TERS vs Reduced Work Time Benefit

UIF Covid-19 TERS

On the 28th February 2021 employers were sent correspondence from UIF regarding the extension of the TERS benefits. These benefits were extended from 16th October 2020 until 15th March 2021 but only certain categories of employees are eligible for this benefit.

These include

  • Employees who are on temporary lay-off or Reduced Work Time within those sectors that have not been able to operate due to regulatory restrictions. These business sectors are specified in Annexure A of the New Directions and include businesses directly involved in hospitality, tourism, liquor, some sectors of Arts, entertainment and recreation and certain businesses included as part of the supply chain to the aforementioned sectors.
  • Employees in all sectors who:
  1. Were required to self-isolate or quarantine to prevent the spread of COVID-19
  2. Are age 60 or above and who could not reasonably be accommodated in the workplace
  3. Have co-morbidities and who could not reasonably accommodated in the workplace

The online portal is open to accept claims for employees list in section 1 above for the period 16th October 2020 until 31st December 2020 ONLY. UIF will communicate on the opening of the other claim codes and the period 1st January 2021 until 15th March 2021.

Reduced Work Time Benefits

In light of the extended UIF TERS benefit period, employers in the sectors targeted for relief will have the opportunity to apply for the TERS benefits.

For those sectors unable to claim TERS, employees could make use of the Short Term/Reduced Work Time Benefits.

The Reduced Work Time covers employees whose working hours have been reduced or who are forced to stay at home due to work stoppage.

Normally, a claim for this benefit is submitted by an employee with the assistance of the employer. However, the system has apparently been enhanced to enable employers to submit bulk applications on behalf of employees and a spreadsheet has been designed to make this easy for employers.

The differences between TERS and Reduced Work Time Benefits are:

  • The Reduced Work Time benefit uses, and then reduces, the employee’s “credit days”. These days are then no longer available to the employee to increase the value of unemployment benefits at a later stage.

The TERS benefit does not use or reduce “credit days”. The value of the RWT benefit is, in almost all cases, less than the value of the TERS benefit.

Effective Virtual communication for continued productivity: Employer to Employee

The COVID-19 outbreak is one that has forced business owners and employers to think outside the normal communication channels they have always used. More and more companies find that they need to virtually run their business with a lot of communicating having to be done virtually as well. A clear communication strategy has become critical during these times to ensure that employees remain as engaged as possible.

There are 3 basic principles employers should usually adhere to:

  • Transparency,
  • Compassion and
  • Ownership

The question then arises, what more/ what else can businesses do to effectively manage Employer-Employee communication in a virtual world?

  • Check in often

As an employer check in with your team as often as possible. This may be formal or informal as you show employees that they matter outside of work.

  • Keep messaging clear and consistent

When communicating as an employer, do not give mixed messages or content. Always remain honest and consistent in the message to employees. Apart from good communication practices, this ensures employees are clear on what an organization is doing and how they hope to survive during these perilous times.

  • Communication must flow both ways

Allow employees to communicate their fears, challenges, ideas, and accomplishments during one-on-one virtual meetings or team meetings. Have safe online channels of communication that address the different issues surrounding the pandemic and how it affects different individuals’ productivity.

  • Eliminate micromanagement

In an office environment, management often manage hours logged, emails sent, and meetings scheduled. In a virtual team things are different. Management should nurture communication between team members to focus on managing results as opposed to managing tasks. Communicate benchmarks and deadlines to gauge effectiveness and productivity of individuals.

  • Communicate a greater sense of purpose

Purpose is one of the most significant guiding principles of a leader. In “The Heart of Resilient Leadership”, Deloitte Global CEO Punit Renjen noted the vital role that purpose plays in fostering an engaged workforce and that employees feel a greater connection to the work they are doing each day when their companies are focused on an authentic purpose.

  • Digital transformation

To further empower the workforce and maximize productivity, leaders should consider new technologies as well as digital ways of working and collaborating to improve productivity and engagement while preserving security and flexibility.

COVID Regulations – Requirements to submit data to National Institute of Occupational Health (NIOH)

The Department of Health has published directives which requires companies who employ more than 50 employees to submit information on a weekly basis via a special portal.

The information that is required on a weekly basis is the following, and is quoted directly from the directive issued which can be accessed here Government_Gazette.

  1. Vulnerable Worker Data:

All employers are legally required to identify those employees who are vulnerable for the more severe outcomes of the COVID-19 infection. Since this is a key component of the screening of workers, this data must be submitted by employers.

The vulnerability status of each worker that is submitted is not dependent on the availability of detailed medical information being available to the employer. This once off submission is submitted when collected by the workplace, and any subsequent occasion when new appointments are made, or an employee’s status requires updating.

  1. Daily Symptom Screening Data:

All employers are legally required to screen all employees entering their work premises daily. This screening must be based on the prescribed set of symptoms as has been defined by the National Institute of Communicable Diseases to determine those persons likely to be presenting with a COVID-19 infection, and therefore should be referred for further assessment.

This daily collected data must be submitted by employers, for those employees that are symptomatic. The data must be submitted on a weekly basis should there be symptomatic workers recorded during the calendar week. The submissions should occur before Tuesday for the previous calendar week commencing on Sunday.

  1. COVID-19 Testing Data:

Based on their daily symptom screening, or on their employees’ presentation to their health provider, employees are referred to health providers / health laboratories for testing for the presence of the COVID-19 virus.

In terms of managing the pandemic in the workplace, the employer is expected to be notified of the results of the tests. The results of the laboratory tests of all employees who test positive must be submitted by employers, upon receiving the results of such tests.

This submission occurs only when an employee tests positive for COVID-19 and should be submitted on a weekly basis should there be positive workers identified during the calendar week.

  1. High exposure risk Workplace Contact – tracing:

When an employee tests positive within the workplace, all those in contact must, as per the Department of Employment and Labour Direction, be assessed for a high risk or low risk of exposure.

A high risk of exposure is defined as being in proximity (<1.5m) for a prolonged period of time (>15 minutes) without the use of personal protective equipment and/or a face mask. Those employees with such a high risk of exposure are expected to be placed in quarantine.

  1. The total numbers of employees placed in quarantine:

Details on high exposure workers should be submitted on a weekly basis should there be positive worker/s identified during the calendar week.

  1. Post infection outcome and Return to Work Data:

Recovery from the infection will vary based on vulnerability and other risk factors. Understanding the outcomes of the infection among employees provides critical information.

All employers who indicate employees have tested positive must submit information about the outcome of the infection, and the return-to-work decision. No confidential clinical information is required. This data must be submitted once only when the employee returns to work.

Submission process?

Employers must access this link: https://www.nioh.ac.za/home/national-resources-directives-guidelines

Important: In collecting this information from their employees, employers are obliged to inform employees about the submission of this data to the Department.

The National Institute of Occupational Health (NIOH), is the statutory entity designated by the Department of Health for the collection, analyses and reporting of the data from workplaces.

This clause does not remove the legal obligations by employers to report COVID 19 related information to specific government Departments (Department of Employment and Labour, Department of Public Service and Administration and Department of Mineral Resources and Energy, Department of Trade, Industry and Competition etc.).

It is recommended that all the data be submitted in electronic format. In instances where employers are already using electronic applications, they can submit data to the NIOH data either through CSV data files and/or secure API transfer.

Egypt – Temporary Solidarity Payment

(Source: crs.co.za)

New law approved to introduce a temporary solidarity contribution.

A new law, Law No. 170 of 2020, was approved and issued in the official gazette on 13 August 2020. It took effect on 14 August and will be applicable for a period of 12 months. This law provides for the deduction of a monetary amount from employees to support the country in dealing with the impact of pandemics and natural disasters.

The law applies to all employees in the private and the public sectors, as well as chairpersons and board members of all public and private entities, whether the relevant employee or person occupies a permanent or temporary position, or acts as an expert, consultant or in any other capacity.

The contribution rates are as follows:

  • 1% from the net income of active employees
  • 0.5% from the net pension of retired employees

The contribution will be based on both fixed and variable salary elements (including allowances, commissions, incentives, bonuses, overtime payments) after payment of payroll taxes and social insurance contributions.

Active employees with a monthly net income of EGP 2,000 or less and retired employees with a monthly net pension of EGP 2,000 or less are excluded from contributing.

The contributions must be paid into a bank account set up by the Ministry of Finance.

ETI – extra COVID claims lost if not made before the 31 August 2020 recon cycle

Editor’s note: We ran a number of articles in the past few months about the challenges with the Disaster Management Tax Relief Bill, the calculation of ETI and how payroll systems had struggled to keep up. We also warned about the perils of getting this wrong. In practice, it looks like many of our fears have been realised. For help with ETI, please feel free to contact us.

The various releases of the Disaster Management Tax Relief Bill (DMTR Bill) put the enhanced ETI relief measures into effect for April, May, June, and July 2020. The first DMTR Bill was published on 1 April 2020 and was deemed to be effective from the same date, followed by the DMTR Bills published on 1 May and 19 May.  As far as the ETI changes are concerned, the provisions were made effective in part retrospectively to 1 April, and the balance of the changes to 1 May.

This very short timeframe, the complexity of the changes, and particularly the changes made in May that were implemented retrospectively to 1 April, put huge pressure on the shoulders of payroll suppliers and employers.  This was drawn to the attention of the authorities by the PAGSA at the time.

Employers have asked whether concessions will be granted by SARS to prevent the loss of claims where either their systems or internal processes mean the employers haven’t claimed them in time for the August 2020 EMP501 filing season.

Unfortunately, as expected, there will be no ability to claim this ETI as the legislation doesn’t allow for SARS to make a concession in this regard.

 

Legislation:

Section 9 of the Employment Tax Incentive Act provides for the roll-over of ETI totals from month to month where this was either more than the PAYE liability for the month or that were not claimed in an earlier month when the ETI was available to be claimed.

Section  9(2) allows any  excess  or  unclaimed  ETI to be rolled  forward  in months  during  which an employer  is  not  tax-compliant (i.e. the employer has not submitted returns required by any tax Act administered by SARS, or has not paid the taxes due as required by any tax Act).

Section 9(4) states that ETI totals can only be rolled forward during the 6-month tax certificate submission cycle (March to August, and September to February). Any ETI that has not been claimed at the end of the last month of each 6-month cycle (31 August and 28/29 February) is forfeited (“deemed to be nil”).

No changes were made by the DMTR Bill to sections 9(2) and 9(4) of the ETI Act.

 

SARS Feedback

SARS have confirmed that the above summary of ETI Act sections 9(2) and (4) is correct – all excess ETI claims that were not made via the EMP201 process by 31 August, are forfeited.

Further,  the ETI  Act  does  not allow  the  SARS  Commissioner to consider requests  to  allow increased ETI  claims  to  be made  after the  6-month  tax  certificate  submission  cycle  has  ended (31  August  and  28/29  February),  even  under  the difficult circumstances of the ETI relief period of April, May, June, and July 2020.

The SARS eFiling and [email protected] systems are aligned with section 9 and will not allow the ETI totals on the EMP501 to be increased.

However, the ETI totals on the EMP501 can be reduced, thereby increasing the PAYE liability retrospectively from the amounts declared on the EMP201 in the previous 6 months.    Penalties and interest will then be calculated on the increased PAYE liability and shown on the employer’s statement of account.

If the employer so wishes, a ‘Request for Remission’ process can be made by the employer to motivate a concession on the penalties in terms of section 218 of the Tax Administration Act. If the employer follows this route, it is best to make use of the services of a competent tax practitioner who has experience of the SARS dispute processes.

UIF TERS Audit

(Source: PAGSA)

As you have all no doubt read in the media releases of 5 September, the Auditor General has recently conducted audits on the UIF TERS benefits that were approved and paid during April and May, a time when the Fund was under severe pressure to develop systems to control the rollout of the benefit.

Some of the senior personnel at the Fund, including the Commissioner, have been suspended to allow further investigations to take place unhindered. This has had a big impact on TERS benefit payments which have stopped while proper checks are put in place.

For many who have been involved in this process the news release was not a surprise as it has been an immensely frustrating journey. We have set out below the media feedback on what has happened and then raised a few points for employers to consider.

Interim Audit Results as Reported by the Media:

  • The UI Fund has had to process an unprecedented number of claims under the TERS benefit, aimed at assisting employees who were temporarily unemployed or partially unemployed during the Covid-19 lockdown.
  • Auditor-General Kimi Makwetu audited TERS claims made in April and May amounting to R28-billion. His findings point to a lack of verification and controls. The interim audit report highlights the following TERS benefit payments.
    • R140 556 822 was paid to 35 043 applicants who had already received benefits from other state institutions:
    • NSFAS students who received stipends, were paid TERS benefit claims of R10 335 344;
    • Beneficiaries of the SANDF received benefit claims of R327 638;
    • Employees paid through PERSAL were paid benefit claims of R41 009 737;
    • Disability grant recipients were paid TERS benefit claims of R69 419; and
    • Old age grant recipients were paid benefit claims of R88 814 684.
    • R10 215 765 in overpayments was calculated incorrectly by the early versions of the TERS system
    • R169 900 was paid to individuals who were indicated as being in prison
    • R685-millionwas paid to foreigners whose employers hadn’t paid contributions within the last 12 months
    • R441 144 was paid to deceased individuals
    • R30 071 248 was paid to 4161 employees with invalid identity numbers
    • R200 000 was paid to employees below the legal working age of 15.

“There is also evidence of overpayments (and underpayments) as well as inflated claims. I take these breaches very seriously,” (Minister Nxesi)

“The Unemployment Insurance Fund (UIF) is implementing actions to address what we have reported. We further selected payments to employers and bargaining councils to verify that the eligible beneficiaries were paid. The observations in this regard will be included in the next report,” (Auditor General Makwetu).

What might this mean to employers?

The first step is for the UIF TERS process to resume and payments to be started again and the subsequent TERS payment periods to be opened and processed.

Thereafter, as we have warned on a number of occasions it is highly likely there will be a ramp up of audits in the UIF space to recover funds where the UIF department considers incorrect claims for TERS may have been made. Please be warned. Audits will arise around the information submitted to the UIF department so make sure your house is in order.

SARS PAYE Deferral – reminder to start paying back

The 35% PAYE deferral for employers under the disaster management relief legislation was extended by another month to cover the August month instead of ending as the end of July. Don’t forget the deferrals now need to be paid back in 6 equal instalments starting on the 7 October until the 7 March 2021, with the timetable as follows:

  • September 2020 – payment due by 7 October 2020;
  • October 2020 – payment is due by 6 November 2020 (last business day before the 7th);
  • November 2020 – payment is due by 7 December 2020;
  • December 2020 – payment is due by 7 January 2021;
  • January 2021 – payment is due by 5 February 2021;
  • February 2021 – payment is due by 5 March 2021.

Further information is available on the SARS website.

The ETI challenge – EMP501 reporting

In May we reported on the fact that most payroll systems had mis-calculated the Employment Tax Incentive (ETI) because the disaster management legislation retrospectively changed rules making it exceptionally difficult.

We have been surprised to see relatively little communication about this from payroll software providers. We suspect then that most employers would have miscalculated their ETI for the six months ended 31 August 2020.

So, why is this important:

  • We have no idea what validation checks SARS will use for this recon period (in the past few days the validation checks have not allowed the disaster management ETI changes, but we assume this will be rectified). Without understanding your ETI calculations you will struggle to submit your EMP501 for this recon period;
  • Assuming SARS applies the validations correctly, if you haven’t manually adjusted your calculations for April and May in particular, then they will be wrong and your entire ETI claim will be rejected – leading to penalties and interest;
  • If you assumed your system would calculate ETI correctly during the disaster management period, you may have left lots of money on the table as unclaimed;
  • SARS is short of cash. There is a high likelihood of subsequent audits in this space given the complexity. Don’t be caught out having to pay penalties and interest post an audit because you assumed your system would do things correctly

We encourage all employers to do a manual calculation of their ETI to get comfortable with their claims and to support their EMP501 filing. Don’t be caught out.

Empowering the retrenched

In the current economic climate, organisational change is almost certain for many companies. This has led to fluctuations in the labour market as companies have been forced in many instances to downsize and go through retrenchment processes.

Employers and businesses are encouraged to adopt best-practice retrenchment programmes that look to empower those being retrenched – both emotionally and practically. This best practice should help limit the damage to the remaining employees helping productivity recover faster, thereby mitigating the negative impact of the retrenchment process.

It is not only the retrenched employee(s) that experience a high degree of stress and anxiety during the process, but the remaining employees and stakeholders as well – be they the line manager, the human resources department, or the business owner.  All involved parties go through a substantial amount of psychological stress before, during, and long after the process has ended.

Irrespective of the reason for the retrenchment, a portion of the psychological stress can simply be lessened through programmes that aim to empower the retrenched employee/s. These programmes include inter alia:

  • Training to help the employees find alternative employment
  • Counselling
  • Financial advice

If the impact of retrenchment can be minimised, then all parties can move on with their lives quicker, leading to a healthier working environment, more constant efficiency levels, upkeep of employer brand, and lower rates of post-retrenchment resignations.

By investing in a programme that assists each individual being retrenched to move on and find new opportunities, some of the pessimism of retrenchment can be eradicated.

Life after TERS

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:

 

Remote Working: 

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.

 

Temporary Lay-Offs:

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.

 

Retrenchments:

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.

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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.