Many organisations, facing significant drops in funding and other income, as well as the inability to carry out many of their projects, are considering temporary or even permanent shutting of operations, and looking for advice on how to support employees at this time. There is much discussion (and confusion) around the new TERS (Covid-19 Temporary Employer/Employee Relief Scheme)) scheme offered in the Directive issued under the Disaster Management Act on 25 March 2020. Some of the confusion was sown by an inaccurate initial guide issued, and some of it is contained in the Directive itself.
In this ngoLAW Brief we:
- Examine the TERS offering, explain how it works and when it is applicable, and deal with the misconceptions; and
- Compare the TERS option to the more final option of retrenching and allowing ex-employees to claim UIF.
We don’t deal with the mechanics of the application and the forms, as there is plenty of useful information already in circulation on these aspects.
Please note that this advice is our current interpretation (6 April) of a Directive which was speedily drafted, and which has not yet been tested (people know how to make the TERS applications, but we have not yet spoken to anyone whose claims have been paid). If anyone has any practical experience which sheds further light, please let us know. We will be sending out updates as the situation unfolds. We apologise for the length of this- it is not “Brief” but we have many clients wanting this guidance urgently.
In the emails to follow this one, we will
- Analyse the other options available to organisations (leave, reducing working days, advance payments etc);
- Answer further questions on the TERS option and other questions you send us; and
- Discuss those who work for the organisation, but who are not formal employees: consultants, short-term contractors- ‘piece’ workers. Neither the TERS nor the UIF benefits will be available to these workers.
WHAT IS TERS?
TERS is a temporary UIF-based scheme which provides funding for payment to employees during a temporary closure of operations of the organisation. TERS is intended to allow organisations to survive a break in operations of up to three months without retrenching its employees.
WHEN IS TERS IS AVAILABLE?
- To organisations which are registered for UIF
- For employees who are registered with UIF; and
- For the duration of a closure due to COVID-19, up to a maximum of three months.
IMPORTANT DIFFERENCES BETWEEN TERS AND UIF FOR UNEMPLOYMENT
(this table does not deal with short-payment UIF, which will be dealt with in the next Brief)
How do we calculate the TERS benefit?
The benefit will be calculated in terms of the UIF INCOME REPLACEMENT RATE SLIDING SCALE of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act 63 of 2001 (UI ACT). The maximum benefit for a high earner would be 38 % of R17 712 a month, which amounts to about R6 730 a month. For the duration of the shutdown or a maximum period of three months, the benefit will not be less than the minimum wage applicable for the relevant sector.
To allow you to compare the options and see the resulting payments, we have taken examples of levels of monthly salary and then showed you the amount which would be paid. (The benefits here stated are taken from the examples in the Third Schedule to the UI Act, and with the help of the calculator at http://ezuif.co.za/uif-calculator/) . The numbers are intended to be illustrative only. We have presumed in this table that the national minimum wage is applicable and, remember, the period of employment is not relevant:
TERS MYTHS (and truths)
INITIAL TERS QUESTIONS
|Complete closure required?
The Directive issued seems to contemplate and assume that there is a complete closure of the organisation, in order for the TERSbenefit to be applied for, and many commentators have agreed with this. However it is unlikely that all of the staff of any organisation will be unable to do any work during a temporary cessation of activities and, certainly, if the intention of TERS is to assist organisations so that they do not close down for good or retrench staff, then we believe that it must be accepted that certain levels of organisational operations must continue.
For instance, if the TERS payments are to be processed and made to the employees during temporary closure, then the finance and admin team will have to be working. And, if the organisation is to survive this crisis, then marketing and fundraising should be harder at work than ever. It also may be that there are certain projects or divisions which cannot continue, and then some which can. If an organisation is, for instance, involved in one project which is about delivering essential services, then that project can continue but others which are not essential (and the workers who are not essential to the essential services) will not be working.
Our feeling is that, if the TERS support is required for employees who are not able to work due to COVID-19, then the organisation should make the application to register for TERS for those employees. Although the Directive does not seem to contemplate the realities we have outlined, we feel that our interpretation is in the spirit of what is intended.
Can we claim TERS and the short-payment UIF benefit at the same time?
Can we claim TERS and top it up with what we can, to support employees?
Can we first do TERS and then, if needed, retrench and let employees claim usual unemployment UIF?
Summary of potential benefits:
Thanks to Fanie Nothnagel of Dalmeny Consulting firstname.lastname@example.org, Cathy Masters and Paul Tyler of CMDS http://cmds.org.za/ and Marcus Coetzee https://www.marcuscoetzee.co.za/ for valuable input on this Brief. They have assisted but are not responsible and the views in this Brief are the current ones of ngoLAW.
Keep the questions coming!
At ngoLAW we will be continuing our work and will research and draw together information and advice to assist you with thinking through and making some tough decisions over the next while. Watch this space for our correspondence and conversations and please forward to anyone who may benefit.
To submit your questions, visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided.
Stay safe, keep calm and carry on- A Luta Continua!
Nicole, Lize, Bandile, Janice, Lisa and Dorothy
Time to catch up
The lockdown time may be the gap you needed to get your admin, governance, standard agreements and overdue updates done.
This is the stuff we are best at, so let us know how we can help.
ngoLAW services continue. We will all be working from home. The easiest way to get in touch is email, and we will also be available on zoom/skype/cell phone (the landline will only be answered intermittently).
- Marcus Coetzee- always thought-provoking and strategic: https://www.marcuscoetzee.co.za/my-thoughts-on-the-shifts-that-this-pandemic-may-encourage-in-south-africa/
- Still recommended reading: Joan Garry’s blog post on virtual meetings- how they should be designed and led (hint: not just as rushed versions of in-person meetings!) is useful and includes a free download of guidelines for a valuable virtual gathering
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