Domestic Workers and the Compensation Fund – what next to be compliant

So, what is the next step for the employers of domestic employees?

Employers are traditionally required to register with the Compensation Fund within 7 days of employing their first employee. Besides being subject to a fine for non-compliance if they don’t, employers will also be open to civil claims if an employee is injured on duty or becomes sick as a result of their employment. Interestingly enough, the 7-day rule does not apply to the current COIDA change to include domestic workers. Domestic employers have merely been “encouraged to register with the Compensation Fund without delay”. The Department of Employment and Labour will be undertaking a nationwide campaign to inform both employers and employees of the changes in legislation concerning domestics.

To register, employers must submit the following documents to the Compensation Commissioner:

  • A completed CF-1E Form (Application for the registration of the domestic worker employer)
  • Copies of the ID documents, passports, or similar form of identification for both employer and employee
  • Proof of the employer’s residential address
  • A copy of the employment contract

When will the employer be required to submit their first Return of Earnings (ROE)?

It is accepted (but not certain so there is some risk) by the Department of Employment and Labour that because of the timing of the amendments, most employers of domestic workers will miss the annual deadline for the filing of the Return of Earnings (ROE) information for the period 1 March 2020 to 28 February 2021 (ROE due by 31 May 2021). With the various roadshows and campaigns only just getting under way it is likely that the employers of domestic workers will have until March 2022 (possibly 31 May 2022) to complete and submit a ROE for the period 1 March 2021 to 28 February 2022.

How will the annual assessment be determined?

The ROE is used within a standard assessment formula to determine the annual amount payable. This assessment tariff is paid directly to the Compensation Fund which will, in the event of injury or illness, pay the employee. It is important to note that the assessment payable is an employer cost.

The COIDA amendments, applicable from 1 March 2021, list domestic workers as Class M, subclass 2500 at an assessment rate of 1.04. These assessment tariffs are reviewed on an annual basis and are subject to change.

Employers can calculate their yearly payments to the Compensation Fund by using the following ROE and assessment tariff formula:

Annual earnings divided by 100 X 1.04 = annual assessment payable.

This would imply the following contribution under different annual remuneration for a domestic worker, but at this point it is not clear as to whether there will be a minimum assessment value applicable to domestics so we cannot confirm that the table below is accurate.

Annual Remuneration Monthly Remuneration Theoretical COIDA Contribution
48,000.00 4,000.00 499.20
60,000.00 5,000.00 624.00
72,000.00 6,000.00 748.80

 

What constitutes COIDA annual earnings for ROE purposes?

The following income constitutes the COID ‘remuneration’ that would be factored into the ROE calculation mentioned above:

  • Salaries and/or Wages
  • Cost of Living Allowance
  • Bonuses (incentive or otherwise)
  • Overtime payments (regular)
  • A guaranteed 13th cheque
  • Housing Allowance
  • Commissions (only if given to an employee who also has a basic salary, and not agents or contractors)
  • Cash value of meals and accommodation provided to an employee
  • Any other payment due to an employee in accordance with the employee’s contract of service

How can we help you?

The HRTorQue team can assist you in registering your domestic, submitting the annual Return of Earnings and ensuring that the payment is made timeously. We can also assist with the sourcing of a Letter of Good Standing if necessary. We also run domestic payrolls and help employers with all compliance in this area. Please contact [email protected] if you would like any such assistance.

Domestic Workers – benefits applicable to domestic workers in terms of the COID legislation

Following a landmark ruling by the Constitutional Court, which ordered that domestic workers be included in and protected by the Compensation for Occupational Injuries and Diseases Act (COIDA), revised rules were published in Government Gazette No. 44250 on 10 March 2021.

This Gazette confirms that domestic workers will now be afforded cover by three main compensation measures as determined by the COIDA. These include:

  • Temporary total disablement, when an injured employee is booked off for four days or more by a treating doctor to recuperate from the injuries or condition. The maximum period payable is 24 months.
  • Permanent disablement lump sums, which are paid on a medical report indicating that the employee has reached maximum medical improvement, limited to 30% of the benefit.
  • Permanent disablement pensions, which use the same criteria as lump sums, but can run to 100% of a benefit payment.

Benefits, and minimum and maximum compensation limits, are based on the type and extent of an injury or disability.

The Compensation Fund will cover “reasonable” medical expenses following on-the-job incidents. If the employee requires chronic medication, as a direct result of an injury or illness contracted while at work, the Compensation Fund will cover these costs too. The Compensation Fund will also pay for assistive devices such as wheelchairs and prosthetics, along with rehabilitation, reintegration and return to work programs.

Funeral expenses are payable to dependents of a deceased employee. If the death occurred before April 2019, funeral expenses already incurred by the dependents will be refunded up to a defined maximum. For those who died after 1 April 2019, the benefit is R18,251 paid as a lump sum.

Surviving spouses will be paid compensation which includes either a once-off lump sum award or pension award. A child pension is also offered, which pays children of the deceased up until the age of 18. This pension may be extended for children who are still going to school after turning 18 years.

If there is no surviving spouse or child, a wholly dependency award may be granted to the parents or siblings of the deceased employee who were dependent on the income of the deceased employee.

Constitutional Court Ruling – Domestic workers should get COID

The Constitutional Court have now ruled that it is unfair for domestic workers to be excluded from the Compensation Fund for occupational injuries and disease. This is not unexpected and will be welcomed by employees in this sector.

The biggest challenges will be working out how this will operate in practice given how dysfunctional the Compensation Fund is already (It struggles to cope with existing employers let alone another 5 million employers); and how the increased compliance risk and cost might impact employment in this space.

The case that sparked the ruling involved a domestic worker who was partially blind and while cleaning windows, fell off a ladder into a swimming pool and drowned. This unfortunate incident highlighted areas of potential risk for injury in a home and the consequences of an informal domestic arrangement which left the survivors of this domestic worker with no funds or recourse as a result of dangerous or undesirable workplace practice.

The next step will be for the legislation changes to be promulgated. A big concern will then be that without any guidance form the Compensation Fund (very unlikely this will be forthcoming), this will require all domestic employers to get registered which is time consuming and expensive and it is unclear what category they should be registered in. It will then require domestic employers to submit an annual return of earnings. Together these steps will cost a couple of thousand Rand so we expect many employers to be non-compliant in the short term which will raise civil claim risks for them.

HRTorQue offers a domestic payroll option to make sure employers are compliant in this space. Contact us for more information.

Registration for UIF with the Department of Labour

It has been eye opening to see how many employers had correctly registered with SARS for PAYE, UIF and SDL, but had not been registered for UIF with the Department of Labour for UIF, or had been registered, but had not been sending monthly UIF declarations.

Initially this caused huge angst because these employers’ TERS applications were being rejected. Fortunately, UIF has allowed employers to show they had made payment, so they didn’t lose out. However, the next step post TERS will likely be short time working UIF applications where the UIF credits built up by employees will be relevant and these UIF declarations (and history) will be critical for employees to claim.

A linked registration we also see consistently being missed by smaller employers in particular is the WCA/COID registration (required by all employers) and the filing of the annual return of earnings to the Compensation Fund. There will be some pain here particularly if an employee is infected and is then unable to claim from the Compensation Fund because the employer is not registered and/or not in good standing.

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.

COIDA

Return of Earnings Audit / Employer Registration / Application for Change of Nature of the Business

Return of Earnings Audit

Government Gazette No 42113 No 1385 was published to inform employers that the Compensation Fund may select an Employer’s Return of Earnings (ROE) to an audit if an employer’s ROE was referred due to the following reasons:

  • Credit assessment or/and
  • A considerable decrease in the amount of Return of Earnings (ROE) declared from prior years

The following supporting documents will be required:

  • Affidavit (Reason for variance / Credit assessment)
  • Audited or Independently Reviewed Annual Financial Statements
  • Detailed Payroll Report
  • SARS EMP 501 / Tax Clearance
  • Manual Return of Earnings
  • Power of Attorney (Consultants, Attorney or any person appointed by an employer)

To view the official publication, please follow the link.

COIDA Employer Registration Form

Government Gazette No 42113 No 1386 was published to inform employers of the prescribed Employer Registration Form in respect of an employer’s obligations to register with the Compensation Commissioner and to furnish him with particulars.

To view the official publication, please follow the link.

COIDA Application for Change of Nature of the Business

Government Gazette No 42113 No 1387 was published to inform employers of the requirements for the change of subclass and nature of business activities.

A business is classified according to the nature of industry the employer is engaged on. To change the nature of business, the following is required:

An affidavit with the following information: 

  • Detailed description of the nature of business activities.
  • Duties of employees.
  • Any other information which will contribute to the appropriate classification of the business activities.

Documents required depending on the type of business:

  • Proof of registration certificate with Companies and Intellectual Property Commission (CIPC) in respect of business entity, close corporation or company.
  • Letter of authority in respect of the trust.
  • Proof of registration certificate with the Department of Social Development in respect of Non-Profit Organisations
  • Certified copies of Director’s ID in respect of Companies
  • Certified Copies of ID of Members in respect of a Close Corporation
  • Certified copy of ID in respect of a Sole Owner
  • Proof of SARS registration
  • Proof of SARS Tax Clearance Certificate

Reasons for the change in nature of business can be due to the following:
The nature of a business changed (sometimes this happens gradually – over years) and the business is now classified in the wrong risk category. It could also be that the company was incorrectly classified from the beginning.

The change in business activities and re-classification of business entity will be effective from the date of receipt of request by the Compensation Fund.

To view the official publication, please follow the link.

COIDA Maximum Amount of Earnings

Department of Labour published Government Gazette notice no. 42092 on 7 December 2018 with respect to the increase of the maximum amount of earnings on which the assessment of an employer will be calculated. The effective date is 1 March 2019.

The prescribed amount under Section 83(8) of the Compensation for Occupational Injuries and Diseases Act No 130 of 1993 (COIDA) has been increased to R458 520 per annum.

The COID Dilemma

Can an unpaid learner practically claim workmen’s compensation?

We are often faced with interesting practical challenges. One such challenge surfaced recently (and is likely to become more common as the government pushes for increased employment through learnerships and work experience programmes).

Background
A company offered a work experience programme where they paid for students travel in order for the students to come to their premises and learn more about the trade. In the course of this work experience one of the learners was injured and the company tried to claim compensation from the Compensation Commissioner, but faced some real challenges.

Challenges
The challenge came in three parts:

  1. Is the learner entitled to claim? Where there is a contract of service the learner should be entitled to claim compensation under the Act.
  2. Is the learner able to claim? As the learner is not being paid any salary often companies will not put the learners on to payroll. Where the learner is not on payroll the employer is usually unable to show the Compensation Commissioner that the learner is employed and levies have been paid on their behalf. It is unusual for an employer to think far enough ahead and include unpaid learners (not on payroll) on their annual return of earnings.
  3. What can the learner claim? Even if the employer has included the learners on their return of earnings or can show evidence of them being part of their headcount the first question the Compensation Commissioner will ask is to see their payslip and proof of earnings to support the claim calculation. Where they have not been paid anything, the claim is zero.

This leads to a very inequitable position where the learner should be able to claim, but the claim is worthless.

What to do?

There is no easy answer to this. In a perfect world the legislation would take this into consideration. The only alternatives are civil i.e.

  • Protect the company from any claims for compensation by getting learners to sign an indemnity form; and
  • Where the company is interested in looking after learners, consider general insurance products to cover the learner in the event of an incident at work

We are currently putting such examples to the Payroll Authors Group and other influential stakeholders in an attempt to get some clarity on the law in this regard and more importantly the practical application of the law. Unless there is a process that can be successfully followed to resolve a valid claim this would unfortunately remain a loose end that prejudices those people who need the benefits and cover the most.

Compensation Fund Annual Return fo Earnings – Deadline 31 May 2018

The W.As. 8 can be filed online (CF-Filing) on the Compensation Fund website, up until the revised deadline of the 31 May 2018.

The fund will immediately calculate the assessment amount and issue an invoice to the employer online. This can be paid and as soon as payment is received the Fund will issue the employer with a Letter of Good Standing (LOGS).

The Compensation Fund is running a number of workshops towards the end of May to help employers with the CF-Filing system.

Editor’s Note: Apparently employers new to the Compensation Fund can now register online (but we have not tested this yet).

COIDA – Maximum Earnings Increase

The maximum amount of earnings for which COIDA applies has been increased to R430,944 effective 1 March 2018. It is noticeable that this is from 1 March 2018 (the start of the tax year) as opposed to the usual 1 April 2018 which makes things easier practically for employers.