How to calculate the UIF-Ters for employees

20 May 2020 by Melitta Ngalonkulu

Submitted correctly, UIF is paid out in 24 hours

The government-initiated Temporary Employer-Employee Relief Scheme (Ters) is now paying out a day or two later after a successful claim.

Ters provides emergency relief for employers to claim benefits on behalf of their employees during the Covid-19 lockdown. This is to avoid employees losing income or being placed on annual leave as a result of the temporary closure of their employer’s operations.

The rules of the scheme stipulate:

Source: Webber Wentzel

However, the main frustration for employers claiming benefits under the scheme relates to the constant changes to the system, system errors and only some employees getting paid despite their companies having gone through the same application process and submitted the same documents for their employees.

Unemployment Insurance Fund (UIF) Commissioner Teboho Maruping says although several issues with the application and processing of Ters have been resolved, many challenges remain.

“Our commitment is to improve all the time and to pay back the trust that has been placed in us as a public insurance fund,” Maruping says.

He says so far, the Department of Employment and Labour has paid 2 551 236 workers, bringing the total value disbursed since April 16 to over R14 billion.

“We are now more confident in saying that we are on track to achieve our vision of a caring, accessible and customer-centric UIF that contributes towards poverty alleviation,” Maruping says.

Challenges

Shane Johnson, a professional support lawyer at Webber Wentzel, says that it has found that there is an administrative challenge for many of the foreign nationals working in restaurants.

“What we have picked up is that Zimbabwean-born employees who have applied for the UIF-Ters benefit seem to get rejected. There seems to a system error,” Johnson says.

He says that should an employer be unsuccessful in its Ters application, [due to a system error ] individual employees may apply for the reduced work time benefit under the UIF.

The UIF has also made a special illness benefit available to employees who are quarantined due to Covid-19.

“Ters benefit can assist an employer for a maximum period of three months,” Johnson says.

Treatment of Ters benefit payments

When considering the tax treatment of Ters benefit payments, it’s important to note that it’s the employee who is entitled to the Ters benefits and not the employer, Johnson says.

“Although the employer receives the payment of Ters benefits from the UIF, the employer is merely responsible for processing the payment on behalf of the UIF.”

He adds that Ters benefits do not constitute remuneration paid by the employer.

“Employers should not reflect Ters payments as remuneration on employees’ payslips and it should also not be included in their PAYE reporting to Sars.”

This is because the Ters benefit paid in advance would be exempt from normal tax.

“This means no PAYE needs to be withheld from the Ters benefit advance in the payroll,” Johnson says. The payment of Ters benefits should be communicated separately to employees and not included in payslips.

Note, employees who are exclusively commission-based earners are not registered with the UIF, therefore they will not be entitled to benefit from Ters.

“However, there are employers who pay a basic salary to commission-based earners. In this instance, the employer’s application for relief from Ters can only be linked to basic salaries,” Johnson says.

How to calculate the UIF-Ters for employees

Johnson cites the following example:

If an employee earns R20 000 per month normally, but for the lockdown period the employer implements reduced remuneration and they then earn R15 000 per month, they can use the following formula to calculate how much they can expect to receive from the benefit:

Step 1

Calculate daily income for the employee:

R17 712 x 12 ÷ 365 = R582.31

Step 2

Calculate IRR using UIF formula:

IRR = 29.2 + 8.80 = 38%

Step 3

Calculate the daily Ters benefit amount:

Daily income x IRR = Daily Ters benefit amount

Step 4

Calculate the total Ters benefit amount:

Daily Ters benefit amount x number of lockdown days = Total Ters benefit amount

R221.28 x 30 days = R6 638.40

R582.31 x 38% = R221.28 (Daily Ters benefit amount)

“The total Ters benefit (R6 638.40) added to the amount paid by the employer during the lockdown period (R15 000) should not be more than that the employee would have received for working during that period (R20 000),”

If the employee receives the R6 638.40, this will contravene rule 5 of the UIF-Ters benefit as shown in the table above.

Source: The Citizen at https://citizen.co.za/business/business-news/2287927/how-to-calculate-the-uif-ters-for-employees/