On Thursday, 26 March 2020, the Minister for Employment and Labour, Thembelani Nxesi, issued a Directive entitled ‘Covid- 19 Temporary Employee/Employer Relief Scheme, 2020’ to the general public (the “Directive”).
The underlying rationale for the issuing of the Directive is founded on the immense impact the President’s declaration of a national lockdown, and the Regulations imposed in terms of section 27(3) of the Disaster Management Act, have had on the continued trading and commercial viability of especially small to medium enterprises and those entities whose businesses operations are considered to be ‘non-essential’.
The majority of employers finding themselves trapped within the definition of a ‘non-essential’ business, have been forced to suspend operations and to shut down for the duration of the national lockdown which is scheduled to end on 17 April 2020. It must also be borne in mind that the executive branch of government has been vested with the authority to extend the national lockdown period, should circumstances require such stringent action.
Government has recognized that the declaration mentioned above, will have crippling, and likely long-lasting, effects on most small to medium enterprises and in response hereto, and with a view to lending a helping hand in securing both the continuation of the employer’s business and the continued employment of their employees, has elected to create the National Disaster Benefit. This program is intended to function through the Unemployment Insurance Fund (“UIF”) and will assist employers in the part and full payment of wages and salaries to workers who have been placed on a forced leave of absence during the lockdown period and as a result of the employer having to temporarily shut its doors.
The purpose of the Directive is stated as follows:
“To make provision for the:
i. Payment of benefits to the Contributors who have lost income due to Covid -19 pandemic;
ii. To minimise [sic] the economic impact of loss of employment because of the Covid -19
iii. Avoid contact and contain [sic] the spread of Covid -19 during the process of application for benefit;
iv. Establishment of the Temporary Employee/Employer Relief Scheme and set out the
application process for benefits of the Covid -19 pandemic and to alleviate economic impact of Covid -19; and
v. To make provision for [sic] online applications for benefits in order to avoid contact during the national disaster period.”
The Directive is aimed at assisting employers who have had to close or suspend their operations as a result of the Covid-19 pandemic and the lockdown for a period of 3 months or less, and which will suffer financial distress as a result of the pandemic. These employers will qualify for what is termed a “Covid-19 Temporary Relief Benefit” (the “Benefit”).
The Directive holds that the Benefit shall be de-linked from the UIF’s normal benefit functioning and accordingly that the normal rule that for every 4 days worked, the employee accumulates 1-day worth of UIF credit, will not apply. Additionally, the current maximum UIF credit limit for days payable (i.e. 365 days for every 4 years worked) will also not find application.
The Benefit will only be utilised to pay for the cost of employee wages and salaries due the temporary closure of a distressed business and will be capped at a maximum Benefit amount of R17,712.00 per month, per employee. The employee will also be paid according to an income replacement rate sliding scale (38 % -60 %) as provided for in the UIF Act.
In the event that an employee’s income, as determined by reference to the said income replacement sliding scale, falls below the prescribed minimum wage of the particular sector concerned, the employee will be paid a replacement income equal to such minimum wage amount. Qualifying employees will receive a Benefit calculated in terms of sections 12 and 13 of the UIF Act, provided that an employee shall receive a benefit of no less than the sector-specific minimum wage.
Very importantly, a company/employer will only qualify for the Benefit and temporary financial relief should it satisfy the following criteria:
- The company must be registered with the UIF;
- The company must comply with the application procedure for the financial relief scheme; and
- The company’s closure must be directly linked to the Covid -19 pandemic.
In conclusion, we set out the process for applying for Benefit as follows:
- An employer must apply by reporting its closure/suspension of operations via email to firstname.lastname@example.org. Upon delivery of the email the employer will receive an automatic response outlining the applications process.
- The employer shall be required to furnish the UIF with the following completed documents:
A letter of authority from the company.
A signed Memorandum of Agreement from the employer or Bargaining Council with the UIF.
An employee who is being paid by the employer during this period is not entitled to this benefit.
Should any further information on the operation of the Directive or the process to be followed for applying for the Benefit be required, please do not hesitate to contact our offices and we will gladly assist.