Q&A: How Business Owners Can Navigate Tax, Labour and Payroll Regulations Around COVID-19
In this interview, Rob Cooper, chairman of the Payroll Authors Group of South Africa, shares how small business owners can navigate tax, labour and payroll
regulations around COVID-19. Rob believes there could be more changes to the
UIF TERS benefit coming up in the next 10 days or so.
Currently, 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. In this article, Rob answers 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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
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