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, [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

Author: Cathie Webb, Director, South African Payroll Association
 
Minister of Finance, Pravin Gordhan, released updated tax tables on the 22 February as is customary in the budget speech towards the end of each government financial year. 
 
We understand that as company employees we will be paying more tax and therefor taking less money home in our pockets at the end of the month, because the country needs more money to keep things running.
 
Calculating your tax accurately can be quite a complex job, which is why there are now formal qualifications allowing payroll people to become specialists in this area, at Certificate, Diploma and Degree level.  Things like allowances, fringe benefits (i.e. either payments made on your behalf by your employer, or goods), medical aid and retirement funding contributions and various other factors impact the calculation of what is the first item to be determined, being taxable income.
 
Using the Tax Table
You may have seen the updated tax table (below), but how do you translate this into knowing how much tax should be deducted from your earnings?
 
Taxable income (R)              Rates of tax (R)

0 – 189 880                           18% of taxable income

189 881 – 296 540                 34 178 + 26% of taxable income above 189 880

296 541 – 410 460                 61 910 + 31% of taxable income above 296 540

410 461 – 555 600                 97 225 + 36% of taxable income above 410 460

555 601 – 708 310                  149 475 + 39% of taxable income above 555 600

708 311 – 1 500 000              209 032 + 41% of taxable income above 708 310

1 500 001 and above             533 625 + 45% of taxable income above 1 500 000

The first column on the table represents the Rand value of your anticipated earnings in the tax year, which runs for the period March 2017 to the end of February 2018. 
 
So, if you earn R10 000 taxable income in March, this must be translated into your anticipated annual income, thus: R10 000 x 12 = R120 000 (a).  You can expect to have taxable income of R120 000 by the end of February next year.
 
To calculate the tax on this, refer to the second column on the table, namely Rates of Tax.  To see which level of the second column to use in your calculation, refer to the first column, where your anticipated annual earnings fall into the very first category of earnings, i.e. R0 to R189 880.  This means that you can use the first level of tax deduction, which is 18% of your taxable income being payable as tax.  R120 000 x 18% = R21 600 (b), which should mean that over the year you need to pay R21 600 tax.
 
Rebates
However, it is not quite this simple, as SARS offers tax rebates (i.e. refunds) every year.  There are primary rebates, which apply to everybody, and secondary and tertiary rebates which apply to people who are between 65 years and 75 years old, and to people who are older than 75 respectively.
 
The rebate table for the 2017 / 2018 tax year looks like this:

Tax Rebate                             2018 Tax Year
Primary                                   R13 635

Secondary (65 and older)     R7 479

Tertiary (75 and older)          R2 493
 
This means that from the initial calculation of R21 600 tax you determined, you can deduct (if you are not yet 65 years old!) R13 635, amounting to a total of R7 965 tax that is due in the year (annual tax payable).  To determine how much tax you should pay in March, you simply divide the annual tax payable by the number of months in the year, thus R7 965 / 12 = R663.75 (c).
 
In this example, we have stated that you are paid monthly, which is why in steps (a) and (c) you multiplied and divided by 12.  Some people are paid every week, or perhaps every fortnight.  The same calculation would work, but instead of multiplying and dividing by 12, you would multiply and divide by 52 (weeks) or 26 (fortnights).
 
Please remember that there may be a number of contributors to the calculation of taxable income – before suspecting that your payroll department has not calculated tax correctly for you, please confirm exactly what is calculated into your pay package to determine taxable income.
 
Photo caption: Cathie Webb, Director, South African Payroll Association.
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

Employees who are paid efficiently, accurately and on time are productive and profitable, which is why payroll administration is a high-return investment for every organisation.
                                                                                                            
“But payroll administration needn't be expensive,” says Lavine Haripersad, Director at the South African Payroll Association (SAPA). “By taking some sensible steps, organisations can reduce inefficiencies and save money in the long run.”
 
Although some new organisations might manage their payroll using a combination of paper forms and spreadsheets, this translates into wasting money on unnecessary labour costs, double-checking input and calculations, or correcting errors. “Invest in specialised payroll software that does all the background work for you. It seems pricey, but it pays dividends in speed, accuracy and compliance,” says Haripersad.
 
The cost of legislative penalties and fines resulting from non-compliant payrolls could impact a company hugely as infringements are not tolerated by legislatively authorities. How confident are you therefor that your systems and processes have fully incorporated legislative obligations?
 
Go for quality
Haripersad warns against utilising freeware or open source systems in order to save money. “Inevitability, you will suffer from the lack of support, while viruses will also take their toll. Always choose a well-known package. You'll realise savings through ongoing development and professional support.”
 
Companies are also advised to use software to its maximum effect by configuring the latest tax tables and other rates, which will allow for calculations that once took hours to complete, to be done in minutes. In addition, any available templates, business rules or automated procedures, like approval processes, escalations, alerts or automatic report transmission should be used. Says Haripersad: “Check your package's capabilities with your payroll software consultant, and stay abreast of the improvements that software providers continuously add to their solutions. It could trim hours off your monthly workload.”
 
Set rules
The larger an organisation’s payroll, the more administrators it will need to stay ahead. To run cost-effectively, a strong set of payroll rules must be implemented and adhered to. “Policies and procedures ensure the payroll team’s work is right the first time, every time, and aligns with organisational requirements,” states Haripersad.
 
However, complications may also arise from incorrect configuration of such pay rules. It is therefore highly recommended that companies engage the services of an external professional to conduct a full payroll audit, to identify potential risks and areas of exposure to the business. This gives an opportunity to take action and to remedy the situation.
 
As a company’s workforce grows, policies and procedures may no longer be appropriate or efficient. It is therefore advisable to review systems once a year to ensure the organisation can scale with the growth. Important points to consider include whether the current software in use is still appropriate; where excessive costs can be trimmed from processes and how these can be simplified. All of which could potentially hold notable savings for a business.
 
Get support
“A good payroll consultant has worked with many companies and has learned how the best payrolls are run,” says Haripersad. “They'll assist a company in creating the most cost-effective system possible and stay compliant.” Consultants may also assist with payroll audits, and can advise on efficiency improvements and irregularities.
 
Perhaps most importantly, Haripersad urges companies to avoid managing payroll with unqualified staff. It might seem cost effective initially, however, errors, inaccuracies and non-compliance will snowball. “Employ qualified payroll administrators from the start,” Haripersad stresses. “Their knowledge, experience and dedication will create cost-cutting efficiencies.”
 
Robust reporting
Companies should further ensure that they have robust reporting and legislative submission mechanisms in place. This will support meeting the critical legislative deadlines and avoiding penalties.
 
More than a server crash, organisational leaders fear a late or error-ridden payroll run. Therefore, never scrimp on this business-critical function. By using the correct software, processes and talents, you can lower costs while protecting your payroll integrity.
 
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