By Peter Cottrell Chartered Accountant (SA)
The application process for May 2020 TERS benefits opened on Thursday 28 May 2020. Since April there have been changes to the regulations and to the application process. The overpayment issue identified in the April 2020 calculations has also been addressed. Illustrating the importance of the TERS relief measure, the UIF is stated to have disbursed in excess of R15 billion to more than 3 million workers in 5 weeks.
Update to Regulations
Updates to the regulations during May 2020 include the following:
- Employees may apply directly for Covid-19 benefits under the scheme if this has not been done by a bargaining council or employer. This does not detract from the existing obligations of employers to apply for benefits on behalf of employees who have been affected by the closure or partial closure of the employer’s operations, but rather addresses the situation where employers have been deficient in their obligations.
- A new definition of a “worker” has been inserted and the benefits are now available to this new wider category of potential beneficiaries. Previously the TERS benefit was limited to contributors registered with the UIF fund. While the new definition of worker includes existing contributors, the expanded definition includes employees who should have received benefits but have not done so due to circumstances beyond the employee’s control, namely that the employer failed to comply with one or more of the following obligations in terms of the UIF Act:
- register as an employer;
- provide details of employees to UIF; or
- pay the contributions due.
Benefit Calculations
In our update of 7 May we identified that much progress had been made with the TERS benefit calculations, but that overpayments had been made as a result of the failure by UIF to apply the maximum benefit limit in terms of Paragraph 5.3 of the Regulations when paying out benefits. The result was that in April the full calculated benefit was paid out by UIF, whereas the benefit should have been limited such that the sum of the actual remuneration received and the TERS benefit did not exceed the remuneration that the employee would ordinarily have received for working during that period. This issue only applies in cases where employees received part remuneration and application was made for TERS benefits.
The letters issued by UIF in response to the April 2020 applications acknowledged the overpayments and identify that the overpayments will be dealt with as follows:
Scenario 1: If the employer did not pay the excess amounts to the employee, the excess is to be refunded to the UIF (this is likely to apply where employers pre-funded the TERS benefit in advance of receiving the amount from UIF based on their own calculations);
Scenario 2: If the excess was paid to employees, then the UIF will recalculate the April UIF benefits and will raise a debt against the employees which will be deducted from the May benefit payment.
The letters made reference to UIF evaluating all transactions paid in April 2020 and we were hoping that further calculations would be provided of the UIF determination of the overpayments. In practice no further April calculations have been received and under Scenario 1 the onus seems to be on the employer to determine the excess amount and to pay this back to UIF.
May 2020 applications
Application for May 2020 TERS benefits may be made online at UIF-Covid 19. The key steps in the May 2020 process are as follows:
- In the circumstances where UIF paid excess benefits out in April and these were not paid to employees (Scenario 1 above), then the employer will need to have paid the amount back to UIF with proof of payment.
- As part of the online application process, employers will need to confirm the April submission by the employer, with three menu options being available:
- “Employees did not work or any amount paid was deemed to be leave income / an advance by the employer.” This option will be selected where employees did not work at all.
- “Employees did work and received remuneration and any excess above normal salary was refunded to UIF by the employer.” This option will be selected where employees did work and where Scenario 1 above applies. This option would also be applicable where employees did work and no overpayment was made.
- “Employees did work and received remuneration and full amount paid by UIF paid over to employee”. This option will be selected under Scenario 2 above.
- Employers will be required to upload required documents. The documents required will depend on the options selected per step 2 above, and will include:
- Bank Confirmation Letter providing proof of employer banking details
- Signed approval / acceptance letter
- Proof of TERS payments to employees
- Refunds to the UIF (if applicable – where Scenario 1 applies).
- Current month payroll data will need to be updated if there have been changes from the April 2020 data.
We once again emphasise the importance of diligent record keeping in order to avoid the risk of breach of the MOA and having to pay funds back to UIF.
Peter Cottrell CA(SA)
STRATEGIC BUSINESS SUPPORT
Email: peter@bizsupport.co.za | Telephone: +27 31 7613400 |
Web: www.bizsupport.co.za
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