The benefit received from the Department of Labour by an employer under the TERS scheme is a UIF benefit and in the ordinary course would be paid directly to the employee. It is therefore clearly not remuneration and not taxable.
Deductions form the TERS Benefit:
However, less clear is whether the employer can deduct the usual payroll deductions from the benefits received before paying them to employees:
- Provident fund, medical aid, risk benefits and union deductions. There are two schools of thought on this and obviously no clear case law. However, we are of the view that an employer can deduct these from the UIF benefit to the extent they are contractually entitled to. We would however recommend that employers where possible communicate and get written agreement from the employee.
- Garnishees/maintenance – while the Magistrates Act does refer to emoluments and where there is no remuneration or emoluments there is an argument that the garnishees/maintenance should not be paid, legal advice is that the garnishee/maintenance is a court order to the employer and any changes or no payment should only be in situations where the employer is no longer the employer or the court has given a ruling that the Emolument Attachment Order (EAO) is not payable. We would therefore recommend that where an employer doesn’t wish to pay the EAO that application should be made to the court.
Treatment in Payroll:
As discussed above, where the benefit is received by the employer and paid to the employee it should be treated as a UIF benefit and not remuneration.
Where an employer has decided to pre-fund the TERS benefit (in anticipation of receiving this from the DoL later) we would recommend the payment is treated as a TERS advance (and not remuneration). In the following period when the UIF benefit has been received this can be treated as a repayment of the advance. In the event the UIF benefit received is greater than the advance then the excess should be paid to the employee with no further consequences. If the benefit is less, then any excess not recovered from the employee will need to be re-classified as taxable remuneration.