Covid-19: TERS UIF Benefits - Directive Updates As At 4 May 2020
by Amanda Roothman on 4 May 2020
"To improve, is to change. To be perfect, is to change often." - Winston Churchill.
Ever since the establishment of the "TERS Benefit Fund" (the Temporary Employer/Employee Relief Scheme, through the Unemployment Insurance Fund) - we have seen tremendous changes.
Most definitely for the better.
The original directive became effective on 26 March 2020, and daily changes were made to accommodate and approve the system, and today, on #lockdownday39 there are only a handful of challenges with this system.
To refresh your memory about the TERS Benefit Fund:
- This is a relief benefit available to employers (whether in form of companies, partnerships, or informal sole proprietors) in good standing with the Unemployment Insurance Fund.
- If you as the employer, has had an adverse financial effect on your business directly linked to the Covid-19 pandemic, and the subsequent lockdown, you may claim on behalf of your employees for this relief - EVEN employers involved in providing Essential Services.
- The budget allocated to this fund is R40 billion.
- This fund is not a loan, and not repayable.
- The nature of the receipt in the hands of your employees, is tax free.
Changes from the Original Directive, versus the Existing Directive:
- Employers registered for the Unemployment Insurance Fund after the Covid-19 pandemic, can become compliant now, in order to claim from the TERS fund.
- Employees may also apply for this relief where employers fail to do so on their behalf.
- The TERS Fund will be in existence for three months, or for the duration of the lockdown (whichever the shortest).
- The original TERS Fund directive was aimed only at UIF contributors who have lost income. The amended directive states that UIF contributors that have been required to take annual leave due to the pandemic may also apply - EVEN if the employees have taken annual leave, and were paid during this time.
TERS Benefit Calculation:
The following needs to be considered, when calculating the TERS Benefit:
Formula: Benefit = DI x IRR
- The minimum monthly benefit is R3 500.00
- The maximum monthly benefit is R 6 638.40
- Capped amount to determine the daily income: R 17 712
DI (Daily Income):
- Monthly Rate x 12 / 365 (this means calendar days, and not working days)
for example, a monthly salary of R 8 000 means:
R 8 000 x 12 / 365
= R 263.01 daily income
IRR (Income Replacement Rate):
- Fixed formula: 29.2 + (7173.92 / (232.92 + DI)
- This answer is a percentage.
Steps to calculate the benefit amount:
Step 1: Determine DI (Daily Income).
Step 2: Determine IRR (Income Replacement Rate) as per the above fixed formula.
Step 3: Multiply DI x IRR.
Step 4: Multiply the answer in step 3 with the amount of days (i.e. 30 days for example 1 April 2020 - 30 April 2020)
Step 5: Step 4 - limited to R 6 638.40, minimum amount R 3 500.00
Example where employer DID NOT pay any portion of the salary to the employee:
Employee Tommy's normal monthly salary amounts to a gross figure of R 18 000. How much will Tommy get from the TERS Fund?
Since this figure is above the capped amount of R 17 712, which means the calculations will be discounted as if the remuneration earned was only R 17 712.
Step 1: Determine Daily Income:
- R 17 712 (capped, as R 18 000 > R 17 712) x 12 / 365
= R 582.31
Step 2: Determine Income Replacement Rate (fixed formula)
- 29.2 + (7173.92 / (232.92 + DI)
= 29.2 + (7173.92 / (232.92 + 582.31)
= 29.2 + (7173.92 / (815.23)
= 29.2 + 8.80
Step 3: DI x IRR
- R 582.31 x 38%
= R 221.28
Step 4: Multiply by the amount of days within the month (e.g. April 2020 has 30 days):
- R 221.28 x 30 days
= R 6 638.40
This amount is the maximum amount per individual that will be paid out by TERS for a month.
Example where employer DID pay a portion of the salary to the employee:
Employee Tommy's normal monthly salary amounts to a gross figure of R 16 000. The employer paid R 10 000 of this amount. How much will Tommy get from the TERS Fund?
- From the above, the 30-day benefit will still be R 6 638.40.
- The amount paid to Tommy from the employer - R 10 000 + TERS Fund may not exceed Tommy's normal R 16 000.
- Therefore, the TERS Benefit will then be R 16 000 - 10 000 = R 6 000 (and not the maximum of R 6 638.40)
This is a correction from the original directive, to the directive in place as at 4 May 2020.
The original directive calculated Tommy's TERS Fund Benefit to be NIL, since the salary received from the employer exceeds this amount.
The Foreign National debacle is still ongoing as the system is not yet accommodating employees without a legit 13-digit bar-coded ID number, linked to their employer's UIF Registration number.
Adopt and change, before any major trends or changes.
This will be our survival.