Ters relief directives cause confusion

First through a lack of clarity, then through amendments.
Many employers made contingency plans to pay their employees as normally as possible for April but may be unable to do so for May. Image: Waldo Swiegers, Bloomberg

The original article has been amended.

The Department of Employment and Labour has issued several amendments to the directive on 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

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

44.69%

The employee would be paid 44.69% for the number of days: R230.13 x 44.69% = R102.84 (daily benefit amount).The amount of R102.84 x 30 days = R3 085.20 would be the Ters benefit calculation. However, as 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. 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

38%

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.

Impact of top up payments

Importantly, Chong says the amendments have clarified the impact of top up payments by employers on these two calculations. Any amounts paid by the employer to top up the shortfall between the Ters benefits calculated and normal remuneration will not reduce the Ters benefits, provided the Ters benefits and shortfall paid by the employer does not exceed the remuneration ordinarily received before the lockdown.

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.

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The jobsworth who dreamt up this bizarre calculation is even less intelligent than the people who can’t do the arithmetic (which, in SA, will be the majority). Can’t these guavament plonkers get ANYTHING right?

So taking the R7000 example above. Based on the UIF calculation, this particular employee were to recieved R3500 on a successful application.

Before the lock down we discussed and agree to pay employees something before they run out money and prior the successful application of the TERS UIF.

Say R3000 was paid in advance, expecting that should the UIF application turn successful, they would compensate us for the full R3000. Turns out they know paid us the R500.

Is the above the correct way the system should work?

Government red tape will always make people ‘s lives a nightmare. These schemes will not yield any relief but more misery. I still maintain give every household R100k or every adult South African over 17 years of age R25k. This will see a great change in the lives of our people. Nothing short of that will be meaningful.

Obviously BEE restricted :

From the moment I went to register the company I just knew that this was going to be a mess of monumental proportions.

From trying to get confirmation of the Ref numbers to the process it does not have a good logic.

I suspect that the whole thing was designed to be a bureaucratic mess that would cost next to nothing, yield a great return for the looters by way of loans/grants from IMF etc. and sound good for election purposes. Win-win all round except for the poor citizens of the country, and not forgetting future taxpayers.

We paid our employees prior to a successful application from TERS.

UIF did not compensate us for the portion the company paid already, only for the difference.

So take 7000 example above, employee suppose to get 3500,

Before lock down we paid 2000, expecting UIF to cover this, then when the applocsrikn was successful, we only recieved the difference 1500 to pay employee

Is this correct?

So there is no incentive for an employer to pay a low paid employee at all.If you pay them UIF just tops them up to R3500 minimum wage based on their formula,if you pay them nothing UIF pays them the same amount that you and the UIF would have paid them in the example.

@AmandaVisser — why are journalists ignoring the fact that ZERO foreign nationals have been paid TERS despite contributions to the UIF.

Department of Labour and UIF saying their system doesn’t recognize foreign passport number. So has SARS been taking in money and the UIF has simply not registered thousands of foreigners.

Tell me, for the relief being offered to Spaza shops. Do they have to be registered with SARS as businesses and do they have to be tax compliant to claim the R3,500 in working capital and another R3,500 in revolving credit on offer??

Does this apply to all small shop owners, irrespective of colour?

End of comments.

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