On April 1st this year, a new Unemployment Insurance Fund (UIF) scale of benefits came into effect as announced by the Minister of Labour in Government Gazette Notice No. 588. The limit for those claiming benefits was increased from R178,464 per annum to R212,539 per annum (or from R14,872 per month to R17,712 per month).

The cause of confusion
In previous years, changes to UIF benefits and the value of contributions deducted from employees (and matched by employer contributions) were implemented on the same date, for the same value. So, many assumed that the increase in benefits limits should likewise be applied to contributions limits. But no formal statement to that effect had been issued. As a result, employers and payroll practitioners were uncertain about updating their payroll parameters.
 
In May 2017, the South African Payroll Association (SAPA) published an article by one of its directors, Arlene Leggat, offering clarity. It explained that contributions and benefits are regulated by two separate laws. Contributions are governed by the Unemployment Insurance Contributions Act of 2002 and any changes must be announced by the Minister of Finance through the government gazette. Benefits, however, are regulated by the Unemployment Insurance Act of 2001 and the Minister of Labour must announce changes, also through the government gazette.
 
Like SAPA, various commentators have addressed the issue. Sadly, the very bodies that should supply much needed answers have not only failed to do so but have compounded the problem.

Making things worse
Leggat refers to an infographic, issued by the UIF at the time of the increase, encouraging organisations to also increase their contribution ceilings. “Lately, we’ve see this erroneous document doing the rounds again, creating more confusion,” she notes.
 
Worse still, it was recently reported that the Department of Labour’s own online U-filing service had applied the new threshold to its calculation for contributions. When asked why, the UIF explained it was an error that was being corrected.
 
“It appears that even the Department of Labour employees are unsure,” observes Leggat. “This demonstrates a lack of communication that must be resolved at the highest level.”

The effect of the problem
In terms of Section 7(5) of the Unemployment Insurance Contributions Act of 2002, if an employer makes deductions in excess of the payment prescribed by the Act, they must return the amount to their employees even if they’re not refunded by the UIF. However, according to Section (7)(3)(c), if the employer fails to deduct the correct amount, they become liable for the contribution. “This puts employers in a catch-22 situation,” says Leggat. “For companies with hundreds or thousands of employees, it could become a major administrative problem.”

The only solution
“Our attempts to provide employers with logical answers have little effect if the Department of Labour is as confused as everyone else,” concludes Leggat. “The Minister of Labour, the Minister of Finance or the Unemployment Insurance Commissioner should make a public statement that instructs employers on how to proceed in no uncertain terms.”
 
SAPA formally requests that such a statement be made and invites concerned parties to join its petition of the government to do so.

​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 whose income is garnished to pay outstanding debts can breathe easier thanks to new legislation that was recently enacted. On 31st July 2017, the State President signed into law the Courts of Law Amendment Act No. 7 of 2017. It amends the Magistrates’ Courts Act, 1944.
 
The result of a Constitutional Court ruling, the amendments offer greater protection to indebted persons against emolument attachment orders, the issuing and management of which have been poorly regulated in the past.

The previous situation
An emolument attachment order (EAO) is an order issued by a creditor on an indebted person’s employer, known as the “garnishee”. It compels them to deduct a specified amount from the defaulting worker’s income to pay the creditor.
 
Previously, EAOs were authorised by the clerk of the court and could be easily obtained from almost any court, regardless of where the employee works or resides, and their ability to be present to defend themselves. Any number of creditors could demand such deductions be made, without well-defined limitations.
 
“This lack of control gave credit providers extensive power to garnish workers’ salaries or wages with little consideration for their ability to survive or their constitutional right to justice,” says Arlene Leggat, a director of the South African Payroll Association (SAPA). “The new laws afford employees the opportunity to defend themselves and relieves the economic burden imposed on them.”

Highlighted amendments
Of greatest significance is that the law now imposes a limit on the amount that may be deducted, which can be no more than 25% of a worker’s salary or wages, regardless of the number of active EAOs against them. “Before, there was no limit,” says Leggat, “and I’ve personally seen workers go home penniless because their entire income was attached to debts.
 
While everyone has a responsibility to pay their creditors, the situation was unsustainable.” It should be noted that the limit applies to basic income and excludes additional remuneration for overtime or other allowances.
 
Further, authorisation of an EAO must be given by a magistrate - not the clerk of the court - at a court that has jurisdiction. Before approving the order, the magistrate must consider whether the order is just and equitable, taking into account various factors such as the size of the debt, alternatives to recover the debt, the worker’s income and their necessary expenses, existing EAOs, and more.
 
Another protective mechanism is a clause that prohibits anyone from requiring a credit applicant to consent to a judgement, installment order or EAO prior to the granting of a loan. Those doing so may be fined or imprisoned for up to 3 years. The same penalty applies to anyone who fraudulently obtains or issues a judgement, installment order or EAO.

Payroll’s duty
Payroll practitioners should familiarise themselves with all the amendments of the new legislation. “It has a major impact on how they manage EAOs and their service to employees,” advises Leggat. “Employers who are legally obliged to enforce garnishment orders will also benefit from their administrator’s understanding of the law and how it can be applied to relieve their burden.”
 
Payroll practitioners and employers are invited to contact SAPA for more details.
 
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 (SAPA)

Whenever a worker is retrenched in South Africa, it’s not just one person losing an income. That’s because employees in this country have a high number of dependents. For example, according to the South African Police Union, each 10111 call centre operator supports about 15 dependents. The statistics are probably similar for other industries. That’s why, before any organisation chooses retrenchments, they should do their best to find another way.

Alternatives to retrenchment
Here are some things businesses might consider, bearing in mind that changes in terms of service require their employee’s consent.

• Reduction in work
Rather than lose their jobs, employees may be open to working shorter weeks, fewer hours - like half days - or shorter shifts. This means they’ll have some form of income to tide them over, and it frees them up to look for a second job or even another position, making retrenchment unnecessary.
​
• Reduced pay
A small reduction in pay across the entire workforce won’t be as hard felt as losing one’s job altogether. Yes, it’s easier to retrench than renegotiate contracts throughout the company. But many have done it successfully. Conversely, freeze increases until the organisation’s fortunes recover.
​
• Voluntary retrenchment
Some workers are more desperate to keep their jobs than others, who may have been looking for a reason to move on. Voluntary retrenchment is also a good way of reinvigorating the workforce because those who are no longer aligned with the company’s mission or values are more likely to take the opportunity to leave.

• Reduced benefits
Although some benefits are required by law, others can often become bloated beyond their value in keeping workers happy and motivated. Reducing benefits gives a business the chance to rationalise their expenditure and, in tough times, employees are more likely to appreciate that necessity.

• Redeployment
This means either moving willing employees to other departments where their abilities are needed or training them to take on new duties, sometimes completely different to what they were doing in the past. Change is difficult but many workers are keen to extend their skills.

• Eliminate overtime
Workers are often paid overtime for working after hours or weekends. This need should drop with an ebb in business and companies can safely cancel overtime. However, employment contracts usually require staff to work after hours from time to time without pay, so some extra hours could fall under this clause.

• Freeze new hires
Rather than reducing the existing workforce, organisations can stop hiring new people. This isn’t always possible because new skills may be required to manage or execute new systems and processes. Again, employers should prefer to up-skill current staff.

• Increased duties
If a business has enough work but can’t fund the required workforce, the extra duties could be shared by current employees. It’s essential that employers alert them that this is an alternative to retrenchment and that their efforts are appreciated.

• Placement assistance programmes
Once, business journals lauded companies who helped place employees in new jobs as part of their retrenchment process. Does it still happen? Really, it should. Businesses have large customer, supplier and recruiter databases, as well as strong business networks. All it takes is a bulk email or a LinkedIn post to exponentially increase each retrenched worker’s opportunities.

A note to employees
There are many ways organisations can avoid retrenchment. That said, new technologies and improved business processes can also lead to positions being made redundant. Skills that were common 5 or 10 years ago may simply no longer be needed in the modern business environment. So, there’s another angle to consider - workers can avoid retrenchment by retraining themselves for jobs that are currently in demand.

The unemployment rate in South Africa is one of the highest in the world and, with our current recession, it may get worse. At SAPA, we’re reaching out to employers to not just follow the law but to do their utmost to avoid retrenchments. Sometimes, there’s no other way. But if it’s an excuse to cut costs or improve shareholders’ dividends, this isn’t the right time for such thinking. So please, approach retrenchment responsibly. With the high number of dependents each employee must support, it’s not just one person who will go without.

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