The Association of Certified Fraud Examiners says that payroll fraud is the No. 1 source of accounting fraud and employee threat globally. It affects 27% of all businesses and lasts, on average, 36 months.
 
South African statistics are scarce, mostly because payroll fraud is under-reported by companies jealous of their reputations.

A rare public case was the arrest in 2014 of two Eskom employees for tampering with the corporation’s payroll network system in a scheme that could have costed the company billions.  Research by Alexander Forbes in 2011 showed that payroll fraud was costing South African business more than R100-million a year.
 
“Payroll fraud is very much a reality and, in South Africa, my experience is that it’s most prevalent in medium to large companies that run electronic payroll systems, and where the number of employees makes manual checking difficult,” says Nicolette Nicholson, director at the South African Payroll Association.
 
She adds that payroll fraud is an occupation, “The books will be balanced legally on the system, because it has applied legislation. But typically, the fraud takes place when new data is entered onto the system, and that’s why it’s not easily picked up by financial audits.”
 
Nicholson explains that payroll fraud usually requires collusion between colleagues, and small transactions that do not trigger alerts are preferred—one reason fraud schemes go on for so long. Most payroll fraud hinges on overtime claims, the payment of salaries to ghost employees whose bank accounts are controlled by the fraudster, dishonest expense claims and the payment of an extra month’s salary when an employee resigns or dies.
 
Causes for payroll fraud include intent and character, as well as peer pressure – where a person’s financial circumstances make them vulnerable to syndicates.
 
Nicholson advises that the best defence is to make a company a low-risk candidate by following these tips:
 
- Put controls in place from the beginning. Duties related to payroll processes should be rigorously segregated, with different people responsible for input, approval and release as a minimum. Frequent spot audits should be performed in addition to external audits, which do not cover segregation of duties. 

- Use external fraud examiners, as most fraud is committed by managers, an external agency should be used to undertake fraud checks. 

- Ethics management is a pillar of King III for very good reason: if the company’s code of ethics is truly embedded into the corporate culture, the occasional rotten apple will find it harder to identify accomplices. 

- Achieve process stability. Pay day is an emotive issue, so small issues tend to get ignored in favour of getting the payroll run underway. It is critical to keep to payroll procedures and cycles, or controls will be abandoned. 

- Empower employees. Very often, blue-collar workers may be barely literate or may have a culture of not questioning payment. Work with union or employee representatives to educate employees about what information should appear on their payslips, and encourage them to check that information for accuracy. It should also help nurture a culture of trust that is likely to impact positively on productivity generally. 

- Leverage the power of data. Put basic business intelligence capabilities in place to enable exception reporting and trend analysis to spot anomalies in overtime, PAYE, tax on bonuses and so on. Early detection is critical. 

- Stern consequences. Criminal action should be taken against an employee caught committing payroll fraud, if the consequences are kept to a mere human resources disciplinary or suspension, the guilty party can go onto work for the next company where he/she can continue their misconduct. This is because the Labour Law does not allow unwarranted reference, in other words, if the guilty person’s potential new employer calls the previous employer for a reference, they cannot divulge anything about the person’s fraudulent activities. However, if the person is pursued criminally, the previous employer is allowed to do so. 

“Fraud can have serious consequences for any company, both financial and in terms of the corporate culture,” concludes Nicholson. “Making it hard to commit it in the first place makes good business sense in every way.”
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

Payslips are among the most important documents people receive, yet few pay enough attention to them, says Nicolette Nicholson, director at the South African Payroll Association (SAPA).
 
“Too many people just see their payslip as confirmation that their salary has been paid and they can relax,” she says. “In fact, it’s an extremely important document and it’s worth checking it carefully to make sure it is accurate. Mistakes could cost you dearly in the long run and you are responsible for making sure the payslip is accurate.
 
“Everybody should file all the payslips they ever receive and keep them forever!”
 
Nicholson continues that a payslip is first and foremost the irrefutable record of a person’s work service for any employer. It provides factual proof of the jobs he/she have held and what they were paid. It’s also the receipt for work performed and should be carefully compared with the letter of appointment, contract or other official documents to ensure that a person’s work is being properly rewarded. Also confirm that the correct employer name and address appears on the payslip.
 
Payslips typically have four main types of information: the fixed salary or contract of employment; the variable income for things like overtime; the deductions area, which would include statutory and personal deductions; and the statistical area, which includes annual and sick leave, job description and so on. Job descriptions are often omitted to avoid potential conflict between employees, Nicholson notes, but this is not good practice.
 
Deductions
A particular point to notice is that personal deductions cannot exceed 25% of a person’s gross pay, and businesses have the responsibility of protecting their workers’ interests here. This means, for instance, that a company’s payroll department has the obligation to act on statutory deductions and in the case of an emolument order to contact the attorney if the garnishee exceeds this ceiling and guide the employee to make arrangements to lower the repayment value on the court order. However, the onus still falls on employees to check these deductions carefully.
 
Staying with deductions, Nicholson says that it is also critical to check that contributions to pension or provident funds, among others, have been properly made. If the incorrect deductions have been made, it will affect retirement income and pay-outs, as well as death benefits.
 
Another important figure to check is tax and unemployment insurance deductions. The employee should also ensure that these deductions have actually been paid over to the taxman and Department of Labour respectively on the IRP5 certificate issued at the end of the tax year.
 
“These authorities will hold the employee liable alongside the employer if the right taxes are not paid,” she adds.
 
Structuring
Payslips will also reflect how an individual’s pay is structured and it’s prudent to make sure that this structuring is legal and harmonises with the job description. For example, travel benefits that are simply there to help reduce the tax liability are not advisable. Tax evasion, or actions aimed at not paying tax, is a very serious offence and carries jail time; while tax avoidance that refer to using legal ways to reduce tax, is less serious, but can attract a fine of up to 200%.
 
Nicholson puts forward that it is good practice to ask for a dummy payslip before accepting a job. This will enable a person to determine whether the deductions are fair and that take-home pay is at the expected level.
 
“If there’s something on your payslip you don’t understand or don’t agree with, take it up with your immediate boss, who will escalate to the payroll department,” Nicholson concludes. “If you don’t get satisfactory answers, your union representative should be able to help.”

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

 There is a name given to those who have spent their working years bringing up their children while caring for their ageing parents – the sandwich generation. This generation is juggling enormous personal responsibility alongside concerns about retirement and the fear that they have not saved enough. As they now approach retirement age and face the challenges around finances, it is the time to make solid plans for the future and to take advantage of recent government tax reforms in order to save and be secure.
 
“The sandwich generation includes those who are close to 50 and who are only starting to save now because earlier in life they had to take care of kids and ageing parents,” says Nicolette Nicholson, director at the South African Payroll Association (SAPA). “It will require immense self-discipline for them to prepare for their retirement effectively while they are still working. They need to be aware of how their retirement plans are structured and how to read their payslips so they can be more money savvy.”
 
Recent changes to retirement taxation came into effect on 01 March 2016. The impact of these amends has yet to be felt by employees and many are unsure as to what they are, how they can benefit from them or what they mean in the long term. The reform has changed the deduction limit for retirement fund contributions to 27.5% of taxable income limited to R350,000.00 per annum. The original limit was 7.5% for pension contributions and 15% for retirement annuities and did not take both individual and business contributions into consideration. The new limit does and the impact on payslip and person can potentially change the way they save.
 
Analysing the payslip
 
Employees need an active retirement annuity (RA) to benefit from the reform and this makes today the ideal time to take advantage of the change and start saving. 
 
“For example, a person earning R20,000 per month can now get an RA for approximately R775 per month and the nett salary will be more or less the same pre and post the March reform date if the full 15% (pre March 2016) were not utilised,” says Nicholson. “Those who have an existing RA should assess whether it is more or less than 15% (pre March 2016) of their income and, if less, should now change it to be the balance of 27.5% of taxable income less the total retirement fund contribution % in order to experience the benefits.”
 
Knowing how to read and assess your payslip will also provide clear insight into the impact of the reform. If nett pay remains the same between February 2016 and March 2016, then it has made a positive contribution, if not, it is worth speaking with a professional who can provide insight into how the payslip is structured.
 
“Anyone who received an increase in March or who needs clearer insight into their payslip should speak with a payroll professional,” says Nicholson. “Their role is to assist and provide you with accurate information on the payslip.  Payroll professionals ultimately affects the pocket of the man on the street ensuring ‘bread’ on their table. Understanding your payslip will assist you in making sound decisions when it comes to your retirement planning. The payroll professional may however not provide financial advice as they are not a registered Financial Advisor.”
 
Tax amendments have also extended into a change in tax bracket. This has resulted in more tax for those still earning the same salary and may not see any extra money on the payslip. However, with the advice of a professional, you can use the reform to structure your salary more efficiently, allocating a larger percentage to your RA and thereby saving on tax and preparing for the future. The sandwich generation should not bank on the younger generation as their retirement plan, they need to set aside today for a secure tomorrow.
 
“Our first instinct is to provide, but there is a need to understand that the most important person is you and you can only help others if you have provided for yourself,” concludes Nicholson. “To retire comfortably, the average person requires R10 million so those who are over 50 and who did not make provision, need to save around R9, 000 a month for a period of approximately 10 years. Don’t buy that car, instead show the younger generation how it’s done. Make a plan, set dates and stay on top of reform, legislation and payslip so you are always getting the most from your money.”
 
Photo credit: AAG.com
 
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

With its annual awards, the South African Payroll Association (SAPA) aims to recognise individuals that hold high the name of the payroll industry. Awards still prove to be a very effective tool in boosting staff morale and improving motivation by recognising employees’ hard work and achievements. 

Nominations can now be submitted for the fourth annual edition of the SAPA Awards in the following categories:

Payroll Professional – Senior 
These professionals must demonstrate implementation of effective payroll process in a robust control environment. Judges will be looking for technical excellence, leadership qualities, keeping abreast of current trends, ability to think strategically, as well as use of payroll information to communicate to senior, middle and lower management.

Payroll Professional – Junior
Individuals nominated should comply with regulatory standards and company policies relating to payroll. Here judges will focus on those who offer service beyond the call of duty and make an outstanding contribution to the employer, while also being an excellent team player.

Payroll – Team
The teams should demonstrate an improvement in reduction in financial costs, providing management information, team engagement across the organisation and employee satisfaction among others.

The winners will be announced on the first day of the annual SAPA Conference, which has been scheduled for 7 – 8 September 2016, followed by a celebratory cocktail event that evening.

For more detailed information on the annual SAPA Awards please visit http://bit.ly/SAPAawards2016

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  

For more information on SAPA please visit:
Website: www.sapayroll.co.za
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association