Payroll Q&A: Your questions answered about COVID-19 relief options for businesses

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Most South African small and medium businesses are struggling to operate and pay their employees during the national lockdown imposed by government to slow the spread of COVID-19. Rob Cooper, chairman of the Payroll Authors Group of South Africa, and host of the Sage Annual Payroll Tax Seminar, led a recent webinar about how employers can navigate tax, labour and payroll regulations around COVID-19.

He looks at some of the most common questions businesses are asking about the impact of COVID-19 on their payrolls.  

  1. Which UIF option is best for COVID-19 claims: The Reduced Working Time Benefit or the Temporary Employer/Employee Relief System (TERS)?

The Reduced Working Time benefit was made effective from 1 January 2019 and provides cover for employees who lose income due to reduced working time, despite remaining in employment. They can qualify for a benefit of between 38% and 60% of the UIF Income Replacement Rate.

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The TERS is a measure introduced in response to the pandemic and national lockdown. TERS provides emergency relief to enable the employer to pay employees when it temporarily pauses their employment as a result of ceasing operations during the lockdown. For TERS, the benefit is capped at R17 712 per month per employee, once again applied at between 38% and 60% of the UIF Income Replacement Rate.

In both cases, the reduced remuneration rate per day is multiplied by credit days (for the Reduced Working benefit), or by the number of days claimed (for the TERS benefit).

‘Credit days’ for the Reduced Working Time are calculated at a rate of one credit day for every four calendar days in a contribution month. Once the credit days are converted into a benefit, those credit days are no longer available for later UIF benefit claims.

The TERS benefit will pay out a minimum of R 3 500 for a month.  This floor does not apply to Reduced Working Time benefits. As such, TERS is a far better option for lockdown UIF claims. 

  1. Does the Compensation Fund offer relief for employees who die or are disabled as a result of contracting COVID-19 in the course of their work?

Employers can claim from the Compensation Fund for employees who have contracted COVID-19 at work. For the claim to be valid, it needs to pass the following tests:

  • The employee contracted the disease during the course of employment.
  • They were exposed to a known source of COVID-19 in the workplace or a place they went for work (such as a business trip or client visit).
  • There is a clear sequence from this exposure to the onset of COVID-19 symptoms.
  • The disease was reliably diagnosed as per the WHO guidelines.

If a claim is approved, the Fund will compensate a worker for up to 30 days of temporary disablement or confirmed illness. Permanent disablement and death claims will be assessed on merit. Employers should claim from the UIF when the employee takes sick leave or self-isolates without getting a confirmed COVID-19 diagnosis. 

  1. I have heard there are some Employment Tax Incentive (ETI) measures. How do they work? 

ETI benefits could previously be claimed by companies for employees between the ages of 18 and 29 earning less than R6 500 per month. Government has made the following adjustments to the ETI for the period 1 April to 31 July 2020:

  • The maximum amount of ETI employers can claim has increased from R1 000 to R1 750 for an employee’s first qualifying 12 months, and from R500 to R1 250 in the employee’s second qualifying 12 months.
  • An ETI of R750 per month is available for employees aged 18 to 29 who are no longer eligible because the employer has claimed ETI for them for 24 months; and those aged 30 to 65 who are not eligible for the ETI due to their age.
  • Government is accelerating the payment of ETI reimbursements from twice annually to monthly as a means of getting cash into the hands of tax compliant employers as soon as possible.

Note that there is also a Skills Development Levy payment holiday available from 1 May 2020 until 31 August 2020.

  1. How are the PAYE Relief Measures applied? 

This option is open to your company if it is tax compliant and has gross income below R100 million per year (excluding passive income such as interest). You can defer payment of 35% of PAYE (not SDL or UIF) for four months starting 1 April 2020 (7 May EMP201) and ending 31 July (7 Aug EMP201).

You will need to repay the deferred PAYE liability in six equal monthly instalments from between August 2020 and January 2021. If you default on these deferred payments, you will be subjected to penalties and interest.

  1. Can employers compel employees to use their annual leave during the time they are closed as a result of the national shutdown?

You may ask your employees to take their annual leave during the lockdown period. This is a better option than putting people on reduced working hours, but recent experiences indicate that there are some administration complications.

Rob Cooper SAGE
Rob Cooper, chairman of the Payroll Authors Group of South Africa

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