What is Letter of good standing? Here’s why you need one

A Letter of Good Standing is an official document that proves you are COID registered and up-to-date with your payments to the Compensation Fund.

The reason why Tenders and Contracts so often require you to have a Letter of Good Standing is simply to make sure you’re taking full responsibility of your employees and to make sure you’re authorized to operate legally.

If you’re not COID registered or you’re not in good standing with the Compensation Fund, your business probably owes the Workman’s Compensation fund money.

More importantly, your employees aren’t covered by the Compensation Fund in the case of any work-related accidents in terms of medical expenses or compensation in the case of permanent injury or death.

What precisely is the Workman’s Compensation Fund (COID) and why do you need to pay them?

Almost every employer is required by law to register with the Workman’s Compensation Fund (COID).

This government fund helps employers pay medical bills or compensation, in the case of death, related to an injury on the job to any employee. However, there’s a yearly fee connected to this fund.

A Letter of Good Standing proves that you are in good standing with COID, with no outstanding yearly payments. Without registering with COID or without paying your yearly fees, you’re not eligible for a Letter of Good Standing.

Where can I get a letter of good standing? There are several steps involved in obtaining a letter of good standing.

STEP 1: Register your Company with COID

The first step in getting your Letter of Good Standing is registering your business with COID. During the process, you will have to pay a registration fee.

You can either register directly with the Labour Department or use our COID service, where our team of Experts will complete the process for you.

Our COID process only takes 25 days whereas working directly through the Labour Department can take up to 3 months or more. Plus we’ll send you all the forms and the updates straight to your email inbox.

Document you’ll need:

  • Valid South African ID
  • Your Company’s Registration Document
  • COID Registration Form
  • Power of Attorney (this is only necessary when using our COID service, to legally permit us to complete the application on your behalf)
  • Proof of Payment for your registration fees

STEP 2: Submit your employee expenses

In this step you have to submit your Company’s total estimated wage and salary expenses for the year (according to financial years) in order for the Compensation Fund to calculate the amount payable to them.

They work out your fee as a percentage of your yearly total wage and salary expenses. This means you have to submit your wage and salary expenses (in a Return of Earnings document) every year.

For first-time registrations, the submission document is included in the COID Registration form, as submitted in step 1.

Renewals, however, require a document called the Return of Earnings.

Once again, you can either work directly through the Department of Labour or you can use our streamlined service, avoiding long queues and confusing admin altogether.

Documents you’ll need:

  • A Return of Earnings Form (only for renewals)

Step 3: Pay your yearly / monthly fee to COID

In about 3 working days after your Return of Earning document submission, the Department of Labour will send you a Notice of Assessment (NOA) stating the amount payable to COID.

After you’ve paid that amount, you’ll receive a Letter of Good Standing proving your employees are covered for a year.

If you can’t pay the yearly cost in one go, you have a monthly payment option. However, you will still need to put down a 30% deposit. Unfortunately this option also means you’re Letter of Good Standing will only be valid from month to month, upon payment.

Whenever you neglect to pay your account or forget to renew your Letter of Good Standing by the end of April, the Compensation Fund will not cover your employees in that time.

Documents you’ll need:

  • Notice of Assessment (sent to you by the Department of Labour)
  • Proof of Payment for your yearly fees

 

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