The current economic outlook is set to have an impact on the bottom line, business and morale, but robust payroll auditing and management processes can curtail risk and support growth.
 
Even in a recession there are specific steps that can be put in place to mitigate risk and enhance payroll effectiveness, ensuring that finances are tightly controlled and that the organisation is prepared for what the recession has in store – spread the payroll load, use the insight from payroll data, and clearly document processes.
 
“The most common risk area in payroll departments is having one person responsible for the calculation of payroll values, reconciliation and payment,” says Cathie Webb, director, South African Payroll Association. “In a recession, when people feel their jobs and income are at risk, there is a temptation to help themselves to a little bit on the side.”
 
Webb points out that on a psychological level, incremental thefts are often not perceived as a crime. People think that the tiny sums won’t hurt the business. However, this is not true. Every cent removed illegitimately from a business has an effect on every person working there.
 
Reducing the risk
“The easiest thing to do to reduce risk is to ensure that the different areas of the payroll cycle are the responsibility of another person,” says Webb.
 
There must always be a high-level view over every aspect of payroll. In a large organisation, it is fairly easy to ensure that the payroll audit is managed by different people, but in a smaller business this may not always be possible. In this instance, there needs to be another person who does sign off and checking before payments are made.
 
“Payroll also plays a supportive role in tough economic times,” says Webb. “Strong payroll administrators should be looking for areas where they can add value and strategic input. For instance, in a multi-departmental branch or organisation, they can assess things like leave patterns and even identify management issues. Payroll has the ability to uncover behavioural patterns that can be managed or enhanced to boost business productivity, cut back on waste and even encourage growth in a recessive environment.”
 
Document and detect
Payroll can use its understanding of finances and budgeting to support employees and businesses in better managing money. South African suffers from a debt culture and few people save for the proverbial rainy day. Payroll’s role in educating people, showing them the value of not spending more than they earn and giving them the tools they need to save for the future, will play a role in the financial success of the organisation.
 
Finally, payroll’s place in protecting against the impact of the recession can be found in the documentation. Webb recommends that the payroll department has clear checks and balances that are adhered to rigorously as it is one space where mistakes and missed deadlines cannot be tolerated.
 
“This way, payroll frees their minds from having to remember the small things so they can focus on ways to add value,” concludes Webb.
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: Lavine Haripersad, director, South African Payroll Association
 
It may be necessary for the South African Revenue Service (SARS) to review some of the binding conditions related to the Employment Tax Incentive (ETI) that it introduced in January 2014 to stimulate employment for work seekers with little work experience and in the age bracket of 18 to 29 Years.
 
This would aid in reducing the administrative burden associated with ETI for the extended period to 28th February 2019.
 
Through the ETI employers are incentivised by way of a reduction in PAYE according to the prescribed ETI guidelines, provided that the employer is fully compliant for all registered taxes. Supporting the ETI program is a no brainer as our youth unemployment is in the range of 52% and there is an urgency to change this situation.
 
It’s good, but…
In so much as the effect has been partially positive in seeming to boost employment for young work seekers and providing them with a platform to launch their careers, it lacked administration consideration for payroll departments.  It seems that it has been manipulated by some employers who are claiming the incentive for workers they would have employed in any case, without creating new jobs.
 
The payroll department has to contend with multiple issues resulting from a set of prescribed guidelines in the Act which do not appear to take the actual work and business environment realities into account, as well as payroll systems’ inflexibility to have robust programming to accommodate the ETI prescribed rules. This has been a major reason that has made business shun away from implementing ETI. Ultimately the noncompliance resulting from this becomes payrolls’ accountability.
 
The difficulty experienced with lack of clarity about implementation of the new (and changing rules) and the slow rate of some payroll systems to program the complex rules has resulted in noncompliance as well as additional manual intervention by the payroll department to verify the calculations.
 
Some of the issues
It is known that companies have had problems with the payroll system programing where it is unable to manage the exclusion of non-qualifying employees when they turn 29.11 years, resulting in claims being made for employees who do not qualify.
 
The value of the remuneration must be based on 160 ordinary hours per month, excluding overtime and unpaid hours. This means that if less than 160 hours is worked, the system must gross up the remuneration to 160 hours per month to calculate the value of the ETI which must then be grossed down on the same basis. This means that hours worked must be recorded and tracked for the correct claim calculation to be made. The calculation needs to be rules based to avoid manual intervention. This adds complexity with system programming and as a result is often managed manually.
 
Employers must ensure that they adhere to the qualifying period of 24 months claim for each individual. The 24 months need not be consecutive. Here again it is critical to have systems in place to manage this as non-adherence will be penalized.
 
In addition, one of the ETI requirements is that an employer must remain tax compliant for all registered taxes to be able to claim the tax incentive. If at any stage the Employer is found to be non-compliant, all ETI previously claimed may be subject to reversal. The implications are that interest and penalties are imposed on arrear taxes. To rectify the process can take up to 21 working days as there is no ETI dedicated contact at SARS.  This becomes administratively burdensome.
 
To avoid this situation, the payroll department must be proactive and add an additional control function in their already busy schedules. A monthly statement of account must be requested from SARS (or can be obtained from e-filing through the person who is accountable for this in the Company). This must be reviewed and any abnormal item reflected must immediately be raised as a query with SARS and rectified to ensure that the ETI claim is processed by SARS.
 
SARS have issued a Draft Binding General Ruling on the ETI Act 28 of 2013 for which comments must be submitted by the 24 July 2017. This clarifies the definition of remuneration which states that overtime is excluded from the calculation of remuneration for the 160 hours in the month. Previously variable pay that was paid was included in the calculation of remuneration. Although welcome, the question is when implemented, do we recalculate the history based on the new ruling?  The South African Payroll Association welcomes input from business, so that ideas regarding the General Ruling can be submitted.
 
Given all of the above employers are still required to be fully compliant and to ensure incentives are claimed correctly as SARS applies strict measures for the utilization of the incentive by employers.
 
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