The concept of the Temporary Employer Relief Scheme (”TERS”) was initially introduced in December 2019 to assist employers in financial distress. However and due to the COVID-19 pandemic, the Minister of Employment and Labour, has through a Directive issued on 26 March 2020 (Government Gazette Number 43161), initiated a COVID-19 TERS through the Unemployment Insurance Fund (“UIF”) to aid employers in providing wage benefits to employees as a result of the effects of the COVID-19 pandemic. This COVID-19 TERS benefit is de-linked from the UIF’s normal benefits.
The original Directive issued on 25 March 2020 (Government Gazette Number 43161) required an employer to close its operations for a period of three months or a lesser period and suffer financial distress in order to qualify for the COVID-19 TERS benefit. On a very strict interpretation of these requirements, it was necessary for an employer to close completely and the Directive did not accommodate scenarios where employers could still operate parts of their business operations during the lockdown period. The term “financial distress” was also not defined in the Directive but this requirement has now been removed making the COVID-19 TERS benefit more accessible.
The amended Directive issued on 8 April 2020 (Government Gazette Number 43216) now makes provision for scenarios where employers can still operate parts of the business operations during the lockdown. In this regard, the meaning of the term “temporary lay-off” has been amended to mean “a reduction in work following a temporary closure of business operations, whether total or partial, due to Covid -19 pandemic for the period of the National Disaster.” Therefore, an employer is entitled to apply for the COVID-19 TERS benefit for affected employees in circumstances where there has been a partial closure of business operations.
Who is Eligible?
Should an employer as a direct result of the COVID-19 pandemic close its operations, or part of its operations, for a period of three months or less, the affected employees of such an employer shall qualify for the COVID-19 TERS benefit.
What will the benefit provide?
The COVID-19 TERS benefit will only pay for the cost of salary for the employees during the temporary closure of the employer’s business operations.
The COVID-19 TERS benefit will be calculated in terms of the income replacement rate sliding scale of 38% (for high earners) up to 60% (for low earners) as provided in the Unemployment Insurance Act, Act No. 63 of 2001. The salary to be taken into account in calculating the TERS benefit will be capped at a maximum amount of R17 712.00 per month, per employee. Therefore, the maximum benefit for a high earner would be 38% of R17 712.00 per month, which amounts to R6 730.56 per month.
Should an employee's income in terms of the income replacement sliding scale fall below R3 500.00, the employee will be paid a replacement income equal to that amount. Qualifying employees will receive a COVID-19 TERS benefit calculated in terms of sections 12 and 13 (1) and (2) of the Unemployment Insurance Act, Act No. 63 of 2001, provided that an employee shall receive a benefit of no less than R3 500.00.
Subject to the amount of the benefit contemplated in clause 3.6 of the amended Directive (R3 500.00), an employee may only receive a COVID-19 TERS benefit if the total of such benefit, together with any additional payment by the employer in any period, is not more than the remuneration that the employee would ordinarily have received for working during that period.
In addition, where an employee is in quarantine for 14 days due to COVID-19 pandemic, the employee shall qualify for the illness benefit contemplated in the COVID-19 TERS scheme. Confirmation from both the employer and the employee must be submitted together with the application as a proof that the employee was in an agreed precautionary self-quarantine for 14 days. Should an employee be quarantined for more than 14 days, a medical certificate from a medical practitioner must be submitted together with the continuation form for payment.
All amounts paid by or for the UIF to employers or bargaining council(s) under the terms of the COVID-19 TERS scheme must be utilised solely for the purposes of the scheme and for no other purpose. No amount paid by or for the UIF to an employer or bargaining council under the terms of the COVID-19 TERS scheme that is required to be paid, in turn, to an employee may fall into the general assets of the employer or bargaining council. Furthermore, it is important to note that no bank may refuse to release or administer the transfer of that amount into the bank account of the employee as required by the COVID-19 TERS scheme, irrespective of whether the employer or bargaining council is in breach of its overdraft or similar contractual arrangements with the bank concerned.
An employer is required to inform the UIF immediately on the recommencement of its business operations that were subject to temporary closure. The employer must then return any unutilised COVID-19 TERS funds, including interest, to the UIF within ten days of the recommencement of its business operations, or the termination of memorandum of agreement, whichever is the earlier.
What are the requirements?
The employer must meet the following requirements:
- The employer must be registered with the UIF
- The employer must comply with the application procedure for the financial relief scheme
- The employer's closure must be directly linked to the COVID-19 pandemic
The employer is also required to furnish the UIF with the following completed documents:
- Letter of authority from the employer
- Signed memorandum of agreement from the employer or Bargaining Council with the UIF, or written or electronic confirmation of acceptance by an employer or Bargaining Council of the terms and conditions of the scheme provided to the employer or Bargaining Council or published in writing by the UIF
Subject to certain requirements, an employer whose employees are entitled to receive the COVID-19 TERS benefit provided by the UIF during the period of lockdown from a bargaining council may not make an application in terms of the COVID-19 TERS scheme and the employees of that employer may not receive any payment in terms of the COVID-19 TERS scheme, other than through the bargaining council.
How does an employer apply?
To obtain application forms in respect of the COVID-19 TERS and all relevant details, an applicant employer is required to send an email to [email protected] and there shall be an automatic response outlining the application process.
For additional information and/or assistance, please contact our Legal Advisory and Labour Consulting Departments.
Legal Advisor, Johannesburg