We are well aware of the virus and it’s medical and health impact however the knock-on effect of the lockdown on employment matters will remain a shock to the system for quite some time.
Practising common sense and social distancing has been made very clear to everyone but the impact of the lockdown must be clearly understood too.
This article focuses on employment options and tax-related concerns during the lockdown.
While government has encouraged all businesses to continue paying their employees, who may be stuck at home and won’t be able to work during this time, many companies simply can’t afford this and are considering other options. This may include scrapping the traditional shutdown period over December and into January.
Below is a list of businesses that may remain open during the lockdown.
- Essential finance systems, such as the JSE
- Petrol stations
- Healthcare providers
- Companies involved in making or distributing food, basic goods, and medical supplies.
Persons and businesses performing duties during this period are REQUIRED to have a permit to operate as defined in the Regulation dated 25 March 2020 as part of the Disaster Management Act, 2002.
Employers need to consider the following options:
- employers who are able to continue paying their employees during the lockdown period, without compromising the viability of the business, are encouraged by government to do so;
- employees who can continue to work from home may be allowed to do so if it is feasible and practical;
- employers may place their employees on annual leave and exchange this with the shutdown in December, if possible and feasible. Payment of leave entitlement should occur at the same intervals as normal remuneration payments i.e. weekly or monthly;
- employers may consider staggering payments of monies due in order to manage cash flow effectively; or
- employers may implement a lay-off for their employees which entails that employees will not be paid as the company has to observe the lockdown.
- temporary layoffs, which means that staff will receive UIF payments but stay on as employees. The UIF payment value will naturally be at UIF rates as is the norm and therefore considerably less than the usual paycheck value unless otherwise advised by government.
- employers may opt to participate in the Temporary Employer/Employee Relief Scheme (TERS) in terms of which employees are placed on training during the lay-off period and the employer is exempted from certain statutory obligations and only needs to pay a portion of the employee’s salary. This however may not be a practical option if the training to be done requires face-to-face interaction.
People who earn less than R6 500 a month will get a wage subsidy of R500 over the next four months (from April to July).
Tax-compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months, and a portion of their provisional corporate income tax payments – without penalties or interest over the next six months.
The South African Revenue Service will also pay out employment tax incentive reimbursements every month – instead of twice a year.
Temporary reduction of employer and employee contributions to the Unemployment Insurance Fund (UIF) and employer contributions to the Skill Development Fund.
Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund.
In the event that it becomes necessary, South Africa will utilise the reserves within the UIF system to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support.
The Department of Small Business Development has made over R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process. REGISTRATION IS AVAILABLE ON WWW.SMMESA.GOV.ZA, for small and medium-sized businesses that require help during the corona virus crisis. The site asks for basic details, such as contact details and shareholder information, with the option to ask for either financial assistance, or non-financial assistance, or both.
Author Craig Tonkin