UIF claims and remuneration during lock-down – Covid-19 talking points
30 Apr 2020
Following the issuing of an amendment to the TERS fund as per Government Gazette 43216 of 8 April 2020, the major unanswered question regarding the amount an employer can pay an employee who will also receive the UIF benefit has been clarified. The clauses read as follows:
“4. The following clause is substituted for clause 3.4 of the Directive:
3.4 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 (38%–60%) as provided in the UI Act.”
“9. The following clause is substituted for clause 5.3 of the Directive:
5.3 Subject to the amount of the benefit contemplated in clause 3.6, 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.”
“10. The following clause is inserted as a new clause 5.4 of the Directive:
5.4 All amounts paid by or for the UIF to employers or Bargaining Council(s) under the terms of the Scheme shall be utilised solely for the purposes of the Scheme and for no other purpose. No amount paid by or for the UIF to an employer or Bargaining Council under the terms of the Scheme that is required to be paid, in turn, to an employee will fall into the general assets of the employer or Bargaining Council, and no bank may refuse to release or administer the transfer of that amount into the bank account of the employee as required by the Scheme, irrespective whether the employer or Bargaining Council is in breach of its overdraft or similar contractual arrangements with the bank concerned.”
- It is noted that the terms “salary” and “remuneration” are used interchangeably in the Gazette. It is recommended that the remuneration recorded in monthly returns as identified in your payroll system be used: the basic remuneration, excluding commission, allowances and the like.
- Should an employer be in a position to remunerate an employee for a period (typically a month) but would also like to receive the Covid-19 benefit from UIF, the employer should consider the scale of benefits from 60% of remuneration for employees who earn in excess R3 500.00 to 38% for employees who earn R17 712.00 (i.e. R 6 730.56).
- If an employee’s remuneration is less than R3 500.00, the UIF payment will be R3 500.00.
- For employees earning equal to or in excess of R17 712.00 the maximum amount that may be claimed will be R6 730.56.
- At the time of drafting this brief, UIF had not as yet published a Calculator enabling easy calculation of the sliding scale, but there are online providers seeking to give answers in this regard. We are unable to clarify the veracity of such tools at this stage. The standard UIF calculator could be used as a guideline. Given that the UIF’s general calculator works on a maximum benefit of R14 872.00 this would leave an employer with a conservative view of benefits between R3 500.00 and R15 000.00, which would be prudent in the circumstances.
- We again reiterate that the UIF senior officials have advised us verbally that employers should continue to remunerate employees, if they are in a position to do so. They advise that such advance payments may be set off against the payment received from the UIF.
- The UIF has advised that due to the numerous applications for TERS it may take some time for employers to receive this relief.
Following the above clarifying approaches to managing the operational considerations affecting the lockdown, the Department of Employment and Labour has gazette its approach in the Covid-19 Temporary Employer/ Employee Relief Scheme. As such we can now address the situation with greater certainty and need to correct a number of considerations in our initial brief.
Following receipt of the Gazette, we have engaged widely to clarify this process and in particular the relief that will be provided. Inter alia, we have engaged with other legal practitioners, consultants and the Head Manager of the UIF to provide the following information.
1. THE OFFICIAL POSITION
All UIF-based benefits applicable to the lockdown are covered in this Gazette and deal with:
- Reduced Working Benefit – as a result of an employer closing its operation as a result of Covid-19
- Illness Benefit
The official and legal position is that the lockdown is a forced layoff. It is a no-fault situation and described by Webber Wentzel as Force majeure. As such, the business principle is one of “no work no pay”, hence the UIF has come to the assistance of employers and employees. This does not stop employers and employees making other working and remuneration arrangements.
1.1 What is the Reduced Working Benefit?
This is a benefit applicable to most employers who have experienced reduced working hours or closures as a result of Covid-19. As such the Reduced Working Benefit implies that employees will be working shorter hours of work or no work over the lockdown period. To reiterate and clarify additional information from the UIF Head:
1.1.1 Both the employer and employee must be registered with the Fund.
1.1.2 A benefit that shall be in place for three (3) months, unless the Minister terminates it on an earlier date.
1.1.3 The initial waiting period for an employee to access benefits will be waived.
1.2 How do I calculate the Reduced Working Benefit?
1.2.1 Employees earning up to the minimum rate of pay for their sector (i.e. the general level is R3 500.00 pm) shall receive a benefit of at least R3 500.00.
1.2.2 The maximum salary level for the purpose of calculating benefits for Covid-19 will be capped at R17 712.00.
1.2.3 No employee will be paid less than R3 500.00.
1.2.4 The UIF scale of benefits will be applied on a scale ranging from 60% of remuneration at the lower salary levels up to 38% at R17 712.00 per month. The current calculator on the UIF site is currently not updated (2018) and works on a maximum level of R14 872.00.
1.2.5 Based on the information in the Gazette we therefore estimate that an employee on the maximum threshold of R17 712.00 would receive 38% of this amount, namely R6 730.56.
1.2.6 Employees earning in excess of R17 712.00 will receive the same benefit as identified in 1.2.4.
1.3 When does the lockdown benefit commence and end? How does this impact the UIF payment?
1.3.1 Under the current situation, this benefit is in effect from 1 April 2020.
1.3.2 Should the period for which an employer is closed be less than a month (i.e. as is defined in the current lockdown where 5-day workers lose 13 working days) the benefit would be calculated on a pro rata basis, i.e. 13 / 21.67.
1.3.3 Should the period of lockdown be extended, the claim could cover up to a maximum of 3 months, subject to 1.1.2.
1.3.4 Should an employer pay a portion of the employee’s remuneration, it is understood via Werksmans Attorneys that the amount payable will be calculated in line with current maternity benefits. We are seeking final clarity on the status of these regulations. If the regulations remain as in the past, TERS will top up earnings up to a set sliding scale.
1.4 What if the company has already required/ offered annual leave to employees?
An employer will be entitled to retract this and apply for UIF instead, particularly if the annual leave has not yet been paid. If this is committed to by employers, it may be difficult to retract, but by the same token there have been cases where employees have opted to rather have less pay via UIF and keep their annual leave. It is suggested that employers could discuss / negotiate this with staff on their return. For example, it may be possible to reduce the annual leave required from employees, thereby enabling the employer to claim the top up from UIF.
1.5 How does the employer apply for this benefit and how does it get paid out to employees?
1.5.1 Bargaining Councils and employers can become Agents for the disbursement of this benefit, by application. This requires a three-step process of sending a Letter of Authority to UIF, thereafter entering an MOU with UIF and then submitting the required forms online. The process of application will follow the usual verification processes and employers will be monitored and audited to ensure monies reach employees.
1.5.2 The Department will pay employers the benefit directly and expect them to pay employees from these disbursements, unless the employer has already paid the employee. If the employee has already been paid, the employer will retain the monies. The UIF Head Manager encouraged employers to pay employees on their usual pay date, as they cannot guarantee a turnaround time due to the numerous applications filed with UIF. Should an employer pay their employees in advance of receipt of their UIF payment they will retain the UIF payment.
1.6 Is the Department’s public communication that employers cannot require employees to take leave correct?
No, section 20(10)(b) of the Basic Conditions of Employment Act clarifies that if there is no agreement between the employer and employee on the timing of annual leave, the timing may be determined by the employer. It, however, goes without saying that it is always best to agree this with the employee.
Having said this, one understands the Minister’s suggestion that funds will be made available to assist employers and employees, albeit that this may be significantly lower than what an employee is accustomed to.
1.7 What about the suggestion that this leave should be identified as “special leave”?
This is not correct. There is no provision in labour law as yet for special leave, nor clarity on the process of payment, if any, for such leave.
2. CONSIDERATIONS AND RECOMMENDATIONS
2.1 Make application for the TERS UIF benefit online as an employer on behalf of employees, particularly those in lower earning positions.
2.2 If you have granted annual leave consider consulting staff to withdraw / reduce to enable the TERS to pay some of this amount.
2.3 If the employer is comfortable with their initial payment arrangements with staff, leave these but consider applying for UIF benefits should the lockdown be extended.
2.4 Communicate, communicate and communicate with your staff, suppliers and customers. Pons Process Consulting is in a position to provide you with briefs that cover a broad range of considerations during lockdown, including employment considerations, motivational, human relations, physical, family, games to play with children, etc.
The notes contained above clarify thoughts shared in our initial brief on this subject. As we learn more we will seek to share this with you, our clients. We will continue to research this unfolding process and keep all our stakeholders informed.
About the authors:
Andrew Pons is the co-author of Juta’s Labour Relations Handbook – a looseleaf that provides practical guidance on effective labour policies, procedures and practices for South African managers. He is also a Managing Partner of Pons Consulting, which he founded in 1996.
Marlene Potgieter authored Juta’s Social Media and Employment Law and co-authored Unfair Discrimination in the Workplace. She is a qualified attorney and employment consultant and is now the Managing Director of Equity Works.
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