Importance of a Letter of Good Standing

Importance of a Letter of Good Standing

You can expect for our team to be professional, efficient and absolutely dedicated while we work hard to get your compensation fund letter of good standing prepared for you. If you would like to know more about the procedure, we recommend that you sign up now with The Return Of Earnings and Letter of Good Standing Package. Ensuring that your business is compliant is one of our main aims. In addition to this, we want to protect your employees against illness and injury. Waste no more time contact us via email or telephone to discuss your application for a letter of good standing and what it means for your business. This letter has become more and more important. Some businesses will not have you conduct any business on their premises if you do not have a Letter of Good Standing.
MAKROSAFE have been assisting clients now for more than 23 years with their Letter of Good Standing.
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Tips on application for Letter of good standing

What is a Letter of Good Standing

The Compensation Fund has been set up to protect employees from the devastating effects of occupational diseases, injuries and even death. All employers are expected to register with WCA so that workers can claim compensation if they fall ill or suffer injuries at the workplace. All registered businesses who have even one employee are expected to pay annual assessment fees to be part of this particular fund. If you are not already registered, we can assist you with the process, starting with the first step: apply for a letter of good standing.

The Return of earnings and Letter of Good Standing Package
A letter of good standing is granted by the compensation commissioner to state that a business is fully compliant and has met with the requirements of the COIDA. In order to apply for this letter, you will need to comply with the following conditions of the Compensation for Occupational Injuries and Diseases Amendment Act, No 61 of 1997:
  • The employer must be registered with the Compensation Fund.
  • The employer must have successfully submitted all statements of earnings as set out in the COIDA.
  • The employer must be fully assessed.
  • All outstanding debt must be settled as per the COIDA.
With an annual letter of good standing, your business has been assessed and all outstanding amounts have been settled before the letter is applied for. Once it is received, your certification is valid for 12 months.  We are focused on and dedicated to ensuring that your business is compliant and that your employees and customers on the premises are safeguarded from potential illness or injury. We encourage you to get in touch with us to discuss your particular situation so that we can advise you on how best to apply for a letter of good standing for your business.

How to get a Letter of Good Standing

An application is done online with the Department of Employment and Labour or manually. Be aware that only one online application can be made annually, so we can do this annually for you when you register with us to do this on your behalf. We will provide you with a legal document to sign that grants us particular authority for the handling of your letter of good standing. This is highly recommended if you want to ensure the best possible outcomes for your application our team of professionals is well versed in how the system and process works. We can use our thorough knowledge and expertise to ensure that the process is swift and hassle-free for you. Ensuring that you can have complete peace of mind is our main objective.
For assistance with obtaining your Letter of Good Standing, click on the image below and follow the prompts:

My Safety Shop - Letter of Good Standing

What is the purpose of a Letter of Good Standing

The letter of good standing is to ensure authorisation of claims from employees against the Compensation Fund. The fund has been set up to protect employees from the negative impact of occupational illness, injury and death. To be part of this fund, your business must pay an annual assessment fee and have a valid letter of good standing.
In order to receive this letter, you must register with the Compensation Fund and have submitted all earnings statements to the fund for perusal. You can expect for your business to be fully assessed and you will be requested to ensure that all outstanding debt, as per the COIDA, is settled before your letter can be provided. Once your letter has been granted, you can expect your company's certification to last for one year.

There are options to consider when applying for this letter. You can apply for one on a payment plan, where you can pay off the assessment fee over 2, 3 or 6 months. This is ideal for companies that do not have enough cash flow available or would prefer to pay monthly instalments over a lump sum. Those who wish to pay the assessment fee off must make an initial payment of 20% that is paid at the same time of application. All instalments must be completed at least 14 days before the expiry of your current letter. This assessment usually starts on the 1st of March every year.

More information from the Department of Employment and Labour about frequently asked questions:

Q - Under which circumstances can I obtain a Letter of Good Standing?
A - The employer can only obtain the letter if they comply with the requirements of the COIDA, including:
  • Submitting the latest return of earnings.
  • Assessment has been paid or instalments have been arranged.
  • An application should be made in writing, preferably on a letterhead and at least one week prior.
  • Quote the registration number, as well as a telephone and fax numbers with a dialling code.
  • Applications on behalf of the employer by Consultants or Agents should be in writing and accompanied by a Power of Attorney.
  • Tampering with the contents of these letters is a serious offence.
Q - What is the return of earnings?
A - At the end of January each year, forms are sent to all the registered employers ( These forms must be completed and returned not later than 31 March. The information on the form assists with the raising of assessment. CF-Filing website allows you to electronically file, pay and receive your Letter of Good Standing.

Q - When does the financial year end start or end?
A - The financial year of the Compensation Fund runs from the 1st of March to the end of February of the following year.

Q - What is regarded as earnings?
A - For the purpose of assessment, earnings mean before deductions any payments made to an employee which arise out of his employment and include:
  • Overtime of a regular nature, (not intermittent or irregular overtime).
  • Bonuses of any kind, including incentive bonuses and annual bonuses.
  • Commission, even though the amount may vary from month to month.
  • The cash value of food and quarters supplied to employees as part of a remuneration package. Cash value of fringe benefits such as a company car, free accommodation or accommodation at a reduced rate, etc.
  • Travel and other allowances paid regularly, as part of the package.
  • Where the employee is remunerated in accordance with a package of benefits, all items forming part of the package, other than employer contributions such as medical aid contributions.
  • Earnings/Drawings paid to working Directors of a Company or Members of a Close Corporation. (To be declared separately) only if it is a fixed Salary.
  • Excluded are the following:
    • Payments of a reimbursive nature.
    • Overtime worked occasionally.
    • Payments for specific non-recurring tasks which do not form part of an employee's normal duties.
    • Ex Gratia payments.
    • Intangible fringe benefits such as subsistence and travelling costs, lunch and costs for business meetings.
    • Travel and other allowances paid occasionally.
    • If a director/member's remuneration is profit sharing, the Director/Member is not an employee in terms of the Act.
Q - Which method does Compensation Fund use for Assessment Rating?
A - The assessment rate, at which an employer is assessed, depends on the nature of an employer's business operations. For rating purposes, employers are therefore divided into different classes and subclasses according to the nature of their activities. The assessment rates are fixed on the principle that each industry should carry the costs of its own accidents and are reviewed annually. Any adjustment is therefore in accordance with the accident experience.

Q - Assessment is not finalised and is referred for audit
A - Please provide the following documents to help us finalise the assessment:
  • Affidavit (Reason for variance/ Credit assessment).
  • Audited or Independently Reviewed Annual Financial Statement for the year under review.
  • Detailed payroll report for assessment year under review.
  • SARS EMP 501/Valid Tax Clearance if exempted.
  • Manual return of earnings (W.As.8).
  • Power of Attorney (consultants, bookkeepers and attorneys when representing the employer).
NB: If the required information above is not received within 21 calendar days of the date hereof, an assessment based on estimation will be made.

Q - What are the benefits (of registering with the CF) for the Employer?
A - The employer can benefit as follows:
  • The COIDA makes provision for compensation to the employees for occupational injuries and diseases.
  • The employer is protected against all civil claims which may be instituted against him in the event of an injury on duty, even in the event of alleged negligence.
Q - What is a Merit Rebate?
A - If the accident record of an employer during a particular period is, in the opinion of the Director-General or FEM, more favourable than those of employers in comparable businesses, the Director-General or FEM may give such employer a rebate on any assessment paid or payable by him. Merit Rebates are paid each year at the discretion of FEM's board in accordance with the FEM's articles of association and are not guaranteed.

Q - Why does Compensation Fund impose penalties on employers?
A - This Fund is protected by provisions which permit the imposition of penalties on employers who fail to pay assessments, or render returns, at a rate of 10% of the assessment.
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Posted date: 27th Jun 2022
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