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Bulletin | Covid-19

Effect of the national lockdown on employent contracts and the relief offered by government in light of the Covid-19 crisis

Fasken
Reading Time 6 minute read
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On 23 March 2020, President Cyril Ramaphosa declared a 21 day national lockdown as a measure to curb the rapid spread of the Coronavirus in South Africa, commencing midnight, 26 March 2020 until 16 April 2020. This followed the declaration of a national state of disaster on 18 March 2020.

The regulations issued by the Minister of Cooperative Governance and Traditional Affairs on 18 March 2020 dealt with, amongst other things, the prevention and prohibition of gatherings, the sale of alcohol at on-consumption premises and the closure of schools. Following the declaration of the national lockdown, the regulations were amended on 25 March 2020, and again on 26 March 2020.

As far as employment is concerned, the regulations as now amended provide:

For the period of the lockdown – every person is confined to his or her place of residence …. (and);

 

During the lockdown, all businesses and other entities shall cease operations, except any business or entity involved in the manufacturing, supply, or provision of an essential good or service, save where operations are provided from outside of the Republic or can be provided remotely by a person from their normal place of residence.

 

An exception is made for, and in connection with, the performance of essential services and the provision of essential goods. In this bulletin, we focus on the relief measures introduced by government.

Effects of the National Lockdown on Employment:

Businesses must cease their operations.  Employees are confined to their homes. In our view, this means that the principle of no work no pay applies and employers are not obliged, in these circumstances, to remunerate anyone not working as a result of the lockdown and for as long as they are not allowed to tender their services. This does not mean that the employment contract is terminated, only that the employees’ duty to tender their services and the reciprocal duty of the employer to remunerate them is suspended. Where does this leave employees?

There is no reason why an employer should not agree, on an ex gratia basis, to continue to pay its employees. If it chooses to do so, it should make it clear to employees that it is doing so on an ex gratia basis. It would also be prudent to stipulate that this will be done until 16 April 2020. If the lockdown continues after that date, the employer must be free to make a different decision.

Employees may also be required to take the period as annual leave, in return for being paid.

It is against this background that the government has introduced certain measures to assist employers in distress on the one hand, and employees on the other.


Relief Measures
:

The Covid19 Temporary Employee / Employer Relief Scheme

On 25 March 2020, the Minister of Employment and Labour issued a directive titled the Covid-19 Temporary Relief Scheme, 2020 (“C19 TERS”). This is a scheme established to enable employers to compensate employees who have lost income due to their employer’s businesses having to close directly due to the Covid -19 pandemic. Two types of benefits are provided for.

First, if, as a direct result of the Covid-19 pandemic - 

  • an employer closes its operations for a period of three months or less; and
  • the employer suffers financial distress during such a period,
  • the employer will qualify for a Covid-19 Temporary Relief Benefit. 

This benefit is distinct from normal UIF benefits and the requirements attached to such benefits are not applicable to this form of relief.

The first thing to note is that this is a benefit which the employer must apply for and it is paid to the employer to enable it to make payments to its employees. It is the employer therefore who administers this benefit. 

Secondly, to qualify for the benefit -

  • the company must be registered with the UIF;
  • it must apply for the benefit in the prescribed manner; and
  • the company’s closure must be directly linked to the Covid-19 pandemic.

To apply for the benefit, an employer is required to report its closure to the Department via email and furnish the UIF with its letter of authority and the signed MOA it has with the UIF. These documents must be sent to Covid19ters@labour.gov.za.

The amount of the benefit is based on the following:

  • An employee who is being paid by the employer during this period is not entitled to this benefit.
  • The benefit will only be paid for the cost of salary during the temporary closure of the business operations.
  • The salary benefit is capped to a maximum amount of R17 712, 00 per month, per employee and an employee will be paid in terms of the income replacement rate sliding scale of 38% to 60% of their salary as provided for in the UI Act.
  • For employers whose employees fall below the minimum wage for the sector, the employee’s salary benefit will be increased to the minimum wage for the sector concerned.

The second type of benefit provided for under the C19 TERS scheme is what are referred to as “illness benefits” and will be addressed below.

Illness Benefits:

The illness benefit is provided where an employee is in quarantine for 14 days due to the Covid-19 pandemic. It is applied for by and paid to the employer.

Employers and employees must send a confirmation letter together with the application as proof that the employee was in an agreed pre-cautionary self-quarantine for 14 days.

The confirmation letter will replace the medical certificate on the Illness application form (UI2.2) as the employee would have self-quarantined without prior consultation of a medical practitioner. Benefits will be paid based on these letters.

Should an employee be quarantined for more than 14 days, a medical certificate from a medical practitioner must be submitted together with the Continuation Form UI3.

Other Relief Measures:

In addition to the C19 TERS scheme, government has also made provision for other relief to employees as a result of the Covid-19 crisis. These will be set out below.

National Disaster Benefit

  • An employer who cannot pay his or her employees for the period of the lockdown can apply for the National Disaster Benefit from the UIF. This applies where an employer decides to close its business for a certain period and send employees home, this will be seen as a temporary lay-off.
  • This benefit will be de-linked from the UIF’s normal benefit structure. The benefit will be at a flat rate equal to the national minimum wage (R3 500.00) per employee for the duration of the shutdown or a maximum of three months, whichever period is the shortest.
  • If an employee is ill, temporarily laid off or unemployed for longer than three months, the normal UIF benefits will apply. The UIF has an online system. Employers should of course ensure all UIF payments are up to date. In addition, employers and employees should both ensure the necessary UI forms and documents are completed and furnished when making application.
  • Applications for the National Disaster Benefit can be made through the following address: https://www.ufiling.co.za/uif/.
  • It is important to mention that an employer or employee cannot apply for the “National Disaster Benefit” and any other UIF benefit simultaneously.

Other UIF Benefits:

Reduction of Working Hours

As a result of the impact of Covid-19, if an employer is reducing the working days, from, for example, five days per week to three days per week, the employee can claim benefits for the two days that the employer may not be able to pay for.

Death Benefits

In the event an employee dies of Covid-19 complications, the beneficiaries will be able to claim death benefits in term of the UIF.

Benefits under the Compensation for Occupational Injuries and Diseases Act 1993 (COIDA):

Covid-19 COIDA Benefits

  • An employee is also entitled to claim benefits in terms of the newly published schedule under section 6A of the COIDA, which allow an employee who has contracted the Covid‑19 virus during the course of their employment to claim from the Compensation Fund for a period of up to 30 days for temporary total disablement.

The above bulletin is written based on the law as at the date of circulation. The law may likely change as government may introduce or amend employment legislation or regulations.  

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