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Making Sense Of The Covid-19 Temporary Wage Subsidy

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Making Sense Of The Covid-19 Temporary Wage Subsidy

Making Sense Of The Covid-19 Temporary Wage Subsidy

The government-imposed lockdown can be seen as a force majeure in which employers are able to implement a no-work-no-pay principle. Nonetheless, the government moved to support employers struggling to pay their staff due to the Covid-19 crisis and also workers who had been let go as a result of the economic shutdown to stop the spread of the virus. It has consequently announced a number of mechanisms.

In addition to UIF claims, small and medium sized enterprises (SMEs) may also apply to three schemes of funding:

  • Debt Relief Fund
  • Business Growth/Resilience Facility, and the
  • Donations from affluent South Africans such as the Rupert and Oppenheimer families

UIF claims

The Department of Employment and Labour has announced that employers that are unable to pay the full salaries of the workers and have had to send them home for their health and safety due to the lockdown are encouraged to apply for the Covid-19 TERS (Temporary Employer/Employee Relief Scheme, previously referred to as the National Disaster Benefit) benefit by sending an email to Before lockdown started, the UIF urged employers unable to pay full salaries to apply for the Covid-19 TERS benefit by e-mailing the above address.

A statement released on 8 April by Werksmans Attorney’s Andre van Heerden, Senior Associate; Jacques van Wyk, Director, Bradley Workman-Davies, Director; and Thabisa Yantolo , Candidate Attorney, outlined amendments to the directive previously issued in terms of Regulations to the Disaster Management Act 57 of 2002 by the Minister of Employment and Labour.

“The purpose of the directive was to give content to the Covid-19 Temporary Employer/ -Employee Relief Scheme (TERS). We summarise below the salient aspects of TERS having regard to the directive, as amended.”

“Due to Covid-19, employees may be laid off temporarily and not paid, either fully or in part. Whilst employers are encouraged to pay employees during this period they are not obliged to do so. Where it is not economically possible for employers to pay employees, either fully or at all, a special benefit fund has been set up under the auspices of the UIF; the TERS;

“A company which has had to close its operations, or a part thereof, for a period of three months or less as a direct result of  the COVID-19 pandemic will qualify for TERS benefit, provided that:

  • The company is registered with the UIF;
  • The company must comply with the application procedure for TERS; and
  • The company’s closure must be directly linked to the COVID-19 pandemic.

“The benefit shall be de-linked from the UIF’s normal benefits and therefore the normal rule that for every four days worked the employee accumulates a one day’s credit and the maximum credit days payable is 365 for every four years will not apply.”

“The benefit will only be for the cost of salary for employees during the temporary closure.”

“The benefit an employee can receive under this scheme will be capped to a maximum amount of R6 730.56 per month per employee. The maximum salary to be taken into account in calculating the benefits will be R17, 712.00 per month and the employee will be paid in terms of the income replacement sliding scale (38%-60%) as provided for in the Unemployment Insurance Act.”

“An employer may then top up the benefits for an employee provided the employee does not end up receiving more than 100% of his/her ordinary salary taking into account any payments received from the UIF in terms of the TERS.”

“Employers must apply by reporting their closure via email to An automatic response, which has recently been updated, will be generated setting out the application process. The employer will be required to submit various documents including a letter of undertaking from the company and a signed memorandum of agreement,” concluded the statement.

Debt Relief Fund

The purpose of the Debt Relief Fund is strictly is to assist small businesses that are experiencing financial challenges as a direct result of Covid-19. This fund is not available to assist small businesses that were already in financial distress for different reasons prior to the outbreak of the pandemic in the country. To access the fund, businesses are required to register on the SMME South Africa platform. It requires applicants to fill in the details of their shareholder/s as well as their employee demographics:

  • They must be 100% owned by South African citizens
  • They should employ at least 70% South African nationals
  • They must be registered with SARS and tax compliant.
  • Priority will be given to businesses owned by females, the youth and persons with disabilities.

Growth / Resilience Facility

The difference between the Debt Relief Fund and the Growth/ Resilience fund is that the latter is a soft loan targeted at SMEs that are manufacturing what could be considered essential goods during the Covid-19 pandemic such as PPE (Personal Protective Equipment).

For businesses to qualify for funding, they need to:

  • meet the government’s definitions of micro, small and medium enterprises
  • meet the turnover threshold for businesses, which in turn depend on the sector in which they operate

All the categories are in accordance with what was gazetted by the department last year in March. Each will be considered on a case by case basis, and the onus is on the SME to prove how its business operations are affected by Covid-19. It is imperative that small businesses be tax compliant when applying to these funding schemes.

Rupert, Oppenheimer Families

Business Partner‘s Sukuma Relief Programme has been appointed as the administrator to disburse R1-billion from the Rupert Family to small businesses, and is now accepting applications for funding, though apparently it has already been over-subscribed and had to suspend the acceptance of further applications.

The fund is made up of two distinct and separate relief offerings – one for formal sole proprietors and another for other business entities, namely close corporations, companies, and trusts, Business Partners announced in a statement. It will comprise grants and low-interest-bearing loans with a 12-month repayment holiday, while qualifying formal sole proprietors will receive a non-repayable grant of R25 000.

Close corporations, companies and trusts will be eligible for an unsecured loan ranging between R250 000 and R1-million, with no repayment obligations or interest incurred for the first 12 months, in addition to a R25 000 grant.

To qualify for funding, close corporations, companies or trusts must be registered, tax- and regulatory-compliant South African businesses that can prove viability prior to the arrival of the pandemic.

When applying, these entities will, therefore, be required to submit documents and supporting evidence to corroborate that it is a viable business that was impacted by Covid-19. This proof can be a demonstration of a decrease in turnover, erosion of working capital, or inability to pay salaries.

Similarly, formal sole proprietors will need to provide proof of an active bank account to show business activity prior to the outbreak of the pandemic and provide evidence of tax compliance, the Business Partners statement said.

Business Partners is actively seeking additional benefactors to contribute to the fund, but applications have been suspended in the interim.

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