On 8 April 2020, the Minister of Employment and Labour issued a notice amending a few significant aspects of the coronavirus (COVID-19) Temporary Relief Scheme (ï¿½C19 TERSï¿½) Directive of 25 March 2020 (the ï¿½Amendmentï¿½).
The C19 TERS was established to compensate employees who have lost income due to the COVID-19 pandemic, through the Unemployment Insurance Fund (ï¿½UIFï¿½). Since its inception, however, there has been much confusion and rapid developments concerning what the C19 TERS is, what its requirements are, and the possible relief it offers.
Where do things now stand after the amendments? We discuss some of the key takeaways for employers below.
Doors open for partial closures
While the initial Directive previously defined a "temporary lay-off" to mean ï¿½a temporary closure of business operations due to COVID-19 pandemic for the period of the National Disaster,ï¿½ the Amendment defines a "temporary lay-off" as ï¿½a reduction in work following a temporary closure of business operations, whether total or partial, due to COVID-19 pandemic for the period of the National Disaster.ï¿½
Significantly, the Amendment widens the COVID-19 TERS' ambit by stipulating that the temporary closure of business operations can be either total or partial. It also clarifies that a reduction in work is required following the closure.
ï¿½Financial distressï¿½ no longer required
In terms of the initial Directive, a company qualified for a COVID-19 TERS benefit if ï¿½ï¿½an employer as a direct result of COVID-19 pandemic close[d] its operations for a 3 (three) months or lesser period and suffer financial distress.ï¿½ (our emphasis added).
Reference to financial distress has been removed from the qualifying criteria and has been replaced with ï¿½an employer, as a result of the COVID-19 pandemic, close[s] its operations, or a part of its operations, for a 3 (three) months or lesser period.ï¿½ Interestingly, reference to the company qualifying has been changed to the ï¿½affected employeeï¿½ qualifying.
In addition to referencing the partial closure, the Amendment seemingly:
- shifts the focus from a company qualifying for the benefit to the affected employees themselves; and
- removes the need for a company to suffer financial distress to qualify for the benefit.
There is no definition of ï¿½affected employeeï¿½ and how this may impact access to the benefits by all employees of an ï¿½affectedï¿½ entity.
The Directive formerly capped the ï¿½salary benefitsï¿½ at a maximum amount of ZAR17 712 per month, per employee and stated that an employee will be paid in terms of the income replacement rate sliding scale (38%-60%) as provided in the UI Act. This created confusion as whether the cap related to the salary or benefits.
The Amendments clarify that ï¿½[t]he salary to be taken into account in calculating the benefits will be capped at a maximum amount of ZAR17 712 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.ï¿½ (our emphasis added)
This wording clarifies that ZAR17 712 per month is a salary cap as opposed to a benefit cap. Put simply, where an employee earns more than the cap, the sliding scale will be applied to the capped amount of ZAR17 712 and not the employee's actual remuneration.
A fixed minimum of ZAR3 500 rather than the minimum wage
Previously, the Directive stated that ï¿½should an employee's income determined in terms of the income replacement sliding scale fall below the minimum wage of the sector concerned, the employee will be paid a replacement income equal to minimum wage of the sector concerned.ï¿½ Rather than using sectoral minimum wages, the Amendment uses a fixed amount of ZAR3 500: ï¿½Should an employee's income determine[d] in terms of the income replacement sliding scale fall below ZAR3 500, the employee will be paid a replacement income equal to that amount.ï¿½ (our emphasis added).
The initial Directive also outlined that qualifying employees would receive a ï¿½benefit calculated in terms of sections 12 and 13 of the UI Act, provided that an employee shall receive a benefit of no less than sector specific minimum wage.ï¿½
On the other hand, according to the Amendment, ï¿½[q]ualifying employees will receive a benefit calculated in terms of these sections, but ï¿½provided that an employee shall receive a benefit of no less than ZAR3 500.ï¿½ (our emphasis added).
Moreover, the Amendment states that subject to this amount (the benefit of no less than ZAR3 500), an employee may only receive COVID-19 benefits in terms of the Directive ï¿½if 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.ï¿½ This means that employees will not be entitled to more remuneration than they would ordinarily receive.
The Amendment also clarifies that employers whose employees are entitled to receive COVID-19 benefits provided by the UIF during the lockdown from a bargaining council, may not apply in terms of the Scheme and these employees may not receive any payment in terms of the Scheme than through the bargaining council.
This only applies if:
- 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; and
- provides for the disbursement of funds received from the UIF to provide COVID-19 benefits to employees bound by the collective agreement during the period of lockdown; and
- the bargaining council has concluded a memorandum of agreement with the Fund 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.
In addition, the Amendment states that, ï¿½All amounts paid by or for the UIF to employers or Bargaining Council(s) under the terms of the Scheme shall be utilized 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.ï¿½
Memorandum of Agreements
According to the initial Directive, an employer was required to furnish the UIF with a signed Memorandum of Agreement (ï¿½MOAï¿½) from the employer or bargaining council with the UIF.
However, according to the Amendment, an employer is now given the option to provide either:
- the signed memorandum of agreement from the employer or bargaining council with the UIF, or
- written or electronic confirmation of acceptance by an employer or bargaining council of the terms and conditions of the scheme provided to the employer or bargaining council or published in writing by the UIF.
While these amendments provide some clarity on the C19 TERS going forward, there are still many questions that remain unanswered, including the lead time on receiving benefits. We anticipate that an updated MOA will be released by the UIF to align with these Amendments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.