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09 Apr 2020
BY Lauren Salt

South Africa: Coronavirus (COVID-19) TERS: a guide to the updated memorandum of agreement for employers

On 9 April 2020, in light of the amendments to the coronavirus (COVID-19) TERS Directives, the Unemployment Insurance Fund (“UIF”) released four new memoranda of agreement (“MOAs”) to be used when employers apply for the COVID-19 Temporary Relief Scheme (“TERS”). It has also issued a revised application procedure.

A MOA records the terms and conditions for the implementation of the TERS by the UIF and any employer who submits a claim under the TERS. These new MOAs are:

  • MOA “A”: for employers who may want to apply directly to the UIF;
  • MOA “B”: for bargaining councils that can themselves pay the benefits to employees directly;
  • MOA“C”: for bargaining councils that cannot pay the benefits directly to employee, and 
  • MOA“D”: for councils,  be they the Tourism  or Minerals Council, who offered to put in the muscle of applying or helping to apply for their many members and thereafter leave matters between UIF and the employers, etc. 

The correct MOA has to be chosen relating to one’s role in the process. Below, we highlight the most crucial clauses in the revised employer – UIF MOA of which employers need to be aware:


The revised MOA is now in PDF format and signed by the Director General of the Department/UIF. In terms of the automated email response, employers are required to fill in the company’s name on page 1, initial on each page of the revised MOA and sign in full at the end. Notwithstanding the initialling and signing of the revised MOA, paragraph 1.2 of Form 4A (Employer’s Undertaking) contains an undertaking which requires the employers to confirm that such signature does not automatically mean that their application has been approved and that there is a binding contract between the employer and the Department /UIF.

Period and scope

According to clause 4, the revised MOA commences on the date of confirmation of acceptance of the COVID-19 TERS application by the UIF and remains in force for three months or less, unless extended by mutual agreement. This might be relevant if the lockdown is extended or, if post lockdown, a company persists with its closure.

The benefits are to be paid by the UIF, in terms of the Directive, to only those qualifying employees who:

  • suffer a loss of income as a result of the temporary closure by the employer of its business operations; and
  • were in employment prior to the commencement of the national lockdown on 27 March 2020.

Thus, although “financial distress” has been removed from the qualifying criteria, the employees will still need to suffer loss of income occasioned by the (total or partial) closure of the business’ operations. This means that employees will need to be financially prejudiced in some way. The extent of the financial prejudice is not elaborated upon and it could, conceivably, be only the difference between their ordinary remuneration and the value of the TERS benefit.

Employer warranties

Clause 6 states that by agreeing to the revised MOA, an employer warrants that:

  • The temporary closure of its business is a direct result of the COVID-19 pandemic;
  • It will immediately inform the UIF on the recommencement of its business operations that were subject to temporary closure;
  • It is registered with the UIF; and
  • It is not registered with a bargaining council that has entered into a MOA with the UIF.

These aspects are therefore material contractual terms.

By signing the revised MOA, the employer also undertakes to use the COVID-19 benefits exclusively and solely for the purpose of paying them to its employees.

Employers employing more than 10 employees: calculations and payment of benefits

Employers are no longer required to open and maintain a dedicated UIF bank account which must be separate from its business account as previously stated in clause 4.2 of the old MOA. Instead, clause 10 obliges the UIF to deposit the funds into the employer’s business bank account and at the same time must either submit:

  • a spreadsheet detailing the amount of the benefits to be paid to each employee listed in the spreadsheet, or
  • confirm the employer’s calculations made in this regard.

The calculations of the UIF prevail.

In addition, in terms of clause 11 of the revised MOA, which regulates payment of the benefit to the employees, the employer must pay its employees their benefits within two days of receiving the funds from the UIF, instead of the five days previously contained in clause 4.3 of the old MOA, unless it has already paid part or all of the benefits. In the latter case, the employer may recover the amounts so paid and pay the balance, if any, to the employees.

There has been much confusion as to whether an employer could continue to remunerate its employees and whether, if it did so, it would be entitled to claim the benefit. This clause clears the confusion and not only does it confirm that the employer can pay, at the very least, some or all of the benefit to the employees, but also deals with the manner in which the monies paid can be recovered.

Clause 12 of the revised MOA also requires an employer to submit proof of payment to the UIF within five days of the receipt of funds from the UIF. The old MOA only created an obligation for employer to account for the expenditure on the previous tranche payment before the next tranche can be processed under clause 4.8.

If any of the benefits have not been utilised by the employer, in terms of clause 13, the employer must also return any unutilised funds, including interest, to the UIF within 10 days of the recommencement of its business operations, or the termination of the revised MOA, whichever is the earlier.

Employers employing less than 10 employees

In terms of clauses 14-15 of the revised MOA, where an employer employs less than 10 employees, the UIF benefits will not be paid into the employer’s bank account, but will be paid directly to the employee’s bank account. This clause was not specifically incorporated in the old MOA.

UIF’s obligations

Clause 21 of the revised MOA provides that, on verification of the supporting documents and calculation of benefits, the UIF is obliged to deposit the benefit funds into the employer’s business account within 10 business days of the submission of the required documentation and information:

  • The first being for the period of temporary closure in the 30 days commencing from the date of the lockdown;
  • The second being for any period of temporary closure during the following 30 days, where the Directive permits;
  • The third being for any period of temporary closure during the balance of the revised MOA, where the Directive permits.

This clause is particularly confusing where the time period runs from submission but the obligation to pay only arises on verification of the documents.

Notwithstanding this, in terms of paragraph 1.3 and 1.4.1 of Form 4A (Employer’s Undertaking), the agreement will become effective upon receiving an approval letter “A3” and receipt by UIF of acceptance of such approval. Therefore, employers must await receipt of a confirmation per approval letter “A3” from the UIF that the application has been approved and advised, in writing, of amounts to be paid to the employees in consequence of such approval.

Employer’s accounting obligations

In terms of clauses 17 to 20 of the revised MOA, an employer has various accounting obligations. Among these, the employer is obliged to keep a proper audit trail of funds received and benefits paid to employees. It must also ensure that its accounting records are at all times:

  • Kept and maintained safely, and are at all times capably of being retrieved in a readable and printable form;
  • Accessible to a person authorised by the UIF;
  • Kept separately from accounting records relating to its business, so that they are capable of being identified on a stand-alone basis.

Where an employer has closed its operations, it may need to consider how it will keep accurate and timeous records during this time if its finance staff have been laid off or are unable to work remotely.

UIF’s auditing powers

The revised MOA provides the UIF with wide auditing powers.

In terms of clause 22 read with clause 23:

  • the UIF may at any time, at its expense and sole discretion, appoint an auditor or a suitably qualified investigator to audit or investigate a suspected breach of the revised MOA and corruption or fraud related to the implementation of the MOA.
  • The employer must co-operate with the auditor or investigator by allowing him or her, or UIF employees timeous, unrestricted access to any records deemed necessary to examine in order to discharge their duties.
  • The employer must also, without delay, furnish UIF employees or the auditor or investigator with any authority which may be required to enable them to obtain such information as they may reasonably require for such purpose.

Documents and information an employer is required to provide

For the first instalment, the employer (even if he or she employees employs less than 10 employees) is required to submit to the UIF:

  • A letter of authority on an official company letterhead granting authority to an individual specified to lodge a claim on behalf of the employer;
  • Acceptance of the terms and conditions contained in the revised MOA;
  • Acceptance by the employer of the UIF’s confirmation of acceptance of the employer’s application;
  • The relevant template duly completed including:
    • Details of the employer;
    • Period of closure;
    • List of the employees and their dates of employment, bank account and ID numbers;
    • Remuneration received by the employees;
  • Proof of remuneration to employees in terms of pay-roll/bank statements for previous three months.
  • Confirmation of the employer’s bank account in form of certified latest bank account (which does not accord with clause 10 of the revised MOA which dispenses with the need for certification);

For employers employing less than 10 employees, they must also include details of the individual bank accounts of their employees. The UIF is required to pay the benefits directly into the employees’ bank accounts.

For the second or further instalment:

  • The relevant template must be updated, where applicable;
  • The period of further closure must be specified (up to maximum of one month);
  • The details of employees no longer in employment provided;
  • Bank statements confirming previous payments provided; and
  • Payroll reconciling payments to employees to amount paid by UIF provided.

Should an employer require any business-specific legal advice on the COVID-19 TERS application process and on the implications of these developments on its business, we recommend getting in touch with your legal advisors.

Lauren Salt
Employment | Executive
+27 84 509 6494

Hlengiwe Mahlangu
associate | employment
+27 66 055 8028

Jessie Moore
Employment | Candidate Attorney
+27 71 125 6135