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employment | 27 Mar 2020
BY Lauren Salt AND Jessie Moore
ENSight

employment


South Africa: TERS and the National Disaster Benefit: some much-needed clarity

On 25 March 2020, the Commission for Conciliation, Mediation and Arbitration (“CCMA”) published a statement on its website, in which it provided some much-needed clarity on the options available to employees, employers and CCMA users in the midst of the coronavirus (COVID-19) pandemic. This clarity has been augmented by a Directive published today and the updated Guide for Employers released by the Department of Labour.

In its statement of yesterday, the CCMA announced that it would cease full operations and services for the duration of the nationwide lockdown from 26 March 2020 to Thursday, 16 April 2020 (both days inclusive). Where urgent assistance is needed, users were told to use electronic means such as fax, email and the relevant CCMA social media accounts (found on its website: www.ccma.org.za).

In particular, those requiring essential service-related assistance were directed to:

Significantly, the CCMA also clarified its position in respect of:

  • The Temporary Employer/Employee Relief Scheme Services (“TERS”), and
  • The National Disaster Benefit.

Since the statement, there has been a directive by the Minister of Employment and Labour in terms of Regulation 10 (8) issued by the Minister of Cooperative Governance And Traditional Affairs in terms of Section 27 (2) of the Disaster Management Act, 2002 (the COVID-19 Temporary Relief Scheme (C19 TERS), 2020 Directive) which casts further light on the above.

TERS applications

According to the CCMA statement, to apply to participate in the TERS:

  • a TERS agreement must be concluded; and
  • the application must be made in the prescribed format.

In addition, to qualify for the TERS, there must be:

  • Business distress – ie, a drop in revenue as reflected in the audited financial statements or most recent management accounts and labour costs as a high percentage of operation costs;
  • Employee distress – ie, likelihood of retrenchment, short-time, and/or any other layoff;
  • Operational distress – ie, occasioned by prospective business (order book) that places the business and employees at risk in anticipation of new business such as re-tooling for new production lines, etc.

Businesses and employers in distress wishing to apply for TERS must complete the TERS form and email it, along with all the supporting documentation, to TERSapplication@ccma.org.za. This application will then be considered by the Project Adjudication Committee for recommendation.

The statement confirms that the above administrative process and qualifying criteria still apply during the COVID-19 pandemic. In particular, they apply to circumstances where the pandemic leads to business closures and retrenchments.

The CCMA predicted that TERS “applications are likely to be made as a result of the adverse impact of COVID-19 in the next four to six months and thereafter.” As such, it was clear that the TERS process will not apply to the lockdown period.

However, the preamble to the Directive states:

 

“During this period of lockdown, companies will have to shut down and employees laid off temporarily. This means that employees are compelled to take leave, which is not out of choice. We therefore anticipate that employees may lose income. Employers are encouraged to continue to pay employees, but where this is not economically possible; we have created a special benefit under the Unemployment Insurance Fund as per the Directive COVID -19 Temporary Employee / Employer Relief Scheme.”

 

From this, it appears that the TERS may apply during the lockdown period.

 

According to the Directive, to qualify for the temporary financial relief scheme, an employer must:

  • be registered with the Unemployment Insurance Fund (“UIF”);
  • must comply with the application procedure for the financial relief scheme as specified in the Directive; and
  • as a direct result of the COVID-19 pandemic close its operations for three months or less and suffers financial distress.

The benefits will only pay for the cost of salary for the employees during the temporary closure of the business operations. The salary benefits are capped at a maximum of ZAR17 712 per month per employee and an employee will be paid in terms of the income replacement rate sliding scale (38%-60%) as provided in the Unemployment Insurance Act, 2001. The Directive also states that where such an employee’s income falls below the sectoral minimum wage, the employee will be paid a replacement income equal to minimum wage of the sector concerned.

However, an employee who is being paid by an employer during this period is not entitled to this benefit, according to the Directive.

Relief available during the lockdown period – National Disaster Benefit

The CCMA statement also provides some clarity on the National Disaster Benefit and when it applies. In essence, it applies to employers who may, as a direct result from the [COVID-19] pandemic close their business for a particular period and send employees home.” However, the statement underscores that this is not related to TERS at all and rather constitutes a temporary lay-off.

The CCMA is also not involved in this process. Parties making the enquiry must approach their nearest UIF (DEL) Centre or go onto their website.

In cases where employers are unable to pay their employees, they may apply for the National Disaster Benefit from the UIF in respect of:

  • reduced work-time;
  • illness; or
  • unemployment benefits.

Despite this, in its statement, the CCMA encouraged those with “adequate reserves or contingency plans in place” to delay their applications to enable the most urgent applications to be attended to first.

In the Guide for Employers on Reduced Work Time, Illness and Dependants’ Benefits released by the Department of Labour and updated since the CCMA statement, it has been further clarified that the National Disaster Benefit and any other normal UIF benefit only applies to employers who are registered with the UIF and make monthly contributions as required by the Contributions Act, 2002. In addition, the benefit will be de-linked from the UIF’s normal benefit structure and thus the “normal rule that for every four days worked the employee accumulated one credit day and maximum credit days payable is 365 for every four completed years will not apply.”

According to the Guide, the benefit will be at a flat rate equal to the minimum wage (ZAR3 500) per employee for the duration of the shutdown or a maximum period of three months (whichever period is the shortest). In addition, an employee or employer cannot apply for the “National Disaster Benefit” and any other UIF benefit at the same time.

 

Although there appears to be some clarity around the National Disaster Benefit and TERS, there are still many unanswered questions for employers and employees alike regarding these and other Coronavirus-related issues.

Lauren Salt

Employment | Executive

lsalt@ENSafrica.com

+27 84 509 6494

Jessie Moore

Employment | Candidate Attorney

jmoore@ENSafrica.com

cell: +27 71 125 6135

 

COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.

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