Injury on Duty claims for employees who contract Covid-19 at work

On Friday, 20 March the Department of Labour published a notice on the compensation for occupationally acquired novel Coronavirus disease (COVID-19) in terms of Section 6A of the Compensation for Occupational Injuries and Diseases Act (COIDA).

Occupationally acquired COVID-19 is a disease contracted by an employee arising out of and during his/her employment.

The notice deals with occupationally acquired COVID-19 resulting from exposure to confirmed cases of COVID-19 in the workplace, or after an official trip to high-risk countries or areas.

Employers must follow the stipulated regulations when submitting claims for COVID-19.

A claim for occupationally acquired COVID-19 must be set out as per sections 65 and 66 of the COID Act.

During this pandemic it is crucial for employers to implement the rules and regulations of the Occupational Health and Safety Act 85 of 1993 (OHS Act). The regulations in the OHS Act must be followed to their full extent to avoid claims by employees and fines imposed on the employer at a later stage. The OHS Act states that an employer must ensure that its working environment is safe and without risk to the health of its employees.

For more details on the official notice, follow the link.

SMME Funding & Relief

The President announced during his 23 March Coronavirus Lockdown speech a relief fund for SMMEs to fund working capital and direct costs. Over the past few days further guidance has arisen around this scheme amidst a raft of “fake news”. Notably that the scheme will be available for SMMEs in good standing with SARS and the Department of Labour; have 100% South African ownership and 70% South African employees; with priority given to women, persons with disabilities and youth businesses (although the latter statement was made in a speech and is not confirmed).

We understand the funding terms are (not yet certain):

  • The facility will be for working capital only (direct, auditable costs)
  • Maximum R500,000 per SMME will be considered
  • Terms of the funding will be dependent on the business’s cash flow
  • Loan facilities will be at Prime less 5%
  • Any misuse of funds will need to be repaid at Prime +10% (indicative)

Application can be made through http://www.smmesa.gov.za/ . The website is working and one can register. We cannot yet give feedback on what happens thereafter.  We will keep an eye on it and update clients as we see progress.

Temporary Employment Relief Scheme (TERS)

The TERS scheme has been talked about in relation to the Covid-19 situation, but was originally introduced in December 2019. The scheme piggy backs off UIF illness and Reduced Work Time benefits and has been adapted and amende don the 26 March for Covid-19. This article and guide sets out the pre-conditions for application and the steps to be taken to claim. In practice, we have not seen a TERS scheme allowance being granted as yet.

In summary the details of the benefit are as follows

  • The benefit is available to businesses who have been required to close their operations for 3 (three) months or less and suffers financial distress as a direct result of the Coronavirus.
  • This benefit will only pay for the cost of salary for employees during the closure of the business.
  • The salary will be capped at R17 712 per month per employee using the income replacement rate sliding scale (38% – 60%) as provided in the UI Act. (In the event that amount falls below the minimum wage, the amount will equal the minimum wage)
  • The benefit will not be dependent on the employee having any credits remaining (usually one credit granted for every four days worked)

Does my company qualify?

  • The company must be registered with UIF. If you are not registered with UIF and need assistance with the registration process please email [email protected] and he will advise you accordingly.
  • The company must comply with the application procedure for the financial relief scheme which may include entering into a Memorandum of Agreement with the Department of Labour
  • The company’s closure must be directly linked to the COVID-19 pandemic.

Further guidance is available at this link. The relevant employer and employee declaration forms for the filing are available to be downloaded from the HRTorQue website:

TERS Scheme Overview

Employee declaration

Employer declaration

Be optimistic and keep sight of the end game

In the context of the lockdown and events surrounding us there is considerable room for pessimism as business owners, employers, managers and leaders. Yes, we do not know the outcome of events. Yes, it is difficult to manage anything without any certainty. However, history shows us that things will recover. We will get out of this and those best able to remain optimistic and to look for opportunities will be those who mentally, physically and commercially will thrive when things get better. Your state of mind through this will be critical.

I sat in an HR conference recently where the speaker talked to the 3 P’s of optimism as developed by Martin Seligman (the author of Learned Optimism). These are very relevant to our current situation so let’s deal with them:

  • (P)ermanence – pessimists tend to assume current conditions will last for ever while optimists recognise they are temporary, often cyclical and things will get better;
  • (P)ervasiveness – pessimists assume that a mistake or problems in one area are all consuming and let it impact their business, personal and spiritual well-being. Optimists tend to isolate the issue and say “ok, that didn’t go so well there”, but don’t let it impact their situation elsewhere;
  • (P)ersonalisation – pessimists assume all set backs are personal. Optimists recognise that issues may partly be due to them, but that often bad luck or external events play a big role.

Consider the events around you. We are all in this together. This was not caused by our neighbours. We could decide to be fatalistic about it or we can use it as an opportunity to strengthen our business, look for new opportunities, broaden our horizons and build stronger bonds with people…

Keeping your business alive through the Coronavirus lockdown

Business owners are scrambling. Demand has dropped for many industries and the battlefield is still too new to know what the landscape will look like over the coming months. Many businesses will go under, but the objective through this is to make sure yours survives. Then when things return to normal (and they will), you will be able to take advantage of the recovery.

I have set out some tips/steps below in how you can increase your chances of being one of the survivors:

  1. Don’t panic! Easier said than done, but if you panic you tend to make emotional, irrational decisions. It is important to think your way through your situation objectively and make proper plans based on facts.
  2. The key issue is liquidity. Do you have enough cash flow to manage through the crisis period. The amount of assets you have doesn’t matter. You need the cash to pay employees and creditors. So, prepare a cash flow analysis showing the cash you have available and what you need to pay and what you can defer. Look at each element carefully:
    1. Cash availability – both bank account cash plus access to overdrafts and funding (check with the third party to make sure this is still available to you)
    2. What payments do I need to make and what can I defer / re-negotiate? How can I best save money on payroll while retaining and supporting my key employees?
      1. Salaries and wages
      2. Suppliers
      3. Tax
    3. What are my fixed vs variable costs? Don’t assume that traditional fixed costs are fixed. Investigate with landlords, banks, suppliers to make a plan. They would prefer to have some clarity on payment and have you survive rather than have you go bust and receive nothing;
      1. What are my payroll options? There is a lot covered in this newsletter around various schemes to help employers with government support, but the main options are (each has pros and cons and processes to be followed which we don’t go into here):
        1. Request employees to take annual leave until they use up their leave balance and then they can use unpaid leave; or
        2. Negotiate for employees to take short time; or
        3. Negotiate an across the board salary cut; or
        4. Formally retrench employees or groups of employees;
      2. Review your receivables. Not everyone will pay you. Divide the receivables in low, medium and high risk of non payment.
            1. Consider what grants and support may be available to you. Remember these will be constrained by timing and amount so don’t bank on getting these in time to help you.
            2. Assess what actions you can take to improve the cash flow position in all of the elements above. Understand what needs to work for you to survive. If there is a shortfall then either consider more drastic steps or recognise you will need additional funding.

           

  3. Review your contracts with customers and suppliers for force majeure clauses. This will impact whether you may be able to immediately terminate a supplier contract or on the other hand may be faced with a customer cancelling on you (this shouldn’t impact payment for work already done)
  4. Continue to iterate the above and don’t get distracted by other issues.
    It is important to remember “Plan for the worst and hope for the best.” The lockdown may continue past the middle of April and you need to be ready to adapt to deal with this.

Budget change – Tax and exchange control treatment of individuals

(source: treasury.gov.za)

Following reforms to the income tax treatment of South African tax residents who receive remuneration outside the country, government proposes to remove the exchange control treatment for individuals, while strengthening the tax treatment. The intention is to allow individuals who work abroad more flexibility, provided funds are legitimately sourced and the individual is in good standing with the South African Revenue Service. Individuals who transfer more than R10 million offshore will be subjected to a more stringent verification process. Such transfers will also trigger a risk management test that will include certification of tax status and the source of funds, and assurance that the individual complies with anti-money laundering and countering terror financing requirements prescribed in the Financial Intelligence Centre Act (2001). This will be phased in by 1 March 2021.

Under the new system, natural person emigrants and natural person residents will be treated identically. Additional restrictions on emigrants – such as the restrictions on emigrants being allowed to invest, and the requirement to only operate blocked accounts, have bank accounts and borrow in South Africa – have been repealed. The concept of emigration as recognised by the Reserve Bank will be phased out, to be replaced by a verification process based on the requirements above. Tax residency for individuals will continue to be determined by the ordinarily resident and physically present tests as set out in the Income Tax Act (1962). Under existing international standards, South Africa participates in the automatic sharing of information between tax authorities on individuals’ financial accounts and investments. These cooperative practices will remain in place to ensure that South African tax residents who have offshore income and investments pay the appropriate level of tax.

Budget discussion – Proposed new foreign exchange approach

The National Treasury proposes modernising the foreign-exchange system. Since 1933, South Africa has operated a “negative list” system. By default, foreign-currency transactions are prohibited, except for those listed in the Currency and Exchanges Manual. As a result, even small individual transactions – such as for travel – require onerous approval processes. This regime constrains trade and cross-border flows, particularly in relation to fast-growing African economies.

Over the next 12 months, a new capital flow management system will be put in place. All foreign-currency transactions will be allowed, except for a risk-based list of capital flow measures summarised in the list below. This change will increase transparency, reduce burdensome and unnecessary administrative approvals, and promote certainty.

  • South African corporates will not be allowed to shift their primary domicile, except under exceptional circumstances approved by the Minister of Finance.
  • Approval conditions granted by the Minister of Finance for corporates with a primary listing offshore, including dual-listed structures, will be aligned to the current foreign direct investment criteria and/or conditions to level the playing field.
  • Cross-border foreign-exchange activities will continue to be conducted through dealers authorised and regulated by the Reserve Bank.
  • Prudential limits on South African banks and institutional investors will remain, but the limits will be reviewed regularly.
  • Banks’ unhedged foreign-currency exposures will remain limited to 10 per cent of liabilities (known as the net open foreign exchange position) and will remain regulated by the Prudential Authority of the Reserve Bank.
  • The domestic treasury management company policy, which allows South African companies to establish one subsidiary as a holding company for African and offshore operations without being subject to exchange control restrictions, will remain in place, as will the international headquarter company regime.
  • The export of intellectual property for fair value to non-related parties will not be subject to approval.

The current policy of certain loop structures, which relates to the acquisition by private individuals of equity and/or voting rights in a foreign company, will remain until tax amendments are implemented to address the risks.

Budget change – Limiting the use of assessed losses

When a company’s tax-deductible expenses exceed its income, it records an assessed loss. Often, the loss is carried forward to the next year and is offset against taxable income in that year. Over the past few years, there has been an international trend to restrict this practice.

Government proposes broadening the corporate income tax base by restricting the offset of assessed losses carried forward to 80 per cent of taxable income, for years of assessment commencing on or after 1 January 2021. This is viewed as a reasonable approach that affects all businesses equally, rather than restricting the number of years for carrying forward assessed losses, which would disproportionately hurt businesses with large initial investments or long lead times to profitability.

Budget discussion – curtailing excessive interest tax deductions

Government proposes to restrict net interest expense deductions to 30 per cent of earnings for years of assessment commencing on or after 1 January 2021. This measure will address a typical form of base erosion and profit shifting by multinational corporations. This practice involves artificially inflating company debt and/or the interest rate on that debt to a related party in another jurisdiction with a lower corporate income tax rate. The resulting interest payments are deducted in South Africa, reducing the domestic tax base and effectively shifting profits to be taxed at a lower rate offshore.

Consultation on the design of this limitation begins today. A discussion document is available on the National Treasury website and the closing date for comments is 17 April 2020.

Net Promoter Score – Powerful, simple surveys

While we encourage employers to do regular, consistent employee surveys to gauge the mood of the workforce and the perception gap (the difference between management’s view of the organization and employees’), there is sometimes a reluctance to do so because management believe surveys are just an opportunity for employees to gripe about their individual circumstances rather than a proper reflection of the organization. Alternatively, employers point to the poor response rate and difficulty in running the process successfully as reasons not to do the survey.

An alternative to a full survey is the Net Promoter Score (NPS). This is a single question survey developed by Fred Reichheld and adapted by Bain & Co. Originally intended to judge customer’s perceptions of the company it can be equally applied to employees.

The NPS asks a simple question, “On a scale of 0 to 10, how likely are you to recommend the company to a friend or colleague?” Anybody answering with a 9 or 10 is a promoter, 7/8 are neutral and anybody from 0 to 6 a detractor. The net score is calculated by taking the percentage of promoters less the percentage of detractors.

Example: In a survey of 100 people, 50 are promoters and 15 are detractors. The NPS is 50% (50/100) less 15% (15/100) which is equal to 35%.

A score of 50% is considered good.

Using a simple survey, the employer can assess engagement over time and assess whether things are improving or deteriorating. It won’t give all the answers, but it will be likely to get a better response rate, is easy to design and can more easily show the trend.