The COVID-19 pandemic has left both employers and employees feeling vulnerable and uncertain as to the options open to them. This article provides an overview of the relief offered by the Government which is available to employers and employees in order to assist them financially through this difficult period.
Many employers are suffering financially as a result of the forced lockdown which has caused their businesses to close and ultimately resulted in them losing most, if not all, of their income. Employers have been encouraged to continue paying their employees during this period, but without income this may seem like an insurmountable task. However, thanks to Government intervention, employers now have a number of options available to assist them in paying employee wages, namely:
- Covid-19 Temporary Relief Scheme, 2020 (“C19 TERS”)
This scheme, previously referred to as the National Disaster Benefit, was established by the Government, under the Unemployment Insurance Fund (“the UIF”), to assist employers in the compensation of employees who may have lost income as a result of their employers’ businesses being forced to close down due to COVID-19. In order to qualify for this benefit, the following criteria must be met:
- The employer must be registered with the UIF;
- The employer must comply with the application procedure for the financial relief scheme; and
- The closure of the employer’s business must be directly linked to COVID-19.
Thus, provided the above criteria are met, an employer which closes for less than 3 months and suffers financial distress as a result thereof, will be entitled to a C19 TERS relief benefit. This benefit will assist an employer to cover salaries for its employees during the temporary closure. The benefit is capped at R17 712 per employee per month and is determined in accordance with the income replacement rate sliding scale (38% – 60%) conferred in the Unemployment Insurance Act 63 of 2001 (“the Act”). However, where the resultant payment to an employee would be less than the statutory minimum wage of R3500 per month, the payment will be increased to R3500 since no employee should be paid less than the minimum wage in terms of this benefit. This is an escalated procedure pursuant to which, the UIF should theoretically pay the benefit within 30 days of a valid application being submitted. However, insomuch as this is a relatively new scheme which will no doubt be inundated with thousands of applications, some teething problems may be anticipated. Furthermore, it is important to note that this benefit must be applied for by, and paid directly to, the employer, which is obliged to use the funds received to pay its employees.
- Illness benefits under c19 TERS
In addition, C19 TERS also offers an illness benefit. This benefit is applicable where an employee is placed in quarantine for 14 days as a result of COVID-19. Similarly to the temporary relief scheme, illness benefits are applied for by, and paid directly to, the employer, which thereafter pays them to its relevant employees.
Each application must be accompanied by a letter duly signed by both the employer and the employee, confirming that the employee was placed in agreed precautionary self quarantine for a period of 14 days. This letter replaces the medical certificate which is usually required for illness benefits payable by the UIF. A medical certificate will however be required where benefits are applied for in respect of quarantine periods extending 14 days. Illness benefits will be determined in accordance with the prescribed structure contained in the Act.
A further, and more informal, benefit available to employers is that, in terms of a directive issued by the Government on 26 March, employers can insist that their employees take their annual leave during the lock down. The Government has however, urged employers to avoid this course as far as possible and instead, utilise the C19 TERS salary benefit in circumstances where they cannot afford to pay employees’ salaries.
Whilst the aforementioned relief mechanisms are certainly to the advantage of the employee, they are, as previously stated, applied for by and paid to, the employer which thereafter pays them across to its entitled employees. It is accordingly, important to examine the relief that employees are directly entitled to claim for. These are:
- UIF reduced working time benefit
At the outset, it must be noted that an employee cannot apply for this benefit where the employer has already made an application in respect, inter alia, of the employee concerned for the C19 TERS salary benefit. However, where an employer has not made such an application, this relief will be available to an employee who has been forced to work short time. The benefit provides that, “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”. Whilst not expressly provided for, this benefit will no doubt also be available to employees who are temporarily laid off without pay as a result of COVID-19.
Here, the claim is made by the employee, with the assistance of the employer, and paid directly to the employee, provided the employee has enough credits. The benefit payable under this heading is limited to the difference between what the employer pays the employee by way of salary and the normal UIF benefits which would become payable to the employee in the event of loss of employment. The normal UIF benefits are determined in accordance with the income replacement rate sliding scale (38% – 60%) contained in the Act, subject to the maximum benefit cap. Furthermore, and in contrast to the C19 TERS salary benefit, lower earning employees who successfully apply under this benefit scheme may well receive less than the statutory minimum wage.
In light of the fact that this benefit cannot be claimed simultaneously with the C19 TERS salary benefit, the question arises as to which benefit is better?
Larger organisations have been strongly encouraged to apply, on behalf of their employees for relief by way of the C19 TERS salary benefit, as opposed to suggesting to their employees that they apply for the reduced working time benefit, since the C19 TERS salary benefit allows large organisations to make bulk applications, thereby sparing the UIF the burden of having to deal with a plethora of individual employees’ claims. This will obviously assist in easing what is likely to be an enormous administrative burden on the UIF. Smaller companies would however, need to consider whether it would be more advantageous to apply for the C19 TERS salary benefit, as opposed to directing their employees to apply directly for the reduced working time benefit.
- Death benefit
The death benefit, as provided for by the UIF, generally allows a worker’s spouse or life partner to claim in the unfortunate event that the worker dies. Accordingly, the wife or partner of a worker is entitled to claim compensation in the event that her husband or partner has died as a result of COVID-19. Children of the deceased are only entitled to claim under this benefit if no spouse or partner exists, or if the spouse or partner does not claim within the prescribed 6 month period. As in the case of other UIF benefits, death benefits are payable in accordance with the prescribed benefits structure and are subject to available credits.
- Claims in terms of the compensation for Occupational Injuries and Diseases Act 130 of 1993 (COIDA)
Inasmuch as COVID-19 was recently confirmed as an occupational illness under COIDA, employees who contract COVID-19 during the course of their employment and who are temporarily disabled as a result thereof, are entitled to claim compensation under COIDA for a period not exceeding 30 days. In addition, COIDA will provide medical aid to that infected employee for a period not exceeding 30 days.
In terms of the notice published by the Compensation Commissioner on 20 March in the Government Gazette, COIDA will also deal with “occupationally-acquired resulting Covid-19 from single or multiple exposures to confirmed cases of Covid-19 in the workplace or after an official trip to high-risk countries or areas previously Covid-19-free”. No claim will be entertained, unless the COVID-19 is formally diagnosed pursuant to World Health Organisation guidelines. Furthermore, there must be a direct link between the COVID-19 exposure in the course of employment and the manifestation of the symptoms. This means that no compensation is claimable under COIDA in instances of self-quarantine where an employee fears that he may have the virus, but does not display any symptoms.
Where an employee dies as a result of COVID-19 contracted at work, COIDA will also pay out reasonable burial expenses and any widow’s or dependant’s pensions, where applicable
OTHER SPECIAL BENEFITS
Relief from banks
As a result of the economic consequences of COVID-19, commercial banks have been exempted from certain provisions of the Competition Act 89 of 1998 so that they are able to provide debt relief to their clients. By way of example, Nedbank, ABSA, FNB and Standard Bank have all made available payment holidays, longer periods to pay back money owed to them and displayed a willingness to assist smaller business affected by the COVID-19 lock down by way of short term loans and overdraft facilities.
Tax relief for employees
Employees in the private sector who earn less than R6500 per month will be entitled to a maximum tax subsidy of R500 for the next 4 months.
Tax relief for employers
Smaller businesses with annual turnovers of less than R50 million and which are otherwise tax compliant, will be entitled to defer payment of 20% of their PAYE obligations for the next 4 months. These businesses may also defer a portion of their provisional income tax payments for the next 6 months without any penalties or interest. In addition, the Government is investigating possible reductions in employer/employee contributions to UIF and Skills Development Levies. This has not however, been finalised yet and is dependent upon sufficient actuarial reserves in the UIF.
Interventions by the Small Enterprise Finance Agency (“SEFA”)
Business Growth Facility:
This is intended to assist in funding the production and supply of health care and related products that can be used to prevent the spread of COVID-19 as well as the production and supply of products that will be in shortage as a result of the COVID-19 pandemic. The stated rationale for this funding is to “give local manufacturers and suppliers an opportunity to produce and strengthen their place in the market, which may lead to long term contracts post the COVID 19 pandemic”.
SMME Relief Finance:
This mechanism will offer loan funding in order to keep existing businesses afloat during the COVID-19 pandemic for a period of six months from April 2020, the rationale being primarily to ensure that jobs are retained in the economy.
Restructuring of funded SMMES:
Various interventions have been offered to assist SEFA funded SMMEs which are negatively impacted by COVID-19, including:
- a payment holiday to SEFA funded SMMEs for a period not exceeding 6 months;
- debt restructuring, which could take the form of extended loan periods, interest reviews and additional funding where required.
Tourism Relief Fund
The Department of Tourism has made available R200 million to assist businesses in the tourism and hospitality industry which will suffer tremendously as a result of COVID-19 induced travel restrictions and the 21 day lock down. The relief will be extended to qualifying hotels, resort properties, B&Bs, restaurants, conference venues, professional catering businesses and tourist attractions, as well as tour operators, travel agents, tourist guides, car rental companies and coach operators.
To qualify, the business concerned must have an annual turnover of less than R2.5 million, they must be able to guarantee the employment of a minimum number of staff for at least 3 months, they must be tax compliant, have been in existence for at least one financial year and must prove that they need relief as a result of the negative impact of COVID-19. It has also been suggested that at least 70% of the beneficiaries should be businesses that are black-owned and at least 50% of all beneficiaries should be businesses owned by women.
Whilst it is accepted that this is going to prove an extremely trying time for employers and employees, all hope is not lost as there are various options and facilities available to those who will struggle financially. Furthermore, employers and employees may dial the COVID-19 hotline on, 012 337 1997 Monday to Friday 8H00 to 20H00, to obtain further information and advice on available benefit options.