Author: Douw van der Walt & Meagan Cesare
Editor’s note: there are some useful options for employers to consider in this article. However, they all assume the proper functioning of the Department of Labour UIF Department and the CCMA. The UIF Department particularly is under immense strain. It is not certain therefore if these solutions are all workable practically i.e. will the processes at UIF allow them and will there be enough money to make payment and by when? This has an impact on employee / employer relationships as the employee naturally assumes that where they are not being paid it is the employer’s fault. Please be careful, communicate well and do your homework first.
South African business owners are emerging at the end of the lockdown period with a lot more wisdom, having suffered through some of the most testing times in recent history.
HRTorQue has experienced a high volume of enquiries from clients on how best to proceed in order to safeguard their business and to preserve jobs. The importance of having well-structured financial plans and high levels of accounting acumen became starkly apparent, as for many small business owners these issues have not always been a priority and became lost in the everyday need to keep their company working and afloat. This is an opportune moment to instill good financial habits or partner with a financial advisor and check in frequently with accountants for up to date results, which could allow analysis of problem areas before they go past a point of no return.
The introduction of the TERS UIF benefit by Government in March 2020 provided some relief to companies. However, TERS as a benefit has only been gazetted for a three-month period (April, May and June) and unless that stipulation is revised and a new Government directive passed; employers must now look for alternative relief to help them through another few months of potentially slow business conditions. There has been recent talk of extending the benefit for those businesses that are ostensibly still in lockdown, such as the tourism industry, but nothing has been clarified.
Our advice to business owners who are still not yet fully operational is to consider the following alternatives:
This is a key consideration before more drastic measures are considered and could be beneficial for both the employee and employer. Many companies cannot bring all their staff back due to COVID-19 regulations which prescribe social distancing measures between employees, as a result of limited space at their business premises. We suggest a careful analysis of your business structure and to identify those employees who are responsible, with good work ethics, and the right infrastructure to enable them to work from home.
Lay-offs are envisaged as a temporary solution to a problem that will hopefully resolve itself once business confidence strengthens. The principle of lay-off is that an employee remains employed with the company, but with no work and no remuneration for a certain period. This may be covered in the employee contract or in bargaining council agreements. If not, the employer and employer should enter into a consensus seeking process to enable the arrangement as provided for in s189 of the LRA. This gives the employer temporary relief for the stipulated period where salaries won’t be required to be paid, but the employee is entitled to receive benefits from the Unemployment Insurance Fund.
Short Time or Reduced Working Time:
This is another option in terms of s189 of the LRA, and for many employers this may be the only way forward for another month or two. Short time is a fairly new concept in the definitions under which the UIF provides assistance, having only been introduced in 2018. The concept is defined as: “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.”
An employee can apply either online or in person at a labour office and the documents are the same as those for temporary layoffs. However please note our concerns that there is still no certainty on the calculation and practical payment of the short time benefit by UIF yet.
Illness Benefit UIF for fourteen-day quarantine period:
Where an employee is ill, but has exhausted their sick leave days they can apply for the illness benefit from UIF.
Training Lay-Off Scheme:
(Editor’s note: we have not seen this operating in practice yet, so caution is warranted)
This benefit is overseen by the CCMA. It is another temporary relief scheme designed to assist employers in distress and was envisaged as a means of reducing retrenchments.
Employees are laid off work for a period whilst they undergo training; they are provided with a training allowance grant from the Department of Labour and calculated on similar principles to UIF unemployment benefits. Workers remain employed during the training lay-off but are not paid their normal salaries. The lay-off may be combined with the short-time work arrangement. The time period is flexible but is usually based on three to six months of training.
Employers may apply to the Department of Employment and Labour for the benefit and these are granted based on the submission of financial statements and budgets as well as a proposed turn-around plan. The CCMA also has dedicated resources that can be contacted for advice on how to start the process.
Should employers be forced to restructure their Company and retrench staff they must be careful to follow the required labour legislation and established protocols.
Consultations must be initiated with all employment parties such as workplace forums, registered trade unions whose members are likely to be affected, as well as with individual employees as the situation dictates.
An attempt to reach consensus must be made on the following:
- Avoiding possible dismissals; this can be done by introducing reduced working time, temporary layoffs, offering early retirement to some employees or stopping overtime pay or the discontinuation of temporary employee contracts.
- Negotiating ways to minimise the retrenchment of employees as well as discuss the timing of the exits.
- The method of selecting employees to be retrenched must be stated as well as the severance pay envisaged.
The employer should provide all information related to these issues in writing; particularly the reasons for the retrenchment process as well as how many employees are going to be affected. Reduce to writing any alternatives that were proposed and why they have been rejected. The number of employees affected must be disclosed, the timing of the retrenchment process as well as the severance pay that has been proposed. There should be a reassurance of re-employment should the company find itself to have increased capacity at a later stage.
Retrenchments cannot be used for the sole purpose of getting rid of unwanted employees.
The employees or other consulting party must be given an opportunity to present alternatives and these must be considered, and a response provided.
At the conclusion of the consultation process, should no agreement be reached on the criteria for selection, then often the LIFO (last in, first out) principal may be applied, but this is not the only means of selection, i.e. for instance a combination of methods such as early retirements or departmental restructuring, or retention of key skill personnel may be used. The CCMA has published guidelines on how restructurings should be conducted, and these are updated from time to time and serves as a useful reference for parties involved in restructuring.
Severance pay as well as notice pay (per labour law) must be paid out. Employees are entitled to their outstanding leave pay as well as any other criteria stipulated in their employment agreement.
There have been multiple press releases and changes announced over the past three months in relation to UIF benefits or DOL policies. These may change from day to day. Details reflected in this article are correct at the time of going to press. Kindly ensure that you check for updates from us on a regular basis.