Can an Employer pay salaries and claim back from UIF?
Media reports with regard to the payment of employees by employers during the lockdown period and thereafter claim it back, may cause grave confusion.
In an article dated 24 March 2020 by FIN24, it was suggested that employers should pay their employees and will then be able to claim this back from UIF.
Congress of South African Trade Unions Parliamentary Coordinator Matthew Parks told Fin24 the discussion at Nedlac was regarding a three-month intervention for workers. Parks said millions of workers could be covered at a wage of R3 500 per month for three months.
“But not every worker is going to need assistance…that money [will care for] those who need assistance,” Parker said.
The UIF provides short-term relief to employees who become unemployed or are unable to work for various reasons and have been contributing towards the fund for a certain period of time, according to different salary levels.
Parks told Fin24 that the minimum amount of R3 500 might not be enough, adding that depending on different workers’ salary levels, R3 500 might be a significant salary cut.
However, he said, workers, will be covered even if their UIF contributions are limited.
“Based upon the existing UIF calculations formula, no worker should get less than R3 500, and all workers will be covered if they need help, even if they didn’t have enough funds in their credit profile in the UIF – for example, if they started working two months ago or something like that,” he said.
Parks warned that the fund is expected to cater to a large number of South Africans, which means weeks of delays could be expected before the money is released to employees. An alternative arrangement, however, is for employees to pay workers and then claim as needed.
“We have agreed that employers should pay the workers because the UIF is going to be overwhelmed.
“The employer should then claim back as needed from the UIF fund afterwards because an employer is in a better place to withstand a bit of a delay of three weeks unlike workers who need to buy food for their families every day,” said Parks.
This statement by Mr Parks, is to our knowledge, incorrect and without any substance.
Employers will not be able to claim back any salaries or part thereof within the current scope of benefits or mandate of UIF.
If you are able to pay employee salaries and pay such, you will not be able to claim it back. You may, however, be able to get some relief from tax subsidy incentives.
The Minister of Finance has announced the following exceptional tax measures as part of the fiscal package outlined by President Cyril Ramaphosa on 23 March 2020 in his speech on the Escalation of Measures to Combat COVID-19. These measures are over and above the tax proposals made in the 2020 Budget on 26 February 2020. The tax adjustments are made in light of the National State of Disaster and due to the significant and potentially lasting negative impacts on the economy from the spreading of the COVID-19 virus. There is a critical need for government interventions to assist with job retention and assist businesses that may be experiencing significant distress. These measures include:
- The introduction of a tax subsidy to employers of up to R500 per month for the next four months for those private-sector employees earning below R6,500 under the Employment Tax Incentive. This will help over 4 million workers;
- The South African Revenue Service to accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible;
- Tax compliant businesses with a turnover of R50 million or less will be allowed to delay 20% of their employees’ tax 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. This intervention is expected to assist 75 000 small and medium-term enterprises.
National Treasury and SARS published draft explanatory notes detailing these COVID-19 tax measures as well as the circumstances under which they will apply. The measures will take effect from 1 April 2020.
The above measures will be given legal effect in terms of two bills to be tabled when Parliament re-convenes later this year for retrospective enactment. These bills are the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration, Bill. The draft bills alongside their draft explanatory memorandum will be published for public comment on the National Treasury and SARS websites by today.
Together with the Commissioner of SARS, National Treasury will also be considering additional exceptional adjustments to assist with COVID-19 relief efforts and to the tax treatment of newly formed funds in this regard.
The draft explanatory notes regarding the COVID-19 tax measures can be found on the National Treasury (www.treasury.gov.za) and SARS (www.sars.gov.za) websites. Comments on the draft explanatory notes can be made to 2020AnnexCProp@treasury.gov.za.