Suspension of the UIF E-Compliance Certificate System
The electronic UIF Compliance Certificate system was developed without consulting third-party stakeholders such as the PAGSA and introduced without warning in late January 2021 to replace the manual system that had been in operation up until then.
Problems were experienced almost immediately, and the number and types of problems escalated steadily from then until now.
After many, many emails to the Fund highlighting the problems, and after many, many requests to meet with the senior management of the Fund to discuss how to resolve the problems, a meeting was finally scheduled for 12 April 2022.
To inform the meeting, the Fund requested the PAGSA to submit a report on the difficulties that the PAGSA and its members (and their clients) had experienced since January 2021.
This report is included in the Annexure to this Newsflash for your information.
Announcement of the Suspension of the E-CC
Having discussed other reports, and halfway through the points in the PAGSA report, a legal representative of the Fund announced the decision to suspend the E-CC system to allow the Fund and third parties time to discuss the way forward.
It appears that this decision had been made prior to the meeting, and later that day the E-Compliance Certificate website was closed with a message that the system had been suspended temporarily until further notice.
From the web site you can now download a Circular letter with more details of the suspension and print it.
Unfortunately this letter cannot be copied or saved (I have asked for such a version but at the time of writing this Newsflash, I had not received it) so it could not be added to the appendix.
1.The completely re-written Unemployment Insurance Act (administered by the Fund) and the Unemployment Insurance Contributions Act (administered by SARS) came into operation during 2002.
2.Simplifying the requirements, the Unemployment Insurance Act (UI Act) puts a duty on employers to pay their contributions to SARS (or to the Fund) and to declare their employees to the Fund.
3.The UI Act does not provide for a prescription period, nor does it provide for an amnesty in any way to absolve declarations that were not made or were incomplete (with hindsight, this is perhaps a weakness in the UI Act).
4.The Fund, as the administrator of the UI Act, has a duty to ensure that employers comply with the provisions of the Act, including the monthly declaration of employee data.
5.The Fund is therefore within its legal rights to enforce the re-submission of missing declaration data.
Only the timing and the method used by the Fund (i.e. withholding Compliance Certificates) to coerce employers to fill their ‘declaration gaps’ can be questioned.
This summary indicates that in order to be able to change the E-CC system, the UI Act will probably have to be amended, and changing the law is a lengthy process.
Suspension Circular Letter
The closing of the E-CC web site means that employers (including those that are compliant) can no longer be issued with a UIF Compliance Certificate.
The Circular on the E-Compliance Certificate web site letter is therefore not addressed directly to employers, but to all:
Organs of State,
Business (public and private), and
to make them aware that the UIF Compliance Certificate will no longer be created, and that they must adjust their tender application rules to no longer expect such a document.
It could take some time before the tender application rules are changed, so companies that tender must be prepared for this, and armed with the circular letter, inform the tender adjudicators that the absence of a UIF Compliance Certificate does not disqualify the tender application.
The Fund has a duty to encourage and enforce compliance, so in the short term perhaps other methods of enforcement will be put into operation.
If the Fund intends to continue with the E-Compliance Certificate process, it appears that the UI Act will have to be amended to provide the rules for compliance certificates (for example as is the case in the Employment Equity Act).
The R60-plus billion paid out in Covid-19 TERS and the July 2021 Civil Unrest benefits has weakened the Fund financially, so one can expect that the Fund will also focus on contribution compliance.
New administration methods can assist in making the Fund more efficient and improving compliance.
As indicated in the PAGSA report in the appendix, and as a short-term project, there are changes that could be made to the E03 specification to provide the Fund with start and end dates for maternity leave, illness leave, etc.
Interesting times lie ahead.
Chairman Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER.
Appendix: PAGSA Report to the UI Fund: E-Compliance Certificate Problems – 11th April 2022
TO WHOM IT MAY CONCERN
Thank you for inviting our comments on the problems that the members of the PAGSA (Payroll Authors Group of South Africa) have experienced since the introduction of the E-CC (E-Compliance Certificate) system in January 2021.
The members of the PAGSA are the companies that develop, install, and support computerised payroll systems at employers, as well as employers that have joined as members to benefit from the PAGSA’s services. An overview of the activities of the PAGSA since our formation in 1989 was sent to you when we started to exchange emails early in 2021 and that I presume is not necessary to send again.
Our comments and suggestions are set out in the sections that follow the introduction.
Before listing the E-CC problems, it is important to briefly mention two matters that I feel are relevant for this submission.
Firstly, since the late nineties the Fund and the PAGSA have enjoyed a very productive relationship that benefited both the Fund and the PAGSA’s members, as well as employers and employees in general.
We have collaborated extensively over the years to the benefit of both parties, going back to the introduction of the new Unemployment Insurance Act in 2002, and the subsequent declaration specification documents, initially dubbed the ‘P99’, but updated and re-issued in 2003, and now referred to as the ‘E03’ specification.
The ‘E03’ specification has the force of law and is the document that payrolls must obey when creating the declaration files with the details of the employer’s workforce that are submitted monthly by employers to the Fund.
Secondly, the PAGSA and a team from the Fund under the leadership of Mr. Tom Buys (who retired early in 2021) met frequently during 2016 and 2017 to discuss the technical details of the modernisation of the UIF E03 specification with a view to issuing a revised E03 specification (dubbed the ‘E17’ because its release was anticipated to be in 2017).
We made substantial progress, but for reasons not known to us, this process was not finalised, and payrolls continue to obey the original ‘E03’ declaration specification.
One of the aspects that were discussed in these meetings was to assist the Fund by changing payrolls to provide the various dates that identify periods of absence from the workplace while still employed. These dates are important for the Fund to facilitate the approval and calculation of in-service benefits such as maternity, illness, and reduced working time.
Equally important for employers and employees is that the dates of these in-service periods of absence from the workplace must not impact on the actual employment start and end dates that are used by employers for a multitude of purposes such as medical schemes, retirement funds, income protection schemes, awards for periods of service, etc. These are just some of the aspects of the actual employment period dates that are critically important and that must not be affected.
Recently, it came to our attention that the Fund has changed the E03 specification regarding the employment start date without discussion with, or even notification to, the PAGSA.
Yet it is the payroll supplier members of the PAGSA that must obey a specification that has been changed without their knowledge. This is disturbing.
This matter of the dates required by the Fund is taken forward in the ‘E-CC Suggested Solutions’ section below.
Lastly, as requested by the Fund, set out in this document is a summary of the difficulties experienced by the PAGSA members with the E-CC system, as well as some basic suggestions for the Fund’s consideration to redress the situation.
The detail of the problems that PAGSA members and employers have been experiencing in our call centers has been emailed to the Fund many times since early in 2021. As requested by the Fund, the categories of E-CC problems experienced by the PAGSA members are summarised below for the purposes of the meeting on Tuesday 12 April 2022.
In general, the E-CC system refuses compliance certificates to employers that according to the Fund’s database records have not submitted payroll declarations to the Fund for one (or more) months for all (or some) employees, going back in some cases decades to years before 2002.
While the PAGSA supports the enforcement of compliance and will assist the Fund wherever possible in this regard, some aspects of the impracticality of this process must be highlighted here:
a.It is possible that in some cases the employer might not have submitted their declarations compliantly in the past, but not in the cases reported to us.
Employers tell us that they have in their possession emails from the Fund that confirm the receipt of the email declaration submission in respect of a month that the E-CC system now flags as being a month in which no declaration was received.
Should the reason for the missing employee data be the fault of the Fund (perhaps a system/email problem?), it is unfair to now penalise the employer by withholding the compliance certificate.
In any event, it would be pointless and a waste of time at this late stage to try and establish the reasons for ‘missing declarations’ from many years back.
We must rather deal with the problem, and not worry about how and why it happened.
b.It appears that the Fund uses the identity number of an employee to trace back the history of declarations for that employee through all of the employee’s previous employers and now requires the current employer to declare information from the past for that employee that the current employer does not, and never will, have.
This expectation from the Fund is simply impossible to comply with – for many valid reasons the current employer does not have this information and it goes without saying that the employer cannot submit false information.
2.‘Late Appointment in a Month’
Employers schedule an administration ‘cut off’ closing date for each month to give the employer enough time in which to capture the payroll input for the month and process the payroll in time to transfer the employee’s net pay into the employee’s bank account before the end of each month.
For obvious reasons, the more employees there are, the earlier in the month is the administration cut-off date.
Employees who were appointed after the payroll cut-off date in a certain month are either not included at all in that month’s payroll run (and therefore not declared in respect of that month), or only the basic demographic data (including the date of engagement) is captured but without any remuneration data and declared to the Fund for that month.
The employee’s remuneration data for the ‘short’ first month of employment is added to the payroll in the subsequent month and processed, paid, and reported in the next month with the correct employment start date as in the previous month.
On validation by the E-CC system, the initial month is identified as a gap month because there is no declaration for the new employee in the month indicated by the employment start date.
Employers have no choice other than the above in order to be able to process their payrolls successfully every month – there is no other way.
Employees are sometimes paid remuneration such as performance bonuses, commissions, or corrections of remuneration that was paid incorrectly during the employment period, etc. in a month (or months) after the month in which the employee’s services were terminated.
Because there can be a ‘gap’ between the declaration in respect of the last month of employment and the month in which the ‘late’ remuneration is paid, this scenario also seems to result in the compliance certificate not being issued.
The PAGSA has requested SARS to interpret the Unemployment Insurance Contributions Act to give payrolls legal guidance as to whether or not contributions must be made in a month in which the individual is no longer employed and is therefore no longer an employee.
This legal matter is therefore pending until the SARS interpretation is received.
Payroll suppliers focus on the ‘E03’ data files for monthly submission to the Fund and have limited exposure to U-Filing.
However, we have gathered what information we could in the short time available regarding U-Filing problems, listed below.
1.The main problem appears to be that the U-Filing database and the ‘E03’ (or Siyaya) database are separate databases, and that the input and/or corrections made on U-Filing do not update what we assume to be the main database (the E03 or Siyaya database) where the majority of the employee data is recorded.
2.Employers with large numbers of employees are being told to use the U-Filing mechanism to update their missing declaration data by using a UIF-supplied spreadsheet. We have been told that this does not work as the spreadsheet that employers are instructed to use, does not import correctly.
As a general comment, the accuracy, compliance level, and integrity of using spreadsheets for data submission is questionable.
3.During the TERS benefit period, it came to our attention that some employers were not able to register on U-Filing. We are not sure if these problems have been resolved since then.
4.It appears that employers who normally submit their declarations created by their payroll system using the E03 mechanism, and who do register for U-Filing, are then expected to continue submitting declarations using the U-Filing channel.
E-CC Suggested Solutions
The following suggestions are submitted for consideration by the Fund to assist the process of resolving the E-CC problems.
1.Temporarily suspend the E-CC system (or alternatively freeze the validations within the system that result in the above problems) to give time in which permanent solutions can be discussed and put into effect.
2.While we support compliance and understand the problems caused by historical declaration problems, the PAGSA view is that the Fund should consider implementing the revised E-CC system as a ‘Forward-looking’ system, as opposed to the current ‘Looking-back’ system that checks historical information.
If ‘forward-looking’ is not possible, consider limiting the ‘looking-back’ period to four years, being the maximum period over which the number of ‘credit days’ are determined by the Fund for benefit calculations and that determines the fund’s potential liability for benefits.
3.Consolidate the U-Filing and the E03 (Siyaya) databases.
Various methods of submitting employee data to the Fund can be considered and might influence where the employee data is recorded, but these options are outside the scope of this document.
First prize for payrolls, employers, and employees (and presumably also for the Fund) would be a single channel of submission, and a single database of employee details.
In this regard, it appears that is no longer possible for large employers to register for the FTP (File Transfer Protocol) method of submitting data to the Fund, so this method of bulk declarations should also be incorporated.
4.Ensure that a system is put in place that confirms to the employer with certainty that the monthly declaration submission has been received, validated by the Fund, and that the employee data for that month has been successfully added to the Fund’s database (whichever one it might be).
5.Presumably the volume of employee data recorded on the Fund’s database is very high, but it would greatly assist employers if a ‘quick view’ can be made available that allows the employer to check for any ‘declaration gaps’ in its employee data as it resides on the Fund’s database, in the same manner that the Fund’s E-CC system currently checks for ‘declaration gaps’.
6.Resume the 2016/2017 E03 discussions with the PAGSA, focusing on adding the following dates:
a.Maternity leave (start and end dates)
b.Illness (start and end dates – if necessary)
c.Reduced Work Time (start and end dates – if necessary)
d.Remuneration ‘First Paid’ Date (see point 2 above regarding ‘late appointments in a month’)
Add to the specification:
An indication in the specification of the fields or requirements that were changed
The date from which the changes become effective (in the past these were phased in over 6 months)
The version number of the revised specification.
As the Fund is aware, not being able to tender when this is an essential part of the nature of their business, as well as the general requirement to be able to prove compliance to clients, is a very serious matter for employers.
The PAGSA is not in a position to be able to quantify the cost of the problems caused by the E-CC problems, but it seems very likely that it is a large amount. Lost opportunities, damage to credibility with clients, unnecessary administration, problem follow-ups, and general time wastage, all come at a cost.
The negative impact ripples forward potentially to retrenchments, increased unemployment levels (plus the cost of the associated UIF benefit claims), and in general, to the economy of the country.
As stated above, the PAGSA supports the necessity of having the E-CC system and would like to contribute to making the system work as smoothly and efficiently as possible in practice.
We are positioned between statutory bodies such as yourselves, and our payroll supplier members. This allows the PAGSA to put new requirements and systems into operation in a manner that will result in effective, cost-efficient, and compliant results, and have offered our services to assist the Fund with the E-CC system problems.
It is hoped that this meeting will result in steps being taken to urgently resolve the above problems, and we would appreciate it if the PAGSA is included in the discussions of the solutions when this is appropriate, as in the past.
After all, it is payroll systems that provide the bulk of the employee data that the Fund relies on.
I trust that these comments will be of help to you.
Chairman Payroll Authors Group of South Africa