UPDATE AND CLARITY ON THE DIFFERENCE BETWEEN THE NATIONAL DISASTER BENEFIT FUND AND THE TEMPORARY EMPLOYER/EMPLOYEE RELIEF SCHEME
We continue to receive numerous queries relating to the National Disaster Benefit Fund (“NDBF”) and Temporary Employer/Employee Relief Scheme (“TERS”) Government implemented as a result of COVID 19 and the national lock down. There seems to be a lot of confusion in the media as to what the funds are and when an employer/employee would be eligible to claim. To add to the confusion, amendments to the TERS directive were published during the day yesterday! Below we set out the basics to bear in mind when navigating the UIF / TERS minefield.
1. The terms NDBF and TERS appear to be used interchangeably in the media. Do not get confused by this.
2. The new amendments to the Covid19 TERS directive permit businesses that have only partially closed to also apply for Covid19 TERS. Previously it was understood that a business could only apply if it had closed completely. Employees who are receiving partial payment of their salaries from their employers i.e. those working reduced hours are now also able to receive some form of payment under Covid19 TERS subject to the condition that the TERS payment, combined with the amount received from the employer, may not be more than that which the employee would ordinarily earn during the month in which the Covid19 TERS benefit is paid.
3. Please note, the employer must be compliant with Unemployment Insurance requirements to be eligible to apply for either UIF or Covid19 TERS. If the company is not compliant, it will have to rectify this, by registering and/or back paying UIF contributions, before the application will be processed.
4. While the Covid19 TERS benefit is delinked from normal UIF benefits, as is the UIF temporary lay-off benefit, the UIF benefit for reduced working hours is linked to normal UIF benefits, which means that the individual will need to have accrued sufficient “credits” for days worked in order to receive payment of this benefit for the full period of the lock down and/or pandemic.
5. The application process for each differs. The employer must apply for Covid19 TERS and, if successful, payment will be to the employer to distribute to the employees. The employer is required to open a separate bank account to facilitate Covid19 TERS payments. While the employee can apply for UIF benefits, Government has urged employers to do so on behalf of their employees. It is presently not a requirement that a separate bank account be opened for this.
6. Should the UIF / Covid19 TERS application be successful, monies will be calculated and paid in accordance with the relevant sliding scales prescribed for these purposes.
6.1 For Covid19 TERS, Government has advised that pay outs will be calculated on a sliding scale ranging between 38% to 60%. The actual amount of the pay-out will be determined with reference to everyone’s salary with the maximum salary amount capped at R17 712.00 per month. It is our understanding that lower earners will be afforded a higher percentage of salary while high earners will be at the lower end. Based on the above we anticipate that the maximum that will be paid under Covid19 TERS will be R6 730.56 per month;
6.2 For UIF, Government has indicated that payments will be calculated in a manner that ensures that employees do not receive less than R3 500.00 per month in total, being the National Minimum Wage. This could either be a single payment of R3 500.00 from UIF for employees who are not receiving any payment from the employer, or a contributory payment from UIF for employees working reduced hours and receiving part payment from the employer.
6.3 Payments under both UIF and TERS will not be for more than 3 months; and
6.4 Employees may not receive payments from Covid19 TERS and UIF simultaneously.
7. In the days leading up to the lock down a Temporary Employer / Employee Relief Scheme Easy Aid issued by the Department of Employment and Labour was circulated. This document set out application requirements that included the submission of turnaround strategies, registration with a Central Supplier Database and the submission of audited financials. The circulation of this document led to a lot of confusion amongst advisers and businesses alike.
The CCMA has now confirmed that the abovementioned Covid19 TERS application process is separate and distinct from the TERS process it had previously administered and continues to administer. The qualifying criteria for application for Covid19 TERS are the partial or complete closure of operations as a direct result of the COVID 19 pandemic for a period of 3 months or less and the suffering of financial distress.
If you have any additional queries, you are welcome to contact us.