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THE COMPENSATION FUND: Unsalvageable cesspool of disaster.
THE COMPENSATION FUND
UNSALVAGEABLE CESSPOOL OF DISASTER
by Rona Bekker
Dear NEASA subscriber
NEASA has been monitoring the amendment to the Compensation of Occupational Injuries and Diseases Act (COIDA), the implementation of the subsequently issued Rules to the COIDA, as well as the ongoing investigations into the years of consecutive qualified audits of the Compensation Fund (‘the Fund’) as issued by the Auditor-General.
In addition to the above, NEASA has taken it upon itself to assist employers with the various other administrative struggles with the Fund.
Whether there is any hope for salvaging what remains of this inept institution, is neither clear nor probable.
Despite attempts to address the endless issues of the Fund through submissions regarding unfair legislative provisions and -rules, meetings with the Compensation Fund Commissioner and the Minister of Employment and Labour, and investigations into the corrupt-, irregular- and wasteful expenditure practices of this institution, no mentionable improvement has been seen.
Among the repetitive repertoire of challenges experienced with and by the Fund, the following requires urgent attention.
LEGISLATIVE AND REGULATORY CONCERNS
Section 73(5) of COIDA defines a “third party” as any entity that transacts with the Fund with the aim of assisting either the employee, employer, medical service provider or pensioner. This means that accountants, employer and professional associations, consultants, agents, group “back-office” companies, group support service companies and many other parties who assist employees and employers in the COID value chain would be included in this definition.
Section 73(4)(a) of the amended Act introduces a new requirement for all entities which fall within the above definition, to register with the Compensation Fund in order to transact with the Fund. Thus, many companies/business/internal group operating entities will need to comply with a new set of registration requirements to assist their clients.
This causes immense barriers and difficulties to their operations and ability to assist businesses, employers, employees and medical service providers with COID matters. Further to this, no regulations have been made public as yet and the ‘registration criteria’ is yet unknown.
Being regulations, not included in the main content of the Act, and therefore not published for consideration with the Bill, the regulations have not been subject to the same public participation and legislative processes that primary legislation such as the COID Act undergoes – this undermines the parliamentary process and places excessive power within the Executive branch’s hands.
In terms of section 73(4)(b), a transitional provision has been written into the Bill allowing six (6) months’ grace period for these third parties to register, however, as no registration requirements have been made publicly available there is no way of determining if a six (6) month transitional provision is fair and reasonable.
SYSTEMATIC AND ADMINISTRATIVE CONCERNS
- Incorrect filing of Return of Earnings (ROE) / material variances in ROE submissions from previous years
In certain instances, employers mistakenly file incorrect ROE submissions, i.e., for a different company within a Group or plainly incorrect figures. Sometimes they add an extra digit by accident, which means the ROE figure is 1 000% (10 times overstated).
The Fund’s algorithms then automatically flag the employer for an audit.
These audits usually take months to be performed and completed. In the meanwhile, this employer cannot obtain its Letter of Good Standing (LOGS) or file its ROEs. In certain circumstances, these businesses close down, as they cannot obtain the necessary contracts or enter certain premises without their LOGS.
- CompEasy system
NEASA has received numerous complaints regarding the use of the CompEasy online system. Employers stated that they cannot successfully register on the system in order to file claims. The majority receive error messages, and some indicated that their information disappeared due to some system failure and then they had to start the process over. No reason is provided as to why their registration is not accepted – the system usually merely states “try again later”.
- Interpretation of COIDA and industry subclasses
To illustrate this issue, imagine a corporate entity with 75% of its staff component operating in administration-, human resources-, finance-, legal-, sales-, product development-, or IT departments, and only 25% operating in retail, yet the whole company is assessed as ‘retail’.
Another company sells electronic household goods and also has its own warehouse. Again, 75% of the employees, for ROE-purposes, work in administrative or other departments, but the entire company is assessed on the codes of a logistics company – this means the company pays a rate which is double the rate for wholesale entities.
Employers are not being made aware of the factors that determine this and consequently they pay exorbitant rates due to incorrect classifications.
NEASA remains sceptical about the possibility of a turnaround of this hapless State institution. At every instance, the Commissioner attempts to assure the oversight authorities and the public of the Fund’s efforts in saving what little remains of the Fund’s operational functionality, yet no concrete improvement can be found.
This Fund, according to the Compensation Fund Commissioner, has a total asset size of approximately R104 billion, as of the end of June 2022.
NEASA calls on the Compensation Fund, as well as the Department of Employment and Labour, to wave the white flag and surrender the Fund’s functionalities, and assets, to the private sector, which will ensure that the beneficiaries, contributors and all other stakeholders are ‘getting their money’s worth’ in compensation services.
Rona Bekker is a Senior Policy Advisor at the National Employers’ Association of South Africa (NEASA).
