Funds
Unemployment Insurance Fund
The unemployment insurance fund(UIF) can provide for short term relief for your employees when they become unemployed or are unable to work due to maternity, illness or other reasons.
Due to the COVID-19 pandemic, the South African Department of labour and the UIF issued a directive to make it clear to employers and employees the kind of benefits that they have available. As a contributor to the UIF you have the following recourse available to you:
Short-time
If there’s a reduction of work due to circumstances beyond your control then you can implement a system of short-time at your business. The current COVID-19 crises is a perfect example of this and if your employees can’t work a full week because of the resulting lockdown then you have the option of implementing a short-time system and paying them a portion of their normal remuneration which corresponds to the number of hours/days that they worked.
Most standard employment contracts provide for a short-time system in some way but check with your labour consultant to be sure.
Where employees have to work short time or are laid off temporarily without pay, they can now claim from the UIF.
As an employer, you will need to complete & submit a UI-19, UI-2.1, UI-2.7 and a Letter stating that Short-time was implemented due to the effects of COVID-19 and the resulting lockdown.
A UI-2.8 needs to be completed by the Employee’s Bank.
Download Package - Mag 2021 - Covid-19 - UIF Pack
Ideally, short-time should be used in preference to outright retrenchment of your employees. Not only is it a less expensive and lengthy process than retrenchments but it is also less disruptive to your business.
The upswing will come and businesses that opt for a short-time system instead of retrenchments will be quicker to increase production and take advantage of it.
Your unique situation might differ and you will have to weigh up the pros and cons of each alternative.
Illness Benefits
These benefits are available to employees who are quarantined for 14 days for the Coronavirus (i.e. “special leave”), irrespective of whether the employee is ill or not. No medical certificate is needed for the first 14 days, but the employer and employee have to submit a letter of proof that they have agreed to “special leave”. In addition to the letter referred to above, the following documents need to be submitted:
Sick leave
Normal sick leave will apply where an employee is absent due to having contracted the Coronavirus.
Death benefits
In the unfortunate event that one of your employees passes away, whether that is from the Corona Virus or some other cause, certain beneficiaries may apply for benefits (See “Easy Aid Guide” insert link). Additionally, if your employee is an essential service provider.
New National Disaster Benefit Fund
This benefit is available where an employer decides or is forced to close its business for a period, due to COVID-19 pandemic, and send its employees home as a result and cannot pay them for this period.
The benefit will be paid at a flat rate of R3,500 per employee, for the duration of the closure or a maximum of 3 months, whichever is the shortest.
This fund is for when you can’t pay your employees at all.
If partial payments are made the other UIF Benefits apply(ie Short Time).
An employer can’t claim both the Short Time and Disaster Fund benefits from the UIF.
The Temporary Employer/Employee Relief Scheme(TERS)
The TERS allows the Unemployment Insurance Fund to directly fund distressed companies that are:
- Fully compliant with the UIF act or undertakes to pay outstanding contributions and submit outstanding declarations
- Able to demonstrate that it will/or has embarked upon a turnaround or sustainability programme which will result in job preservation at the expiry of the funding agreement
- Able to meet its obligations in relation to the UIF act.
If your business meets the conditions and are approved then the following solutions are available to you:
- Wage Subsidy (Up to a Maximum of R14,742 per employee)
- Wage Subsidy and Staff Training through the relevant Seta
- Turnaround solution intervention via Productivity SA
Download Package - Mag 2021 - COVID-19 - TERS Pack
Small Business Development
The Department of Small Business Development made funds available to assist SMME’s that are in distress and if the distress is because of the Covid19 pandemic.
If your business is an SMME then there are two interventions available to you: The Business Growth Facility and Debt Relief Finance.
Funding for the business growth facility can be used to finance stock purchases, bridging finance or finance business equipment. Debt Relief finance can be applied to employee salaries, rent or municipal accounts.
Applications may be made through a simplified process on their website www.smmesa.gov.za.
The South African Future Trust
The SAFT was established by Nicky and Jonathan Oppenheimer and will make funds available to South African SMME’s impacted by the Corona Virus.
The fund, which was seeded with R1billion from the Oppenheimer family, will extend direct financial support to the employees of your business if they are at risk of losing their jobs or will suffer a loss of income due to COVID-19.
Applications can be made via one of the four big South African banks.
Once approved the funds will be paid directly to your employees while the business remains liable for the loan.
The loans are interest-free for a five year period and subordinated to other pre-existing loans that your business might have.
To qualify you must have been in business for longer than 24 months and have an annual turnover of less than R25million.
Sukuma Relief Programme
The Rupert Family and Remgro Limited pledged R1 billion in response to President Ramaphosa call to help SME preserve jobs and sustain their businesses. The programme is administered by Business Partners which forms part of the Remgro Group.
This fund is not only targeted towards registered businesses and trusts but also sole proprietors who have to endure hardship during the COVID-19 pandemic. Sole proprietors are however limited to the R25,000 grant if they qualify.
Close corporations, trusts and companies that qualify can apply for a loan of between R250,000 and R1 million in addition to the non-repayable grant of R25,000. These loans are interest-free for the first 12 months and there are also no payment obligations during this period. Thereafter interest accrues at the Prime lending rate.
Applications can be made online on the Business Partners website
Caveat: Due to the high number of applications that the programme received since being established they have temporarily closed it for new applications until they have processed those already in the system.
SARS Tax Relief
To help small businesses with their cash flow and job retention the South African Revenue Service has introduced some special tax measures.
As an employer, you will receive a tax subsidy of up to R500 per month for the next 4 months for all employees earning less than R6500 per month under the Employment Tax Incentive(ETI).
ETI Reimbursements will also now be paid out monthly instead of bi-annually in an attempt to get the money in your hands quicker.
And if you are in good standing with SARS and your businesses annual turnover is less than R50 Million per annum then you are allowed to withhold 20% of your employees’ tax liabilities over the next 4 months without risking penalties and interest. You can also withhold a portion of your businesses provisional corporate income tax payment over the next 6 months. Remember that your Provisional Tax return for the 1st period of 2021 is due at the end of August 2020 so this will still fall within this period as well.
TOOLS & TIPS
Budgeting
In uncertain times it’s more important than ever to create a budget for your business and to stick to it. Remember that you also need to measure and report on it each week/month. Your variance analysis will tell you where you need to adjust your budget and keep it top-of-mind - what gets measured, gets controlled
Cash Flow Forecast
There’s nothing as optimistic as the cash flow forecast of a business looking to get finance. It is great if you are positive about the current situation and all the opportunities that are available but you need to remain realistic as well.
You can use this template (Link) to forecast your incoming receipts, your outgoing payments, keep track of your bank balance and see when you will potentially run into trouble.
Cash flow forecast is also a good tool to do “What-if” analysis. Once you have it all set-up play around with it to see what would happen if one of your clients pays you late or not at all.
Hands-On Help
If you’re in need of more hands-on help, schedule a free 1-hour consultation with our team by clicking here.