Compensation Fund Action Plan: Department of Labour briefing

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Employment and Labour

21 February 2018
Chairperson: Ms F Loliwe (ANC)
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Meeting Summary

The Compensation Fund -- an entity of the Department of Labour – reported on progress on its action plan to restore its image, which had suffered from adverse media publicity and negative reaction from stakeholders due to service delivery issues.

The objectives of the action plan were anchored on the four major pillars of the Fund: financial administration; customer focus and service delivery improvement; internal business processes and administration; and people management. Achievements in each of these areas were thoroughly detailed.

Members were generally appreciative of the enthusiasm with which the Fund was implementing its action plan. They suggested the Fund’s good work should be communicated, as the public still had a perception that applying to the Fund was a waste of time. They commented that private doctors were rejecting claims, thus putting pressure on the hospitals, and asked if something could be done about that. Why was the issue of the computer system always hovering under the mantra of “almost there”? There were still a lot of illegal claims, with applicants pretending accidents occurred at work places, and the Department was asked if it had a system in place to detect these illegal claims. Clarification was sought on the non-completion of the enhancement training programme, while progress in responding to audit finds was described as “very slow.” A Member said that corruption “permeated all the structures of government,” and asked the Department if it was not having that kind of problem with the Fund.

The Department’s responses were focused on the fact that there were small challenges with Umehluko, but on the whole, the system was stable and working. The Fund was looking forward to dealing with all the weaknesses in the system.

Meeting report

Ms Bahumi Matebesi, Deputy Director-General (DDG): Corporate Services, Department of Labour (DoL), introduced the delegation from the Department and apologised for the absence of the Director General (DG), Mr Thobile Lamati, who was in Argentina attending a G20 forum.

Ms N Tolashe (ANC) interjected and asked why there was no formal apology for the absence of the DG.

The Chairperson agreed, and said this should be the first and the last time this happened. The Department would be sent back without presenting if the DG was absent again.

Action Plan of the Compensation Fund

Mr Vuyo Mafata, Commissioner: Compensation Fund, said the Fund had been receiving negative publicity from the media as well as key stakeholders due to its service delivery. As a corrective measure, to restore the image of the fund, and action plan had been developed in 2015, and operationalised as a guiding standard for effective and efficient service delivery. The objectives of the action plan were to improve service discharge in the performance of the fund; improve the efficiency of the fund in terms of administration, financial management and operations; and to restore its reputation. It had four key pillars. These were financial administration; customer focus and service delivery improvement; internal business processes and administration; and people management. When the Department had started with the plan, service delivery had ground to a halt.

Financial Administration

Only four items remained in progress under financial administration. These projects or initiatives included the revision of the employer assessment model, the loading and reduction of assessment tariffs, clearing of long outstanding reconciliation items, and correction of all prior open vouchers. A concurrent consultation process at the National Economic Development and Labour Council (NEDLAC) for the revision of the employer assessment model would start in March 2018, and the policy would be published for comments in the following month. The initiative of loading and reduction of assessment tariffs would be implemented in the 2018/2019 financial year.

The Fund was undergoing discussions with stakeholders on the proposed assessment model recommended by the actuaries’ report. 1 476 employees had been recommended for loading, and 11 803 employers had been recommended for reduction with effect from the next assessment year. This would assist in resolving the backlog of three prior years’ audit findings.

In implementing employer discounts, R211 million had been refunded back to qualifying employers. This had improved the use of online services by 98%.

To improve debt collection, enhancement on key-offs and batch processing had been completed, so interest and penalties for late payments had been charged. A total of R2.4 billion worth of interest and penalties incorrectly charged had been identified for possible correction as prior year errors, and an approval to write off the amount had been granted. Interest worth R108 million and penalty for late payment amounting to R112 million was charged as at 31 January 2018. The correction of prior errors had been completed.

Under the completeness and accuracy of the revenue initiative, system enhancements had been signed off. Interest worth R108 million and penalties for late payments amounting to R112 million had been charged as at 31 January 2018.

On the approval of financial policies, 20 policies had been ratified by the DG and had been implemented. The number of findings had been reduced from 141 to 89 in the 2015/16 and 2016/17 financial years. The fund had developed a manual process to clear outstanding reconciliation items in the clarification account, which had been reduced by 88% as at 31 January 2018. The system’s architectural limitations had been rectified to avoid future problems.

There had been implementation of algorithm checks for fund deposits, and a memorandum of understanding was signed with four banks and a database of all employers submitted to the banks. All deposits were validated against the database to ensure employers used the correct reference numbers.

In line with the project of improving the bulk payment process on Umehluko, the ability system module was decommissioned as a claims payment and reporting module in an effort to improve the process of benefit payments. Like the clarification account initiative, the legal case management system had gone live on 3 November 2017. To clear long outstanding reconciliation items, a process was under way to identify long outstanding deposits and overpayments, as R62 million out of R96 million of unclaimed merit rebates had been identified. Out of the R96 045 527 that had been outstanding as at 31 March 2015, merely R51 501 551 was still outstanding.

Customer focus and service delivery

In the area of customer focus and service delivery improvement, all initiatives had been achieved.

In the project for participation in the Department of Health contract to supply chronic medication, the chronic medication dispensing service provider had been appointed and commenced its distribution of medication in September 2016. Since then, the Fund had dispensed medication to 676 patients to the value of R 6 921 593. Regular monthly meetings were held with hospitals, organised industry bodies and other related stakeholders in an endeavor to enhance relations. This had led to achievements in the quarterly targets of the Fund in respect of processing medical invoices, thereby also enhancing the relations between the Fund and medical service providers.

In line with the project to develop and implement the Return To Work (RTW) programme, a rehabilitation policy and strategy had been developed and approved by the DG, and pilot projects would start in April 2018. A rehabilitation and reintegration unit had been established and interviews conducted to capacitate the unit. There was also the project for the establishment of a panel of experts for post-traumatic stress disorder (PTSD). The panel had been appointed and a regulation in that respect had been developed. For public perusal and review, the regulation would be serialised in quarter 1 of 2018/2019. The presentation of the draft policy to various committees had started on 20 February 2018.

A new and modernised call centre had gone live on 10 July 2017 in line with the initiative to restructure the query resolution process. Up to January 2018, calls had been reduced from 120 620 per month to 25 212 as a result of queries from repeat callers being resolved. The answer rate had improved from 76.9% to 86%, and the drop rate from 22% to 10.3%. Public liaison officers had received 234 calls, and 150 had been resolved in January, and the average turnaround time for each query being resolved was two days. The directorate was also visiting provinces where there was a huge volume of queries. In addition, customer care agents had been deployed in hotspot labour centres to assist with service delivery issues.

Internal business processes and administration

Four items were still in progress under internal business process/administration. These were eradicating claims backlogs at operations; improving the functional knowledge of teams through multi-skilling; processing open items from the SAP system of financial administration; and the project to improve hospital case management to introduce efficiency.

The Commissioner said the Fund was still doing capacity building in the provinces. Under the restructuring of the employer registration and compliance functions to align core business initiatives, the Minister of Labour had approved a new structure to realign the core business functions of the Fund. The move of the initiative from the Chief Directorate: Financial Management to Operations Management was part of the reviewed organisational structure introduced from 1 October 2017. The move was being implemented and vacant senior management posts had been advertised. Core business posts had been prioritised for filling before the end of 2017.

On the eradication of backlogs at operations management, there was ongoing progress with both the medical and compensation claims backlog. System enhancements to enhance the speedy adjudication of claims had been implemented. These addressed system challenges in respect of adjudicating claims. Posts for skilled medical and claims personnel in labour centres and provincial offices were being filled. 67% of undecided claims which had been registered on 31 March 2017 and backwards, had been adjudicated. The Fund had had to adjudicate 12 481 claims from the backlog, and as at 31 January 2018, 258 226 invoices had been paid, amounting to R1.411 billion.
On the processing of items project, there was 382 open vouchers for total temporary disablements (TTDs) to the amount of R2 390 951 from 9 November to 14 November 2016. The payment of TTDs had not changed since November 2016, and with the integration of uMehluko, this project would re-commence. As at 7 February 2018, 1 056 permanent disability awards amounting to R21 135 899 had been paid, and 235 TTD’s amounting to R2 417 875.

The initiative to fill medical posts in provinces had seen the appointment process of senior medical personnel being completed. The junior positions in most provinces had been filled as well. In the project to improve hospital case management, the appointment of a service provider had been put on hold and would commence with the business case and policy in February 2018. In the interim, an in-house case management process had been developed and implemented from the second quarter of 2017/18 by the medical case coordinators in the provinces on selected cases.

To implement the Commission for Conciliation, Mediation and Arbitration (CCMA) case management system for hearings and objection matters, the legal case management system had gone live on 3 November 2017.

The fraud prevention plan project -- the declaration of financial interests – had been implemented for senior management service (SMS) members. The non-SMS members’ policy had been approved but not yet executed. Security background screening of officials was being done on a regular basis. The ethics survey had been completed and recommendations were being implemented. Fraud and ethics training had been conducted for all officials.

People Management

The Commissioner said there were some grey areas in the sphere of people management, characterised by unrest because of the decentralisation of the Fund. Only one project for enhancing training and development was still under way. To assess the impact of the decentralisation of staff, investigations on decentralisation issues had been conducted, a report had been produced and recommendations implemented.

A skills audit had been conducted and a training plan developed. Implementation was under way, and a gap analysis of skills had been conducted. This had indicated a need for a combination of training and development of skilled personnel. To adhere to performance management, and the provision of support, training and development interventions, coaching and mentoring were being undertaken as part of the implementation in accordance with the recommendations of the skills audit project. The performance management policy was being strictly implemented -- all staff had performance agreements and were being assessed bi-annually.

On the project of improving communication, a change management project had been completed, a report produced and a survival guide for staff with regard to future change interventions had been developed. All new projects were following a formal change management process. A revised staff structure had been approved and was being implemented. The Department had adopted a two-pronged strategy with regard to human resources and now recruited people with the skills required, especially the financial and medical skills. In situations where the employees did not have the necessary skills, the Department sends them for training.

The Compensation Fund’s organisational functional structure had been finalised and approved by the Minister on 31 March 2017. The structure was being implemented during the 2017/18 financial year. 86%of the jobs in the revised structure had been evaluated, and the job evaluation process was continuing. 71 posts in the revised structure have been captured on the Personnel Administration System (Persal).


Mr M Bagraim (DA) said that there had been some negative media comments and as a result, people would ask why they should claim from the Fund when they did not get anything. He commented that the Fund’s good work should be communicated, as the public still had a perception that applying to the Fund was a waste of time. The best way to counter the negative media comments was for the Department to start speaking to the radio stations and tell the people the good news that comes out of the Fund. Private doctors were rejecting the claims, thus putting pressure on the hospitals. He asked if something could be done about that. Why was the issue of the computer system always hovering under the mantra of “almost there”? He said there should be an income tax amnesty for small businesses so that everyone was under the net. The business community did not realise the benefits of being registered, so the Department should explain the benefits to them. He asked why people were having problems with registering. Did the Department have a pharmacist to dispense the medication? There were still a lot of illegal claims, with applicants pretending accidents occurred at work places. He asked if the Department had a system in place to detect illegal claims. He applauded increase in the Department’s answer rate,had  which improved from 76.9% to 86%.

Mr D America (DA) was delighted to see progress with the implementation of a comparative analysis last year and this year. He was also happy about the organogram indicating the skills structure. He sought clarification on the non-completion of the enhancement training programme. Did the Department contract a consultancy to assist and if they did, at what cost? He was satisfactied with the audit process action plan, but asked about the current status of the disciplinary process in which five members had been suspended last year.

Ms S van Schalkwyk (ANC) said that taking a closer look at the last update on 15 November, a few items had remained stagnant. She asked if three months was not enough to show progress with the response to audit findings, for example. The reconciliation process was still the same -- there was movement, but in a very slow and piecemeal manner. Another area of concern was the issue of people dealing with disability, as  it was difficult to analyse if there was real progress or not. She asked when the Department was planning to totally eradicate the problems, and for details of the Fund’s vacancy rate.

Mr W Madisha (COPE) said that there were serious problems, and referred to the R70 billion not claimed. The issue of corruption permeated all the structures of government, and he asked the Department if they were not having that kind of problem with the Fund.

The Chairperson asked why no disciplinary hearings had been held, and why the Department left people unprosecuted. Why was the Department so slow when it came to redeploying trained and skilled people?

Compensation Fund’s response

The Mafata said that they were improving communication at community radio stations through talk shows, to boost the positive image of the fund.
In response to private hospitals turning down patients, leading to overcrowding at other hospitals, the Department had improved the funding.

On the issue of disciplinary hearings, he referred to the cases in Durban, where a person had chosen to go to court. That was why the Department had ended up making a decision to go to court.

On the issues surrounding employers who have not previously registered with the Compensation Fund, employers were given amnesty to do so and submit annual returns as per the Compensation for Occupational Injuries and Diseases (COID) Act. Part of the challenges that the department is facing or having with employers involve the fact that when employers do register, in some cases they don’t register in the correct classes, they register in the wrong classes with the aim to score lower assessment rates. A lot of employers have attempted to register in the past but the registration process would take longer than 12 months. As a result, the department is encouraging employers to register and the department also developed an online system; a one-stop-shop such that an employer could be able to register and complete the process within 20 minutes as well as airing their views on the website and everything they want in that process. In line with the queries of claims which were not dealt with, the rationale was that the Compensation Fund found that the processing of claims is a process and there is a missing key document that has not been finalised; the final medical report so that the department will be able to assist. Other people have also not submitted claims in the past. Once the outstanding document and other claims not yet submitted comes in, the department would make a decision on liability for the processing of claims

The Department had contracted a doctor with a pharmaceutical licence to dispense medication.

Training was a continuous process in terms of the structure of the organization, and the Department was recruiting, as well as disbursing long-term bursaries for further studies by personnel.

The Department had completed an in-depth forensic audit involving the staff who had been suspended, and would finalise the cases. The precautionary suspensions were just to enable the audit. It was waiting for one report to be finalised and would then engage law enforcement agencies to deal with the matter.

The training of people was a continuous process and the reclassification of employers was also a long term process.

Some people were getting equipment to assist them, and therefore did not need medication for chronic diseases or medication.

The Commissioner apologised for not showing the numbers for to compare progress between last year and this year. He promised that the Department would provide statistics next time to allow for a comparative analysis.

He said the Department had created a pension and rehabilitation unit to deal with claims coming from those particular sections.
The Department did not have a problem of unclaimed funds, or corruption in that regard.
It was also competing with the Department of Health to employ doctors, and had nine doctors in the provinces.

Mr America commended the enthusiasm and zeal of the Department. Although things may not be perfect, progress had been made.

The Chairperson said that the Department’s free services must benefit society. She cited the instance of a man from Durban who had lost his arm in a work place accident. In this case, she pointed out that people did not have to approach lawyers, and she tasked the Department to do a follow up on why on TV it had been reported that there had been a mistake. 

Committee minutes

The Chairperson sought consensus to adopt the minutes of 14 February 2018.

Mr America (DA) proposed their adoption, and Ms L Theko (ANC) seconded. The minutes were adopted.

Revised Committee Programme

The Members deliberated on the draft revised programme for the first term of 2018. The Chairperson proposed conducting public hearings, as well as other tasks for the Committee -- in particular, a discussion on the National Minimum Wage on 28 February, and 7, 14 and 27 March.

Ms Van Schalkwyk proposed that Members should meet on 19 March, or 22 and 23 March, and not 27 March, citing that 27 March was Human Rights Day.

Mr America said he was in agreement with Ms Van Schalkwyk, except that Monday 19 March was a constituency day, so Members would be visiting constituencies.

The Chairperson said the due date for the implementation of the National Minimum Wage was 1 May, as presented in the State of the Nation Address (SONA) by the President. She therefore suggested that Members should meet on 19 March. From 12:30pm on March 22 to 23 March would be for public hearings. She urged Members to sacrifice the constituency day.

Mr Madisha disagreed, saying the constituency visits were critical and Members had to go and interact with their constituencies. At the same time, he was not ruling out the importance of the matter. All others days except Mondays were fine.

The Chairperson ruled out 15 March, saying the due date for submission of other documents relevant for the meeting was 16 March.

Mr Madisha proposed a later date -- 28 March.

Mr Bagraim said that since the legislation would have repercussions for decades, Members must follow the processes and procedures without undermining the process.

Ms Tolashe interrupted Mr Bagraim on a point of order. She said it was not like public hearings were not going to be conducted.  

The Chairperson insisted on squeezing the meeting in on 19 March.

Mr America responded that the constituency day was beyond their control, and it was the prerogative of their political principals to decide.

The Chairperson asked who should be invited first for the public hearings,.

Mr Bagraim suggested that four federations should be invited: the South African Federation of Trade Unions (SAFTU), the Federation of Unions of South Africa (FEDUSA), the National Council of Trade Unions (NACTU), and the Congress of South African Trade Unions (COSATU).

The Chairperson asked if the federations were all accepted in the Bargaining Council, but Mr Bagraim said he was unsure.

The revised Committee programme for the first term was adopted.  

The meeting was adjourned.


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