How can we reduce the impact of a future pandemic on Employers?

Apr 23, 2020 Jade Lawson 0 Comments

The relationship between an employee and an employer is a reciprocal one. Where the employee places his services, skills, and time at the disposal of the employer, and in return, the company remunerates the employee for services rendered in terms of the employment contract.

In light of the recent COVID-19 pandemic, this employment relationship has been suspended, as the employer is forced to close the business during the lockdown period and in most cases, the employee is unable to render any services to the employer. Due to the lack of cash flow, employers have forced their employees to take annual leave, while others have not had the means to pay their employees’ wages. The forcing of leave is discussed in a previous post titled ‘What are my rights as an employee during lockdown?’.

What options are currently available to employers impacted by COVID-19?

·        Employers can claim Temporary Employee/Employer Relief Scheme (TERS) UIF to pay employees

The Government has introduced TERS. TERS is a special benefit created for under the UIF and aims to provide emergency relief to employers so that they may continue to pay their employees during a temporary lay-off.

The benefits under TERS are available to an employer who closes its operations due to the COVID-19 crisis for a period of three months or less and as a result, is in financial distress.

·        Employer relief schemes/funds

Small, medium, micro-sized enterprises (SMMEs) have the option to apply for SMME funding through the Debt Relief Fund, Business Growth/Resilience Facility, the donations from affluent South Africans such as the Rupert and Oppenheimer families, and Patrice Motsepe and affiliates. There are various other funding options, which can be found in the following article https://www.moneyweb.co.za/news/south-africa/covid-19-crisis-funding-where-to-apply/

How can we reduce the impact of a pandemic on businesses in the future?

At this point, we are dealing with an extraordinary scenario with the COVID-19 pandemic. Our Government has a small number of resources available to protect our employers; however, is it enough to ensure the sustainability of these employers?

Therefore, we need to start considering different preventative measures should employers be faced with a pandemic or disaster in the future. Our Government has set precedent with the lockdown to preserve human life above the economy, however, it would be a greater achievement to further pioneer a strategy that could do both for future generations.

Therefore I propose the following options to protect employers:

Option 1, the Government creates a National Disaster Management Fund, which would operate in the same way as the current UIF model. Employees and employers would each contribute 1% of the employee’s gross earnings to the fund. If our country is faced with another natural disaster or pandemic and the President declares the National State of Disaster, employers would need to immediately submit applications to the fund to have them pay a percentage of the employee’s salary for a period up to 3 months. By implementing this option, it would elevate the burden on the employer to pay employee salaries for the period of the natural disaster or pandemic. The disadvantage of this option is that the fund would take a substantial amount of time to build up enough resources to be paid out as a suitable percentage of the employee’s salary.

Option 2, Employers deduct a mutually agreed upon amount from their employee’s salary, which the employer invests in its own Disaster Management Fund. Should our country be faced with a natural disaster or pandemic, the employer would pay employee’s salary from this fund, up to the amount contributed. When the employee resigns, the employer would pay the employee back his contributions to this fund. The disadvantage of this option is that employees may be resistant to having a certain amount deducted from their salary each month and secondly the employee would need to work for the company for at least 3 years to receive 1 month’s payout from the employer’s Disaster Management Fund.

Option 3, Usually standard business interruption policies typically include an endorsement excluding viruses and/or pandemics. However, insurance companies could offer a new type of insurance coverage that would cover the loss of income related to a pandemic similar to what is being offered by the Ark Specialty Program of Lloyd’s. This type of cover would include cover for viruses and pandemics such as COVID-19. This disadvantage of this option is that this type of policy would incur higher premiums for employers and the ability of the insurance market to cope with the management of a large number of pandemic risk claims.

Considering these options, our Government needs to determine the sustainability of these options in order to reduce the impact of a future pandemic on employers.

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