Much confusion has arisen with the introduction of the Covid -19 temporary employee / employer relief scheme (C19 TERS), previously referred to as a “National Disaster Benefit”, in terms of a directive that was gazetted on 26 March 2020.
C19 TERS is not the only UIF relief option available in the case of temporary lay-offs. Many employers have already laid off their employees without pay and submitted claims under the UIF ‘Reduced working time’ option.
[NOTE: The confusion has by and large been caused by a more recent Easy- Aid Guide for Employers to access UIF benefits that seems to confuse C19 TERS document requirements with that of the UIF ‘Reduced working time’ option. To avoid confusion, we have made available the previous version of the UIF Easy-Aid Guide.
TEMPORARY LAY-OFF OPTIONS
1. UIF ‘Reduced working time’ option
Although indications are that the C19 TERS is likely to receive priority and seems to be preferred by Department of Labour and Employment, the ‘reduced working time’ option is still available to employers and employees.
The ‘reduced working time’ was originally intended for employees who have to work short time. This benefit was introduced fairly recently (2018) in the following terms:
“A contributor employed in any sector who loses his or her income due to reduced working time, despite being employed, is entitled to benefits if the contributor’s total income falls below the benefit level that the contributor would have received if he or she had become wholly unemployed, subject to that contributor having enough credits.”
Although not expressly stated, this scheme should also be available to employees that are on temporary lay-off without pay during the Covid-19 crisis. The following documents need to be submitted:
· UI 19 and UI 2.7 (completed by employer)
· UI 2.1 (application form)
· UI 2.8 (bank form completed by bank)
· Letter from employer confirming reduced work time (or lay-off) is due to the Coronavirus
· Copy of ID document
An “UIF Easy-Aid Guide”, as well as the relevant forms, has been send to all.
Features of the ‘reduced working time’ option:
· The claim is subject to the employee having enough credits.
· The claim is by the employee (with the assistance of the employer).
· The employee has to obtain a UI-19 form and then get a bank authorisation in respect of the account into which the benefit is to be paid, which will be a challenge, especially during the lock-down.
· Submission can be made online to the relevant processing centre (See list of processing centres at the end of UIF Easy-Aid Guide available at the link below).
· The benefit will be calculated in terms of the income replacement rate sliding scale of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act, subject to the maximum threshold as determined from time to time.
· It is possible that lower earning employees may get out less than the minimum wage under this dispensation.
· Payment is made by the UIF directly into the employee’s bank account.
· Subject to available credits the employee can (theoretically) receive this benefit for up to 12 months.
2. Covid-19 temporary employee / employer relief scheme (C19 TERS)
This scheme is intended to provide emergency relief to enable employers to pay employees who are temporarily laid off due to the Covid-19 crisis.
The directive appears in the Government Gazette (No. 43161) on 26 March 2020, sets the C19 TERS out the basis of the scheme as follows:
“Should an employer as a direct result of Covid-19 pandemic close its operations for a 3 (three) months or lesser period and suffer financial distress, the company shall qualify for a Covid19 Temporary Relief Benefit.”
(The Government Gazette is available at the link below.)
Features of the COVID-19 TERS option:
· It is a separate benefit scheme (separate from normal UIF benefits with its own set of forms and requirements) which cannot be claimed at the same time as the UIF ‘reduced working time’ benefit.
· It applies where the company has closed its operations as a direct result of Covid-19 (at this stage this option does not seem to apply if the company doesn’t close entirely, but lays off only some of its employees)
· Claims are not dependent on an employee having any UIF credits and will be entitled to benefits irrespective of how long they have contributed.
· The company (rather than the employee) submits a claim for UIF and the company then pays over the money to employees.
· Online process: Send blank email to Covid19ters@labour.gov.za and you receive an automated response with the relevant forms and other requirements.
· The UIF will be prepared to “top up” any payment made by the employer (by prior arrangement with the UIF).
· The benefit will be calculated in terms of the income replacement rate sliding scale of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act, subject to the maximum threshold which is currently R17712. Despite conflicting reports, our understanding is that the maximum benefit for a high earner would be 38 % of R17 712 a month, which amounts to about R6 730 a month.
· For the duration of the shutdown or a maximum period of three months, the benefit will be not less than the minimum wage (referred to as a ‘flat rate’ of R3500 per month). After the expiry of this 3-month period, the employee might receive less than the minimum wage based on the above sliding scale.
· There is supposed to be a faster turnaround time with processing (According to the agreement to be signed with the UIF the benefit should be paid out to the company within 30 days of a valid submission).
· The company has to enter into a written agreement with the UIF if it has 10 or more employees (updated in the latest “COVID 19 TERS EASY AID).
· The company has to fulfil a number of administrative requirements, e.g. proof of payroll for the last three months.
· The company has to open a dedicated UIF bank account, or clear an existing account, so that Covid-19 benefits can be tracked.
(A Covid-19 TERS Easy Aid is available at the link below.)
Which lay-off option do I choose?
There are several considerations. The Covid-19 TERS seems to be intended for as emergency relief with a relatively quick turnaround time. Some bargaining councils and large consortia of employers have been encouraged to make use of this scheme. They would make bulk submissions and, once the benefits are paid over to them, they would pay the benefits to the employees. This should ease the administrative burden on the UIF.
Covid-TERS also seems well suited for employers who foresee that they will not be able to pay their employees in full for a significant period (up to 3 months). The UIF intends to help ‘top up’ salaries to the extent allowed by the income replacement rate sliding scale (but only if this has been agreed upfront with the UIF). This type of relief seems to be in sharp focus by the UIF.
Smaller companies may also make use of the benefit. They would have to decide based on their prospects of recovery, and whether it is worth their while to comply with the Covid-19 TERS requirements. They also need to consider the practical difficulties that their employees may experience in obtaining their benefits, especially during the lock-down period (which may be extended). The UIF Commissioner has indicated that employers with less than ten employees do not have to enter into the prescribed agreement (MOA) with the UIF. Small employers may be accommodated in other ways, but it is not clear to what extent. Each company will be judged on its own individual merits. We have our doubts about the capacity of the UIF to give much individual attention in the current circumstances.
Employers must make a choice. They cannot claim under both systems at the same time. It is not clear whether an employer who has already submitted under the ‘reduced working time’ option can withdraw that submission and claim under Covid-19 TERS. In our view this should be possible, though. The UIF Commissioner has indicated that companies that want to make use of Covid-19 TERS should do so before the end of the current lock-down.
While Covid-19 TERS appears to have unique and helpful features, it is a new system and there are likely to be teething problems.
There is no clear right or wrong way. Each company should make a choice based on its own circumstances.
There have been conflicting reports on what employers are entitled to do with regard to leave.
In our view the point of departure is this: The 21-day lock-down has been imposed by Government. Neither employers nor employees are to blame. Employees who have to stay at home are unable to tender their services due to the lock-down. They are not entitled to be paid. So, what measures are available to mitigate the financial deprivation suffered by employees during the lock-down?
There seem to be the following options:
1. Employees take the annual leave that is due to them.
2. UIF benefits (UIF ‘reduced working time’ benefit or Coivid-19 TERS benefit).
3. Employers pay their employees in part or in full, if they have the resources to do so (even though they have no obligation).
4. Employers grant their employees loans.
On 26 March 2020, a directive was issued by the SA Government acknowledging an employer’s right to insist that employees take annual leave. However, the directive encourages employers to make use of the Covid-19 TERS relief instead (The directive is available at the link below). Until such time that this directive is replaced with a new directive, statements by politicians and others that are in conflict with the directive do not have to be taken seriously.
Employers may already have an arrangement in place that employees use their annual leave credits during the lock-down. It has the advantage of providing immediate financial relief during the lock-down. In such cases employers may decide to apply for the Covid-19 TERS relief. If the claim is successful, the leave granted can be formally reversed. If the Covid-19 TERS benefit is not granted, it would be in order to maintain the original leave arrangement.
Employers can only be expected to do what is reasonable in the light of their unique circumstances and the resources they have available to them.
COIDA AND SICK LEAVE
Covid-19 has been declared an occupational disease. If an employee is absent due to contracting the Coronavirus out of and in the course of his or her employment, it will not be regarded as sick leave. Instead it would be covered in terms of the Compensation for Occupational Injuries and Diseases Act of 1993 (COIDA). The employee must as soon as possible after the commencement of a disease give written notice thereof to his or her employer or to the employer where he or she was last employed, and he or she may also give written notice of the said disease in the prescribed manner to the compensation commissioner. Thereafter, a further process needs to be followed by the employer and a medical practitioner. If, however, it cannot be shown that the Coronavirus was contracted in the course of the employee’s employment, any period of absence as a result of being infected will be regarded as sick leave.
OTHER UIF OPTIONS
Illness benefits for 14-day quarantine period
This UIF benefit is available to employees who are quarantined for 14 days due the Coronavirus (i.e. “special leave”), irrespective whether the employee has contracted the virus or not. No medical certificate is needed for the first 14 days but the employer and employee have to submit a letter of proof that they have agreed to “special leave”. In addition to the letter referred to above, there is certain other documentation that has to be submitted (See “UIF Easy-Aid Guide” which is available at the link below).
While this option is available in principle, it is not available during the 21-day lock-down, except for employees who are able to work due to being part of essential services. At this stage it seems that it may be used after the lock-down, though.
In the unfortunate event that an employee passes away, certain beneficiaries may apply for benefits (See “UIF Easy-Aid Guide” at the link below). The following documents need to be submitted:
· UI 19 and UI 53 (completed by employer)
· UI 2.5 or UI 2.6
· Death certificate
· UI 2.8 (bank form completed by bank)
· Copies of ID documents of applicant and the deceased
OTHER ‘TERS’ BENEFITS (NON COVID-19 RELATED)
There is another temporary relief benefit scheme (TERS) that was originally introduced towards the end of 2019. It was introduced to assist employers in distress, in order to avoid retrenchments. This scheme – which is overseen by the CCMA – is not to be confused with the Covid-19 TERS scheme.This scheme does not envisage normal lay-offs. Instead employees are laid off work for period while they receive training, along with a training allowance. It involves a rather cumbersome process (e.g. requires the submission of annual financial statements, turnaround plan, etc.). While employers should still be able to submit an application for relief in terms of this scheme, it is unlikely to enjoy priority during the current Covid-19 crisis
Click here to download the Step by Step Guide to claim UIF TERS Fund
Click here to download the National Lockdown Deceleration by Employers