The amended measures under the Temporary Employer-Employee Relief Scheme (Ters) have been ‘relaxed’ in order to help more companies claim relief.
The Department of Employment and Labour earlier this month published its amended Ters directive from the Unemployment Insurance Fund (UIF).
Webber Wentzel says the initial directive required employers to have suffered financial distress as a direct result of business closures from the Covid-19 pandemic.
In terms of the amended directive, financial distress is no longer a requirement to claim Ters benefits, according to Webber Wentzel partner Joon Chong.
“This amendment is most welcomed, as an admission of financial distress by the employer is an act of insolvency which could give a disgruntled employee the opportunity to initiate winding-up proceedings of the employer,” she notes.
The directive has also been amended to allow for relief to employers who pay their employees. “This amendment is also most welcomed. Employers who have prioritised payments of salaries should not be denied the opportunity to be granted some relief from the Ters benefits.”
Chong notes that employers with partial closure of operations due to the coronavirus pandemic can also claim Ters benefits.
She explains that partial closure means the closure of the offices even if the majority of the employees work from home.
Chong adds that reduced operating hours also qualify as partial closure.
The department said only companies that are registered with the UIF will be able to claim Ters benefits. In its frequently asked questions document, the department notes that companies that registered after March 15 this year may not be eligible for the benefit.
Informal businesses, people working for commission and freelancers will not be able to benefit from the scheme as they are not covered under the UIF Act.
The department says the principle is that the “higher the remuneration the lower the replace rate”. The calculation of the payment is informed by the last remuneration, capped at R17 712 per month.
The benefit amount is then determined in line with a sliding scale that ranges from 38% to 60%. If the remuneration was R20 000, the calculation will be based as if the worker received R17 712. Since this is the highest remuneration, the replacement rate will be 38% (R6 730).
Chong says employers paying reduced salaries will also be able to apply for the Ters relief. The relief will ‘top up’ the remuneration received up to the maximum of the normal remuneration received by the employee.
Business for SA, in an article published on its website, says it is recommended that the employee’s payslip reflects “Ters benefit” (in the event that the employee is paid the value of the benefit) or “Includes Ters benefit” (if the employee is paid an amount higher than the Ters benefit).
“Employers may supplement these benefits, but employees may not get their full salary plus the benefit. The maximum that an employee may accordingly receive from the UIF and their employer is 100% of their salary.”
Chong says there are a number of practical issues if “normal payroll amounts” are processed in the April payroll.
She explains that if an employee earning R20 000 receives the maximum benefit, the April payroll should process R6 730 as a non-taxable amount (which is not subject to PAYE) and R13 270 as a taxable amount (that is subject to PAYE).
Chong recognises that this adjustment for taxable and non-taxable amounts is not feasible to process for very large payrolls. The Ters benefit is also an estimate as it is still uncertain how the 38% to 60% sliding scale will apply at differing levels of income.
“Employers would then be prudent to treat the entire R20 000 as remuneration which is subject to PAYE.”
She also warns against treating a Ters benefit advance as an interest-free loan. This would be considered a fringe benefit subject to PAYE.
Employers could reduce future PAYE withheld for the relevant employee when the R6 730 Ters benefit is received from the UIF.
Illness and death benefits
Piet Nel, project director of tax at the South African Institute of Chartered Accountants, said in an earlier statement that employees who have been quarantined for 14 days or longer will be able to apply for the Illness Benefit under the UIF.
Existing benefits for illness and unemployment will kick in if no leave is granted. Nel says if a UIF contributor passes on from Covid-19, death benefits will be paid to the beneficiaries of the deceased.
Beatrie Gouws, head of stakeholder management and strategic development at the South African Institute of Tax Professionals, says the queries they are receiving on Ters centre on the legal technicalities of the benefit and facilitating the claiming process.
“We are aware that the Payroll Authors Group of South Africa is engaging directly with the Department of Labour to establish a template that the payrolls can use to programme and produce a report that will assist employers in claiming the Ters benefit.”
She says by making use of a payroll report many of the legal technical challenges facing employers and tax practitioners alike will be resolved.
Listen to Nompu Siziba’s interview with Sandile July of Werksmans Attorneys: