appears in the above clause 3.1. This removes the previous requirement that employers needed to be prepared to prove their financial distress and further broadens the scope in alignment with the overall objectives of the scheme.
- The definition of “temporary lay-off” is amended to refer to “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.” [The amendment is underlined]
- This means that the application of the scheme is far wider, allowing for employers who are in partial operation but have temporarily laid for employees to participate in the scheme.
- The minimum benefit amount has been simplified to the effect that the benefit shall not be less than R3,500 per month, irrespective of the sliding scale calculation.
- The guidance has been amended to clarity that a separate bank account is no longer required. There is a new proviso in the regulations that the amounts “shall be utilized solely for the purposes of the Scheme and for no other purpose.” In practice, it will be critical that employers can account for the funds received and the disbursement thereof to employees.
- The requirements for a memorandum of agreement (“MOA”) are expanded to include written or electronic confirmation of acceptance by an employer.
- Although not stated in the Regulations, the guidance from UIF indicates that the MOA is only applicable to employers with more than 10 employees.
- All employers, even those with less than 10 employees, will be required to the new confirmation of acceptance document.
- New provisions have been included to cover benefits from bargaining councils. Where employees are entitled to receive benefits from a bargaining council, there is now a prohibition on the employer applying for benefits. This amendment avoids a potential duplication of benefit claims.
UPDATED APPLICATION PROCESS
Employers will need to carefully follow the application process, and employers who previously submitted applications using the previous process will need to resubmit their applications. The updated application process is as follows:
- Obtain the documents required to submit the application by emailing Covid19ters@labour.gov.za.
- Complete the prescribed template with critical employee information, including:
- UIF and PAYE reference numbers;
- dates of shutdown; and
- employee details (name, ID number, banking details, normal remuneration, remuneration paid).
- Complete the prescribed template with the employer’s bank account information
- The prescribed templates will need to be converted to CSV format strictly following the requirements with regard to format (a detailed guide is provided).
- For organisations with more than 10 employees, complete the applicable Memorandum of Agreement. It is noted that the agreement has changed from the previous version and that three options are included in the information pack.
- Provide a confirmation of banking details in the form of a bank confirmation letter (this need not be certified).
- Complete and sign the letter of undertaking, confirming acceptance of the terms of the TERS scheme (this is a new document)
- Submit (or resubmit) the documents to covid19UIFclaims@labour.gov.za
- For companies with less than 10 employees, there are now 4 documents that need to be submitted.
- Companies with more than 10 employees need to also submit a Memorandum of Agreement, bringing the total to 5 documents.
These requirements are technical, and we anticipate that there will be further practical issues in implementation, bearing in mind that this is a brand new system that has not had time for development or testing. Employers are encouraged to pay attention to the letter of what is being asked in order to avoid unnecessary time delay due to rejection.