Author: Arlene Leggat, a director at the South African Payroll Association (SAPA) South Africa has a higher than average rate of overtime fraud owing to limited prevention and detection systems, and a workforce which has become dependent on the financial advantage it offers them. Every year another story revealing extensive overtime fraud hits the media, exposing how easy it is for employees to defraud companies. In February 2017, 283 employees were implicated in the Merafong municipality for committing fraud estimated to be valued at millions of Rands. Overtime fraud is a lot more prevalent than we want to believe. The challenge is that most companies tend to not take the case further than a rap over the knuckles - dismissing the person and making them another company’s problem. The right thing to do is charge them and ensure they get a criminal record. Alongside a clearly defined policy around overtime fraud, or theft of any kind, the threat of criminal action will go a long way towards making anyone think twice before they lie about the hours they’ve worked. It isn’t, however, the only step that must be taken towards effective prevention. Measures of prevention Employees need to realise that overtime fraud can be as little as claiming one or two extra hours a month, not just 200. A lot of people don’t see those little hours here and there as fraud. It is. And it should net them a criminal record. Organisations must educate employees on overtime hours, what constitutes fraud, and what will happen should they be caught committing it. Then, they need to invest in systems which can mitigate fraud overall. One such solution would be to implement an automated clocking-in system. It isn’t infallible, but it does allow for improved control over hours spent working versus hours put down on billing. Another option is to implement controls within payroll, making it the last line of defence. The business must put its overtime policy into play from the start and it must ensure that it is strictly adhered to. It also needs to comply with overtime legislation as outlined in the Employment Act. Two sides to the story The Basic Conditions of Employment Act states that employees are not allowed to work more than three to four hours of overtime per day. The number of hours is dependent on the length of the standard work day, and the role of the employee. Collectively, within a seven-day period, you are not allowed to work more than 10 hours of overtime – it is legislated and companies cannot change this at will. Unfortunately, this is largely ignored by most companies in South Africa due to several factors, including a lack of skilled staff. So, if overtime policy isn’t being adhered to and the company isn’t enforcing it, then it opens the door for employees to commit fraud. Consequences count There must be someone monitoring overtime, checking it against systems and legislative parameters and enforcing its adherence rigorously. Not only will this limit the employee’s ability to commit fraud, but it will ensure that an eye is always on the overtime ball. If employees believe that there are no consequences and that they can push boundaries, they do. This then leads to a weakened moral culture within the business, and that can have far reaching effects on morale, productivity and, of course, fraud. To limit the potential for overtime fraud and to ensure that employees are also protected against working more hours than they should, the organisation must actively develop policy to monitor it. Payroll has a pivotal role to play in balancing overtime requested against internal policy and legislation, ensuring that hours are kept within legal limits from the outset. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAPA please visit: Website: http://www.sapayroll.co.za/ Twitter: @SAPayroll LinkedIn: The South African Payroll Association
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What it means to be a third-party agent for SARS
Few employers or employees truly understand what it means when you are nominated by The South African Revenue Service (SARS) as a third-party agent, which often results in a matter that could be resolved speedily lingering unnecessarily and impacting both parties. In this instance a Payroll professional is in a prime position to help manage the process. “Your company’s Payroll administrator performs many services that can alleviate a company’s administrative burden,” says Arlene Leggat, a director at the South African Payroll Association (SAPA). How it works If a taxpayer fails to submit their returns, or to pay their income tax, SARS will apply penalties every month until their returns are received and all amounts owed are settled. However, if a penalty is outstanding for over two months, the Tax Administration Act allows SARS to appoint any person, including an employer, to hold money for that taxpayer as SARS’ agent. If nominated as such an agent, that person/organisation will be sent an AA88 Notice showing an amount to be withheld from the employee’s income, which is to be paid to SARS by the due date shown on the form. It’s important to understand that when you, as an employer, receive an AA88 Notice, you become legally accountable for the payments. Penalties against an employee with unpaid tax will stop, but for outstanding returns penalties will be applied until the forms are submitted. Failure to adhere to the AA88 instruction will result in the agent being penalised for late payment. A separate penalty will be incurred for each month that the employee fails to submit their tax return. Every three months SARS will accumulate this debt and issue an AA88 to the Employer (Agent). SARS will also regularly send the agent an AA88 Reconciliation Statement showing any paid, cancelled or outstanding amounts for all employees against which an AA88 has been issued. What Payroll should do Any Payroll department should be familiar with the entire AA88 system, how to process payments and how to resolve issues of all kinds. If you’re unable to make deductions, as will be the case if the taxpayer has left your employment, Payroll should inform SARS of this situation immediately, via the @EasyFile system. On receipt of an AA88, Payroll should inform the employee that deductions will be made, ensure they understand their obligation, and assist them with settling their debt promptly. If the AA88 is for outstanding taxes, Payroll must ensure the employee knows why the deductions are being made to avoid that a sudden cut in pay might be perceived as trickery on the employer’s part and the worker becoming demotivated and unproductive. If the employee hasn’t submitted their return, Payroll should inform them that penalties will accrue until they’ve done so and explain the process to be followed. If possible Payroll may even offer assistance in completing and submitting such returns. They would require one of their Payroll team to be a registered Tax practitioner in order to do so. An employee who earns under R350 000 for the tax year isn’t required to submit a tax return. However, mistakes can creep in and penalties are applied in error. If Payroll receives an AA88 Notice that appears to be penalties for late submission (usually increments of R250), they must encourage the employee to take it up this with SARS to resolve as soon as possible If the deduction will cause the employee financial distress, Payroll should inform the employee that they can reduce the deductions by proving to SARS they cannot afford it. The employee must gather information about their expenses and submit this to SARS. If SARS deems the case valid, it may split the payments into more manageable monthly installments. Payroll should also keep the employee updated on deductions, especially in the case where unsubmitted returns yield new penalties every month. In this way, the employee can see the dynamics and that their employer is not withholding pay unfairly. In addition, if any refunds are due to the employee because of double payments, Payroll can inform them of the process to be followed apply for a refund. And if the employee leaves the company or dies, Payroll should apply for cancellation of further AA88s and refunds for any payments made afterwards. Education It would be greatly beneficial for any company to send Payroll personnel that are not acquainted with processing AA88s to SARS’ free workshops to ensure they have the latest information and requirements at their disposal. Value-added service “Make sure your Payroll department isn’t only processing AA88 claims endlessly, but providing a value-added service that keeps your workers happy, motivated and productive,” says Leggat. “They should always strive to help employees protect their income and reduce the administrative burden on your company.” ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAPA please visit: Website: http://www.saPayroll.co.za/ Twitter: @SAPayroll LinkedIn: The South African Payroll Association |
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