CR381 Loss of income claim – Covid19 – is a TERS/UIF payment considered “income” in terms of the policy definition


Loss of income claim – Covid19 – is a TERS/UIF payment considered “income” in terms of the policy definition


1. The policy commenced on 27 November 2017, after the National Credit Act (NCA) Regulations of August 2017 were promulgated.

2. The Policy stated:

If you become Unemployed or if you are Unable to Earn an Income during the period of insurance, other than as a result of Disability, we will pay all your obligations under the Credit Agreement that become due and payable:

  • For a period of 12 months from the date you became Unemployed or Unable to Earn an income;
  • During the Remaining Repayment Period; or
  • Until you become employed or are able to earn an income, whichever is the shorter period.

3. “Unable to Earn an Income” was defined as:

Unable or Inability to Earn an Income means you are incapable of earning an income from any occupation, work, job or business for any reason other than Disability.

4. Relying on the definition above as read with the NCA Regulations, the insurer contended that there had to have been a 100% loss of income for a claim to succeed.

5. For the months of April 2020 and May 2020, the complainant did not receive her monthly salary from her employer due to the Covid-19 pandemic. As a result, she received a benefit from the Temporary Employee/Employer Relief Scheme (TERS) for the months of April 2020 and May 2020.

6. The insurer argued that the benefit payments received from the TERS for the months of April 2020 and May 2020 constituted income earned and the complainant therefore did not suffer a 100% loss of income as required by the policy for her claim to succeed.  


7. The question that arose was whether the payments which the complainant received in terms of TERS for the months of April 2020 and May 2020 constituted income earned ‘from any occupation, work, job or business for any reason other than disability’.

8. The matter was discussed at an adjudicators’ meeting.

9. The meeting noted that the policy did not define “income” or “income earned”.  The meeting therefore considered the ordinary meaning of “income earned” and/or “earned income”.

10. The Collins English Dictionary defines “earned income” as “income derived from paid employment and comprising mainly wages and salaries”. 

11. The Cambridge Dictionary defines “earned income” as “money that a person or company receives for work they have done, including wages, tips, commissions, and bonuses, but not income from investments”. [Emphasis added]

12. The meeting also considered the TERS Directive issued on 26 March 2020 by the Minister of Employment and Labour, the amendments thereto, as well as legal opinions that had been obtained by the insurer and this office.

13. When one interprets parts of a document, those parts cannot be read in isolation. As Wallis JA said in Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] 2 All SA 262 (SCA) at 271 and 273:

“The present state of the law can be expressed as follows.  Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence.  Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production.  Where more than one meaning is possible each possibility must be weighed in the light of all these factors.  The process is objective not subjective.  A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.  Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used.  To do so in regard to a statute or statutory instrument is to cross the divide between interpretation and legislation.  In a contractual context it is to make a contract for the parties other than the one they in fact made.  The “inevitable point of departure is the language of the provision itself”,read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.”

Interpretation of the TERS Directives:

14. The preamble of the TERS Directive issued on 26 March 2020 (hereinafter referred to as “the March TERS Directive”) states:

“During this period of lockdown, companies will have to shut down and employees laid off temporarily.  This means that employees are compelled to take leave, which is not out of choice.  We therefore anticipate that employees may lose income.  Employers are encouraged to continue to pay employees, but where this is not economically possible; we have created a special benefit under the Unemployment Insurance Fund as per the Directive Covid-19 Temporary Employee / Employer Relief Scheme.” [Emphasis added]

The purpose of the March TERS Directive is stated as:

“2.1.1   To make provision for the –

  • Payment of benefits to the Contributors who have lost income due to Covid-19 pandemic;
  • Establish the Temporary Employee / Employer Relief Scheme and set out the application process for benefits of the Covid-19 pandemic and to alleviate economic impact of Covid-19;

2.1.2    To make provision for online applications for benefits in order to avoid contact during the national disaster period.” [Emphasis added]

Clause 5 of the March TERS Directive states:

“5.        Application Procedure


            5.3       An employee who is being paid by the employer during this

 period is not entitled to this benefit.” [Emphasis added]

The March TERS Directive does not refer to income earned but instead makes reference to a “benefit” or “benefits” or “special benefit”.

This was significant.

15. Clause 5.3 of the March TERS Directive was then amended by the TERS Directive issued on 11 August 2020 (hereinafter referred to as “the August TERS Directive”) as follows:

“5.3      Subject to the amount of the benefit contemplated in clause 3.5, an employee may only receive Covid-19 benefits in terms of the Directive if the total of the benefit together with any remuneration paid by the employer for work performed by the employee in any period is not more than the remuneration that the employee would ordinarily have received for working during that period.” [Emphasis added]

The August TERS Directive also did not refer to income earned but instead made reference to a “benefit” and “remuneration”.

Significantly, the August TERS Directive distinguished between the TERS benefit and remuneration paid by the employer to the employee by defining “remuneration” to mean:

“ “remuneration” bears the same meaning as the definition of the term in the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997) read with section 35(5) of that Act and the Schedule to Government Notice 69, GG 24889 of 23 May 2003”

Therefore, the definition of “remuneration” in the August TERS Directive meant, as per the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997):

“… any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person…” [Emphasis added]

It followed that the August TERS Directive construed the TERS ‘benefit’ separately from the employee’s ‘remuneration paid by the employer for work performed by the employee’.

SARS treatment of TERS:

16. Unlike income earned, TERS benefits are exempt from tax as directed by the South African Receiver of Revenue (SARS), in its memorandum to employers dated 11 September 2020 wherein it was stated:

Income code 3724: Employees must use this code to declare any payments received by their employees from a COVID-19 Disaster Relief Organisation. These payments do NOT include payments received from the Unemployment Insurance Fund (UIF) Temporary Employees Relief Scheme (TERS).

Payment from the UIF TERS are exempt from tax and must not be reflected on the IRP5/IT3(a) certificate issue by employers to their employees.

Sources of funds for TERS payments:

17. The source of funds for the TERS benefit is the National Disaster Benefit Fund and not the employer.  If an employer cannot pay his employees due to the pandemic, it makes application to the National Disaster Benefit via the UIF. The employer is merely a conduit for payment of the TERS benefit.  The payment of TERS by the employer, does not convert the TERS benefit, payable via the UIF, to income paid by the employer for services rendered.


18. In summary:

  • the TERS benefit is a benefit created by statute and not income earned from any occupation, work, job or business and/or remuneration paid to an employee for services rendered;
  • the source of funds for the TERS benefit is the National Disaster Benefit Fund;
  • the source of funds for the TERS benefit is not the employer in terms of a contract of employment;
  • TERS is a benefit paid via the UIF from the funds of the National Disaster Benefit Fund, not from the employer’s coffers;
  • the employer’s role with regards to TERS is, at best, that of a payment agent;
  • the ordinary meaning of “earned income” and/or “income earned” in the context of income earned for services rendered / work done, cannot mean passive income from TERS.

19. In light of the above, the meeting agreed that the TERS benefit did not constitute income earned and therefore could not be considered in the assessment of the complainant’s claim.

20. The meeting was also of the unanimous view that the conclusion reached above was in accordance with the principles of fairness and equity as applied by the office.


21. The insurer accepted our view and paid the loss of income claim.