The Department of Employment and Labour has approved a temporary employer/employee relief scheme (TERS). This enables employers to pay employees with funds made available by the UIF as a TERS allowance. Certain conditions must be met for the UIF to pay the amount to the employer.
In an address to the nation on Wednesday evening, President Cyril Ramaphosa said the special Covid-19 relief scheme of the UIF has paid out more than R11 billion to two million employees employed by over 160 000 companies in distress.
However, some employers have so far experienced difficulties in claiming TERS benefits due to the changing processes, amendments to directives, and a lack of clarity about the information the UIF requires from applicants. The good news is that the Fund appears to be improving its processes and simplifying the calculation of benefits.
These are the four questions employers have asked most about the scheme:
1. Is the TERS payment exempt from PAYE?
Amounts paid from the Fund as a TERS benefit are exempt from PAYE (Pay-As-You-Earn), and no employment tax should be calculated on the payment. No IRP5 code is required for these payments. It does not have to reflect on the tax certificate of the employee as the employer is simply acting as an agent by paying the amount to the employee. Employers may still want to reflect it on the payroll to keep track of the payments.
If the employer made a “top-up” payment to bring the employee’s remuneration closer to his or her usual salary, this amount is subject to PAYE, UIF and SDL (however, there is no SDL during the payment holiday period running from May to August).
2. Can I still claim ETI when employees receive TERS benefits?
To qualify for ETI (employment tax incentive), the employee must at least earn the minimum wage, according to the highest of the wage regulating measure or the national minimum wage. The R2 000 requirement in the case where no wage regulating measure is applicable or where the employer is exempt from paying the national minimum wage was removed in the revised Draft Disaster Management Tax Relief Bill.
The employee will not qualify for the ETI if he or she is only paid the TERS benefit and the employer does not remunerate the employee. The employee may still not qualify for ETI if the employer does not pay the minimum wage when it tops their wages up.
3. How do I correct an incorrect claim?
To ensure the Fund pays the correct amount, the claim must be submitted correctly. The values submitted in the claim affect the benefit calculated by the Fund. For example, if the employer did not declare the correct amount as “remuneration paid during shutdown”, the remuneration would not be considered and the Fund might overpay. This would mean the employee might receive more than what he/she would usually earn. There is no guidance yet as to how employers should resubmit or correct incorrect claims.
4. When can I submit the claim for May?
The Fund has not started accepting claims for May. Employers must keep their eyes on notifications from the Fund about when these will be allowed. It should be soon.
Yolandi Esterhuizen is a registered tax practitioner & Compliance Manager, Sage Africa & Middle East.