28 April 2020 by Amanda Visser
The Department of Employment and Labour has issued several directives in terms of the temporary relief scheme offered to employers and employees affected by the national lockdown necessitated by the Covid-19 pandemic.Read: Wider relief for companies struggling to pay workers
However, the lack of clarity around the Temporary Employer-Employee Relief Scheme (Ters) and the complicated calculations involved have resulted in misunderstandings and incorrect calculations.
Added to this, employers and consultants have experienced problems with the call centre not answering calls for several days while also struggling to submit applications online.Read: Incomplete applications hold up UIF relief
The South African Institute of Chartered Accountants (Saica) issued a statement over the weekend notifying employers who have done incorrect calculations to “immediately correct” their payroll.
The institute also urged employers to engage their staff, especially where workers were under the impression that the Ters benefit would top up their salaries.
Not acting within the requirements could be costly
“Saica is of the view that employers that claim the Unemployment Insurance Fund (UIF) Ters benefit without informing the UIF that they are paying a portion of the salary and then later top up the salary are not acting within the requirements of the legislation as the UIF specifically requires employers to inform them if they can afford to pay a portion of the salary.”
Joon Chong, partner at Webber Wentzel, says there is a lot of uncertainty around how the Ters benefits would be paid due to the ongoing changes (amended directives). “This is especially the case in situations where employers have processed the April payroll and paid the Ters benefits as an advance payment and additional amounts for the shortfall.”
Employers have made contingency plans to ensure their employees would receive their salary in April as normally as possible.Read: Covid-19 crisis funding: Where to apply
From May 1 the country will move down to Level 4 lockdown restrictions, however, many employers will still be contending with either full or partial closure of operations. Chong says an employer with full or partial closure should still apply for Ters benefits for the May and June payrolls for their employees.
Many employers have made contingency plans to pay their employees as normally as possible for the April payroll. However, many are not able to continue doing this for the May payroll if their operations are still fully or partially closed.
In terms of Ters, the salary to be taken into account in calculating the benefit is capped at R17 712 per month per employee, with the employee receiving the benefit in terms of the income replacement rate sliding scale from 38% to 60%.
If the employee’s income falls below R3 500 the employee will be paid a replacement income equal to that amount.
For those earning a higher amount, the replacement income will vary.
Calculating the Ters benefit on a salary of R7 000
An independent tax consultant did a calculation on a monthly salary of R7 000 using a formula based on the UIF legislation.
Step 1: Determine the daily income (monthly remuneration x 12/365)
R7 000 x 12 = R84 000/365 = R230,13
Step 2: Calculate the percentage of daily income replacement
Formula: 29.2 + [7 173.92/(232.92 + 230.13)]
29.2 + (7 173.92/463.05)
29.2 + 15.49
The employee would be paid 44.69% for the number of days: R230.13 x 44.69% = R102.84 (daily benefit amount). If the employer did not pay the employee at all, the amount of R102.84 x 30 days = R3 085.20 will be paid.
If the amount resulting from this calculation is lower than the minimum wage, the minimum amount will be paid (R3 500).
Calculating the Ters benefit on a salary of R35 000
The tax consultant also gives an example where someone earns above the capped amount and is not paid at all. If their monthly salary is R35 000, the calculations will be discounted as if they are earning the capped amount of R17 712.
Step 1: Determine daily income: R17 712 x 12/365 = R582.31
Step 2: Calculate the percentage of daily income replacement
Formula: 29.2 + (7 173.92/(232.92 + R582.31)
29.2 + (7173.92/ 815.23)
29.2 + 8.80
The employee would be paid 38% for the number of days: R582.31 x 38% = R221.28 (daily benefit amount). For 30 days the amount of R6 638.40 will be paid if the employee received no payment from the employee.
Where things differ …
However, Chong says these calculations will look very different if employers had made contingency plans to pay their employees the shortfall between a normal salary and the Ters benefits. The UIF formula takes any shortfall paid by the employer to reduce the Ters benefits payment to the employees.
The Ters benefit when employees are placed on annual leave
Johan Botes, head of the employment and compensation practice at Baker McKenzie, says that in terms of an amended directive, employers will be able to credit their staff for annual leave days taken during the lockdown, and off-set the amounts received from the UIF against the salaries paid to staff placed on annual leave. According to the directive, employers must credit staff for the annual leave taken “with the proportionate entitlement to paid annual leave in future”.
In the directive published on April 8, Labour Minister Thulas Nxesi urged employers to calculate the Ters benefits staff will receive from the UIF and pay this to staff, with a view to offsetting or reimbursing it once employers receive payment from the UIF.
“This appears to be done in tacit acknowledgment of the strain placed on the administration of claims by the UIF, due to the deluge of new claims submitted,” Botes said in an earlier statement.
Given the ongoing changes, Chong advises employers to consult their tax and employment law advisors on the latest position relating to the Ters directives before closing their May payroll.
Source: Moneyweb at https://www.moneyweb.co.za/news/economy/ters-relief-directives-cause-confusion/