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, [email protected], 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

 The new Act will make benefits available to a much larger proportion of the workforce, and also has the potential to stimulate economic growth.
 
Author: Arlene Leggat, Director, South African Payroll Association
 
The Unemployment Insurance Amendment Act, which was signed into law by President Zuma recently, has been widely reported on as likely to have a positive effect on the country’s workforce. However, it’s also important to point out it’s potential to help stimulate the economy.
 
Changes brought on by the new Act strengthens the economy and widens the safety net for employees, as it will force the Unemployment Insurance Fund (UIF) to free up more capital to a wider range of people now being able to claim and claiming being made easier. This is critical because in South Africa, on average, each employed person has 10 dependants, pointing to a deeper impact on the economy.
 
The Unemployment Insurance Fund (UIF) has been exceedingly good at collections and has built up an immense surplus with its current value standing in excess of R99-billion.
 
Although the new Act will have no material effect on payroll administrators or HR professionals, it does have the potential to affect their “clients” quite profoundly. These professionals have the knowledge that employees generally lack, and they should take proactive steps to ensure that employees understand what the new Act means.
 
This important educative role will help employees unlock new value, and will eventually contribute towards a motivated, engaged workforce, while ultimately helping to stimulate the economy.
 
A deeper look
As mentioned, one major innovation of the new Act is to allow a much wider range of people to claim unemployment benefits. A notable category here is foreign nationals, who previously had to contribute to the fund but could not claim. Now, foreign nationals who are working in South Africa legally can claim unemployment benefits on the same terms as South Africans. This is set to benefit a large number of people, given the great number of foreigners in the semi-formal sector, including domestic workers.
 
Another group that is to benefit is students on learnerships. When their learnerships expire and they do not succeed in finding employment, students are now be able to claim unemployment benefits from the Unemployment Insurance Fund (UIF). Similarly, employees who have their work hours, and thus their pay, reduced can now claim for the loss of income. In a struggling economy, companies often reduce work hours in order to avoid retrenching employees—the new Act thus helps mitigate the impact of a reduced salary on those affected.
 
Easier to claim
The Unemployment Insurance Amendment Act also makes some significant changes that will make it easier to claim benefits. A welcome change given the fact that many have found it difficult to claim from the UIF. Changes to help reverse this unsatisfactory state of affairs include relaxing some of the time constraints for claims.
 
For example, as per the previous Act, death benefits had to be claimed within six months, which resulted in many families finding out too late that a benefit could be claimed and missing the deadline. Under the new Act the time limit for claiming death benefits has been extended to 18 months, which will afford families enough time to complete the long (and often arduous) administrative process required.
 
Under the old regime, many expectant mothers simply never claimed maternity benefits because they could not claim until the child was born. This effectively meant they would only receive the money well after they had returned to work. Now pregnant women can claim eight weeks before the scheduled birth, which improves their changes of receiving the money when they need it. The maternity benefit has also been increased from 45 percent of normal pay to 66 percent.
 
Those who are unfortunate enough to have run out of sick leave also stand to benefit. Previously, seriously ill employees could only claim from the UIF if their illness continued for 14 working days after their sick leave was exhausted. The threshold is now seven days, thus reducing unpaid sick leave in theory to little over a week.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], 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

It’s not uncommon for a payroll to be consistently managed so poorly that workers threaten to strike over incorrectly administered pay. Often, the person administering the payroll is not adequately qualified for the job.
 
Lavine Haripersad, a Director of the South African Payroll Association (SAPA), says such risks are why hiring accredited payroll practitioners is so important. Yet, many employers don’t realise how much skill it takes to run a payroll. “There are literally hundreds of legal requirements and specialised procedures to follow,” she says. “It’s therefore critical that organisations have professional payroll administrators who know, understand and can practically implement them.”
 
So what do the top payroll administrators know (that business managers sometimes don’t)?
 
Correct Procedure
Payroll consists of various processes that must be correctly executed. “Qualified payroll administrators know these processes intimately,” says Haripersad. “These processes include record keeping, employee take-on, month-end procedures, year-end procedures, and more.”
 
Calculations
There are many complex payroll calculations related to tax, medical aid, pension funds, provident funds, allowances, reimbursements, deductions or bonuses. A payroll administrator knows how to perform them in accordance with the latest legislative requirements.
 
The law
Payroll is governed by an extensive set of legal and regulatory requirements. Payroll administrators are trained in the law and ethical governance, and keep themselves updated on new standards as part of their duties. “So they act as advisors to their organisations, guiding them in the right direction to avoid legal problems,” says Haripersad.
 
Information management
Payroll information and data must be collected, stored, secured, destroyed and used in accordance with various laws and accepted procedures. “The safeguarding of employee data must adhere to the Protection of Personal Information Act,” warns Haripersad. The proper information must also be submitted to the government at defined intervals. And correctly calculated payroll aggregates must be reported to accounting for recording in the general ledger. “Payroll administrators are well versed in the function of information inside and outside the organisation.”
 
Tax
Employee tax is so critical it demands special attention and skills only a professional payroll administrator can provide. This is especially true of larger organisations where the taxable portion of intricate remuneration, allowances, expense claims, deductions, bonuses or perks schemes is difficult to determine.
 
Ethical practices
Accredited payroll administrators are specifically disciplined in ethics and bound to the association’s Code of Professional Conduct. Not only do payroll administrators have an authoritative standard to work to; employers also have in SAPA a means to resolve unethical or unprofessional behaviour. The same can’t be said for non-certified administrators.
 
Project management
Payroll administrators are also trained to work in dynamic environments like project management where each payroll project might be different from the last. They therefore have project management training and can often act as project administrators.
 
Strategic advisors
Overseas companies see payroll for what it is - a key business enabler. International payroll administrators can work towards a Master's Degree in payroll management and provide direction to national and global payroll initiatives. But even a single organisation can derive such value from a well-trained payroll administrator.
 
Payroll administrators offer a wealth of knowledge that an employer can leverage to their benefit. Says Haripersad: “If organisations see payroll administrators as managers rather than workers, they will appreciate the strategic value they stand to gain from their input.”

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], 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

By Lavine Haripersad, Director at the South African Payroll Association (SAPA)
 
From the outside, payroll seems simple. Get the right software. Push a button at the right time. Then, hey presto! Your workers are paid. Right? If only. Plus, the old adage of “garbage in, garbage out” still applies. To do a proper job, you need fully qualified and experienced payroll administrators on staff. If you’re not convinced, take a look at what could go wrong.
 
Unhappy workers
Employees are sensitive about their income because it's tied to their happiness and safety. If their pay is late or incorrectly calculated, they become suspicious of their employer and demotivated. Payroll administrators focus on getting pay to workers accurately and on time.
 
Wasted time
Overbooked or under booked hours, unearned overtime, excessive vacations and absenteeism, or frequent sick leave become the norm if left unchecked. Administrators monitor time closely because it’s a key component of payroll. They can report irregularities and help improve performance.
 
Leaked information
The Protection of Personal Information Act demands that employee records be confidential and properly protected. That includes payroll and earnings information. Payroll administrators are disciplined to conscientiously guard their data because of the legal implications of leaked information.
 
Unhappy government
SARS deadlines are strict. If information is submitted late or incorrectly, penalties could accrue on a daily basis. The longer it takes to resolve, the higher the costs. Haripersad says that payroll administrators understand the process intimately. They know which documents to submit, when to submit them, what information to include, and how to avoid expensive mistakes.
 
Tax delinquency
SARS frowns on tax evasion and will take legal action even if it’s unintended. Tax calculations are far too complex for an amateur. Mistakes can be costly. Qualified payroll administrators will correctly calculate various employee tax deductions, administer withheld tax amounts until they are paid to SARS, correctly complete tax submissions, and much more.
 
Legal problems
If payroll doesn’t comply with legal requirements, lawsuits may ensue. Employees will sue the company if not paid. And not adhering to various government regulations could land you in hot water. Compliance is at the core of a payroll administrator’s duties. They make time for the details.
 
Bad audits
If independent audits regularly uncover inaccuracies in a company’s payroll, shareholders could lose faith and withdraw their investment, followed by a drop in share price. Further, the press and public interest groups could highlight such discrepancies, tarnish the company’s reputation, and shrink its market and income. Professional administrators keep precise records that pass audits every time.
 
Administrative costs
If mistakes are regular, they'll compound into higher administrative costs because work must constantly be corrected. Payroll administrators perform their duties frequently and are therefore well-practiced, so costs are kept low.
 
Organisations should not to take chances with unqualified staff. Payroll administrators offer protection against legal, tax and procedural risks. Why settle for less?
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected] www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Associatio