The Department of Employment and Labour has established a COVID-19 TERS that works through the Unemployment Insurance Fund (UIF) as one of the measures to help both workers and businesses impacted by the national lockdown due to the COVID-19 pandemic that has paralysed numerous businesses and left many in South Africa without an income. The first directive that was issued on 26 March 2020 has been amended on 8 April 2020 to, inter alia, give clarity around some questions that arose from the first directive.
President Cyril Ramaphosa also stated during his address to the nation on 21 April 2020 that the UIF’s special COVID-19 benefit has already paid out R1.6 billion as at 21 April 2020 and thereby assisted over 37 000 companies and 600 000 workers. He added that R40 billion has been set aside for income support payments for workers whose employers are not able to pay their wages.
The Department’s Chief Director of Labour Relations, Thembinkosi Mkalipi said that employers are encouraged not to request employees to utilise their annual leave credits for the lockdown, but to rather utilise the financial assistance placed at their disposal through the COVID-19 TERS in cases where companies cannot afford to pay their employees. Employers must apply for the COVID-19 TERS benefits if they cannot afford to pay their workers. Employees cannot apply for the COVID-19 TERS benefits themselves. Employees can only apply for normal UIF benefits themselves as in the past but that is completely different from the COVID-19 TERS benefit.
The COVID-19 TERS benefit works on the following principle: If a business is unable to pay their employees, they can apply for this benefit; if a business can still afford to pay employees a part of their salaries, the TERS benefits will “top up” these payments; and if a business had to temporarily lay-off workers, whether total or partial, they can also apply for the TERS benefits. It is however important to note that employees cannot earn more than 100% of their current salaries.
It is particularly important to note that all applications for the COVID-19 TERS benefits must be submitted during the lockdown period. The Department has indicated that no applications will be entertained once the lockdown has been lifted.
Applications must be submitted online. The starting point is that businesses must send an email to firstname.lastname@example.org to register their companies for this benefit. The business will then receive an automatic reply detailing the documents they are required to submit and a step by step guide on the process to follow.
The following key documents will be required:
- 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 and Employer). The process has been made easier with the new regulations in that a business no longer has to provide a signed Memorandum of Agreement (MOA). The business can simply accept the terms electronically or in writing;
- Prescribed template that will require critical information from the employer;
- Evidence/payroll as proof of last three months employee(s) salary(ies); and
- Confirmation of bank account details in the form of certified latest bank statement.
The completed application together with the documentation must then be emailed to Covid19UIF@labour.gov.za. A hotline has also been put in place for the TERS benefit, being 012-337 1997. The Department indicated that the turnaround time is currently around 15 days. The Department can however not guarantee this turnaround timeframe for new applications.
Regarding the amended regulations, Jenine Naidu published the following short and self-explanatory summary on the Financial Institutions Legal Snapshot’s website on 15 April 2020 (https://www.financialinstitutionslegalsnapshot.com/2020/04/8-things-to-know-about-the-amended-covid-19-ters-directive/):
“Below are the key changes that have been effected:
1. Employees affected by the partial closure of their employer’s business are entitled to benefits
- The previous Directive did not define ‘closure of operations’ and it was not clear whether a partial closure of operations would meet this requirement.
- Businesses that are still in operation, albeit partially, because they provide essential services and goods may now claim on behalf of employees who have been affected by the partial closure.
2. Employers do not need to prove financial distress in order to claim
- Employers simply need to prove that they have partially or totally ceased business operations as a direct result of the COVID-19 pandemic.
- The focus is now on ‘affected employees’ rather than a business in financial distress.
3. The maximum salary to be considered when calculating the benefit is R17 712
- The previous Directive stated that salary benefits would be capped at R17 712.
- The amendment confirms the position that benefits are calculated on the income replacement rate sliding scale and are therefore capped at 38% of R17 712.
4. C19 TERS benefits may be used by employers to ‘top up’ salaries of affected employees
- The previous Directive precluded employees who were being paid during the closure of their employer’s business operations from claiming these benefits.
- Employees who are being paid a portion of their salaries may now claim benefits, provided that the sum of the partial payment from their employer and the UIF benefit does not exceed their normal remuneration.
5. No employee shall receive a total remuneration of less than R3 500
- This provides protection to employees whose benefits fall below the national minimum wage.
- This applies with the proviso that the total amount that an employee receives from both the UIF and their employer must not exceed that employee’s normal remuneration (except where the normal remuneration was below R3 500).
6. The Memorandum of Agreement between the employer or bargaining council and the UIF may be concluded electronically
- The employer or bargaining council may either submit a signed MOA or may confirm their acceptance of the terms and conditions stipulated in the MOA in writing or electronically.
7. Where a bargaining council has applied for benefits, an employer falling within the council’s scope may not apply
- This provision only applies if the required collective agreement has been concluded and if the bargaining council has entered into the requisite MOA with the UIF.
- The MOA may provide that employees falling outside the scope of the bargaining council may claim these benefits.
8. No bank may withhold the C19 TERS benefits owing to employees
- This provision applies even in circumstances where an employer or bargaining council has breached the terms of their overdraft facility or any other similar contractual arrangement with their bank.”
Good news for businesses is that they no longer have to prove that they are in financial distress. Even if a business has only been partially closed or the employees worked shorter hours, the business can still apply for this benefit. The employer may however not use the money received in terms of this benefit for any use other than for payment of the business’ employees.
It is furthermore important to note that a business must be registered with the UIF and make monthly contributions as required by the Contributions Act of 2002 before the COVID-19 lockdown started to qualify for TERS benefits. Companies who only registered after 15 March 2020 may not be eligible for these benefits.
The Department of made it clear that government will take serious steps against companies if they find that they were not paying their workers and failed to claim from the COVID-19 TERS. The Department furthermore stated that “workers should not be punished because of irresponsible employers” and encouraged businesses to apply for this benefit on behalf of their employees to soften the lockdown blow to their employees.