By Pierre van der Merwe – Partner, Jordan Dias – Associate and Alisha Naik – Candidate Attorney
Updated in line with the amended Directive issued by the Department of Labour as at 8 April 2020
The COVID-19 pandemic has presented an unparalleled level of economic uncertainty in South Africa. The spread of the pandemic has forced both employers and employees to adopt a proactive role in limiting the negative impact of the virus on businesses and employees. The government has also stepped in to provide much needed assistance to employers and employees during these uncertain times. This article looks at the support mechanism which the government has introduced, namely, the COVID-19 temporary relief scheme (“Covid-19 TERS”) (Note: while the temporary employer/employee relief scheme established in December 2019 remains applicable, it falls outside the scope of this article.)
The Covid-19 TERS is funded by the National Unemployment Insurance Fund (“UIF”).
The government support is intended to act as a financial safety net for employees, arising from, amongst others, closure of businesses directly impacted by Covid-19, unemployment, illness, quarantine or reduced working time. Importantly, employees should not earn more than they would ordinarily earn.
3. Covid-19 TERS
On 26 March 2020, the Minister of Employment and Labour issued a directive which provides emergency relief and is intended to alleviate the economic backlash caused directly by the COVID-19 pandemic. On 8 April 2020, the Minister of Employment and Labour issued an amendment to the directive. In this article, we refer to the directive as is amended.
i. What is COVID-19 TERS?
The directive states that, should an employer close its operations, or a part of its operations, for a 3 month or lesser period, as a result of the Covid-19 pandemic, then affected employees shall qualify for a Covid-19 benefit. The directive does not require an employer to prove it is in financial distress, but, rather, just that it has closed its operations as a result of Covid-19. Importantly, the benefits are delinked from the normal UIF benefits and, as such, the usual requirement that, for every 4 days worked, the employee accumulates 1 credit day, does not apply.
ii. How is COVID-19 TERS calculated?
The salary benefits are calculated in terms of section 12 and 13(1) and (2) of the Unemployment Insurance Act, 2001, (“UIA”) and are similar to, for instance, the calculation of maternity leave benefits (i.e. the salary to be taken into account in calculating the benefits will be capped at a maximum amount of R17,712.00 per month, per employee and an employee will be paid in terms of the income replacement rate sliding scale of 38% – 60%, as provided in the UIA). Should an employee’s income, as determined in terms of the UIA, fall below the national minimum wage of R3,500, the employee will be paid a replacement income equal to that amount. Subject to the foregoing, an employee may only receive Covid-19 benefits 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 the period. If a company can still afford to pay its employees a portion of their salaries, the Covid-19 TERS may be used to “top up” salaries, subject to an employee not earning more than his/her ordinary salary. It is not clear whether this allows employees to claim if they continue to earn a portion of their salary which is more than the maximum benefit payable.
iii. Bargaining Councils
An employer whose employees are entitled to receive Covid-19 benefits during the period of lockdown from a bargaining council may not make an application in terms of the scheme and the employees of that employer may not receive any payment in terms of the scheme other than through the bargaining council. These restrictions only apply if –
a. the parties to the bargaining council have concluded a collective agreement that –
- has been extended by the Minister of Employment and Labour, in terms of section 32 of the Labour Relations Act, 1995 (Act No. 66 of 1995); and
- provides for the disbursement of funds received from the Unemployment Insurance Fund to provide Covid-19 benefits to employees bound by the collective agreement during the period of lock-down; and
b. the bargaining council has concluded a memorandum of agreement with the UIF for the council to disburse Covid-19 benefits on behalf of the Fund to –
- the employees who fall within the scope of the collective agreement; and
- if authorised by the memorandum of agreement, any other employees in a sector identified in the agreement, whether or not they fall within the registered scope of the bargaining council.
iv. Duration of COVID-19 TERS
The Covid-19 TERS will assist where an employer closes its operation for a 3-month period or less – e.g. during the current period of lockdown. The benefit will only be for the cost of salary for employees during the temporary closure of the business operations.
v. What about a period of quarantine?
The Covid-19 TERS benefit extends the UIF illness benefit to employees who are quarantined for 14 days due to Covid-19, irrespective of whether the employee is ill or not. The employer and employee have to submit a confirmation letter, together with the relevant application, as proof that they have agreed to the “special leave”, whereby the employee quarantines him or herself. The letters will stand in place of the medical certificate which may ordinarily be required in terms of the UIA prior to accessing the illness benefit. Should an employee be quarantined for more than 14 days, a medical certificate from a medical practitioner must be submitted with the application form.
vi. How do employers apply for Covid-19 TERS?
Employers wishing to claim under this benefit must send a blank email to firstname.lastname@example.org and thereafter follow the online application process.
The employer will receive an automated email response, which will attach the prescribed documents that must be completed. The automated email response includes instructions on how to complete the relevant attachments.
The prescribed documents are:
- a prescribed template which requires critical information from the employer;
- employer’s account information;
- confirmation of bank account details;
- memorandum of agreement (only applicable to employers with more than 10 employees); and
- letter of undertaking.
Once the application form has been completed and the prescribed documents obtained, employers must submit to the relevant department.
4. EXISTING UIF BENEFITS
The existing UIF benefits relating to unemployment benefits, illness benefits, maternity benefits, parental benefits, adoption benefits and dependents’ benefits continue to apply. An employer or employee cannot apply for the National Disaster Benefit or the Covid-19 TERS and any other UIF benefit simultaneously.
Employers should consider applying for the support currently provided to ensure that they maximize the benefits offered by the government during the pandemic. Applying for the benefits timeously will also assist and cushion employees during these uncertain times.