Johan Botes, head of the Employment practice group in Johannesburg, discusses the impact on employers of the most recent amendments to the Directive dealing with claims to the Unemployment Insurance Fund (UIF) as a result of COVID 19.
The Minister of Employment and Labour in South Africa has issued amendments to the Directive dealing with claims to the Unemployment Insurance Fund (UIF) as a result of COVID 19. The Directive was first published on 26 March 2020 and updated on 8 April 2020. The latest change allows employers to set-off an amount received from the UIF in respect of a new COVID-19 annual leave benefit, from amounts paid to employees for annual leave taken during the lockdown.
The lockdown resulted in businesses being forced to close and employees having to stay at home. Employers were able to invoke their right to withhold remuneration for the period where employees could not tender service. Many employers, however, placed employees on annual leave in an effort to ensure they continued to receive salaries during the lockdown. Placing staff on annual leave during this period softened the blow for employees, albeit at the expense of their annual leave allotment. The latest amendment to the Directive means that employers will be able to credit their staff for annual leave days taken during the lockdown, and set-off the amounts received from the UIF against salary paid to staff placed on annual leave. According to the Directive, employers must credit staff for the annual leave taken “…with the proportionate entitlement to paid annual leave in future”.
In a further amendment to the Directive, the Minister urged employers to calculate the COVID-19 UIF benefits staff will receive from UIF and pay this to staff, with a view to off-setting or reimbursing it once employers receive payment from the UIF. This appears to be done in tacit acknowledgment of the strain placed on the administration of claims by the UIF, due to the deluge of new claims submitted.
This additional claim will allow some employees reprieve in that their annual leave should be credited as their employers will receive payment of this new benefit from the UIF. However, the annual leave claim – on the face of it – is calculated using the same formulas, threshold amounts and maximum cap as other COVID-19 claims. In practice, this means that almost all staff, save for those earning the national minimum wage, will receive an annual leave COVID-19 benefit that is significantly less than their full (actual) remuneration received from their employers for the annual leave taken during the lockdown. Employers that have paid staff in full for annual leave taken during the lockdown will therefore receive only a portion of their staff’s salaries from the UIF as part of this new annual leave benefit, while employees are entitled to be credited for annual leave actually taken. Thus, many employers would have paid more to staff in respect of annual leave than it will recover from the UIF as the COVID-19 annual leave benefit.
How employers will deal with this in practice is unclear and is not addressed in the regulations. It remains to be seen whether employers will recover the additional amount paid to staff from future remuneration (subject to section 34 of the Basic Conditions of Employment Act) or whether the answer lies in interpreting “proportionate entitlement to paid annual leave in future” to credit annual leave days pro rated with the actual funds received.