Payroll fraud schemes typically last about 2 years before being detected, and are twice as frequent in small businesses as in larger ones. This is according a 2016 Global Fraud Study by the Association of Certified Fraud Examiners. Most often, perpetrators hold accounting positions (21.6% of cases).

Cathie Webb, a Director of the South African Payroll Association (SAPA), says employers should be wary when their payroll administrator resists being away from the office. “It may be they’re afraid that someone standing in for them will uncover irregularities and expose them.”

So a payroll administrator who never takes time off, arrives early, leaves late and works over weekends may seem dedicated. But they could also be committing payroll fraud.

Apart from always being at their desk, such administrators are overly protective of their records, computerised or physical. They’ll insist that the work won’t be done correctly by those who don’t know their system but will avoid training backup personnel to perform their duties.

How it starts
“It often begins with financial difficulties at home,” suggests Webb. “The practitioner might create and pay a falsified employee or change their own pay rate for a single run just to get out of hot water.” But when the act goes unnoticed, it becomes easier to repeat and eventually snowballs into major fraud.

Why the problem exists
Unfortunately, blame falls squarely on the organisation. “In most cases we’ve witnessed, the shocked employer completely trusted the payroll administrator and never audited their work,” reports Webb. “It’s an accounting function and the same checks and balances need to be enforced.”

How to prevent it
Employers can take several steps to short-circuit payroll fraud:

Employ a certified payroll practitioner
The days when payroll was a ‘fallen into’ career, one which was discovered as someone worked their way up the ranks, are rapidly disappearing. Today, payroll is one of the pillars holding up the business, handling one of its biggest costs and providing strategic insight which transforms corporate communication and impacts on the bottom line. 

“When a business hires someone who has chosen a career in payroll, they are hiring someone who understands the challenges, knows how to minimise statutory risks and reputational damage and who can see the links between payroll, finance and HR,” says Webb. “They have the skill and knowledge to address any disconnect with management and are strategists who know their value and how to communicate with those in charge.”

Today’s payroll practitioner is a strategic thinker who understands risk, recognises the potential for engagement across departments and knows the business from the inside out.

Segregation of duties
Certain payroll duties can be delegated to others. For example, the payroll practitioner prepares the banking file, but finance performs its submission to the bank.  A third person should be responsible for checking that all the reporting balances.  Additionally, the banking transactions should always require two authorisations, by people who clearly understand that the responsibility includes checking the details.

Internal audits
It’s good practice to perform regular audits to make sure the business is running smoothly. Include a thorough inspection of payroll records and processes.

An approval process 
Payroll submissions should follow a systematic approval process with department or team managers reviewing and signing-off payroll for their staff. The financial director or CEO should also inspect and approve consolidated payroll for the company.

Master record auditing
It may be possible to place automatic alerts on changes to computerised master records, such as employee pay rates or bank detail changes. Secondary staff are alerted, and review and approve them.

Task automation
Some payroll tasks can be handled by a computerised process. Because calculations or processing happen in the background, there’s less opportunity to tamper with figures.

Staff rotation
Train backup staff to perform payroll duties so they can stand in for an absent payroll practitioner. But also have them perform payroll duties regularly so that one person never has complete control.

Annual leave
Force payroll practitioners to take annual leave. It’s a good way to prevent both fraud and burnout. A well-rested practitioner is more alert and less prone to errors that could also result in loss if undetected.

Be proactive
Your dedicated payroll practitioner may or may not be defrauding your company. “Rather than worrying about it,” advises Webb, “take time-tested steps to prevent the opportunity.”

​ENDS

MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, 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 is essential that employers support employees in recognising if they are suffering from Post-Traumatic Stress Disorder (PTSD) and that they understand the difference between this level of stress-related illness and other forms of work-related stress or fatigue.
 
The Occupational Health and Safety Act and the Compensation for Occupational Injuries and Diseases Act (COIDA) both recognise the impact of PTSD on employee and employer. It is a potentially debilitating condition which affects performance and personality and there are a number of symptoms which can be attributed to it.
 
“PTSD is not the same as normal workplace stress,” says Cathie Webb, Director at the South African Payroll Association (SAPA). “Difficulty with another employee, extended working hours or a toxic working environment – these are factors which impact individuals on a different level from PTSD. There should be processes in place to resolve these challenges internally already, but for an employee to benefit from an employer’s contribution to the Compensation Fund, they would have to suffer from symptoms that are far more severe.”
 
The Compensation Fund is a mandatory fund to which all employers must contribute. From the moment a business hires its first employee, the organisation has seven days in which to register with COIDA.  Employers have to detail the type of work undertaken by the business, and pay towards the fund on an annual basis.
 
The impact of stress
“The outline of the Act is simple – keep track of incidents while performing agreed work which result in physical injury or mental illness and follow the guidelines,” says Webb. “It is designed to protect the employer from having to deal with litigation for each employee and give the employee financial support as they recover. Any injury or illness covered by the Act has to be medically approved.”
 
The employee has to see a medical professional who will confirm that they are unable to function in their role. Some of the symptoms of PTSD which would be immediately visible to the employer would include constant hyperventilation when facing the situation which caused the problem, crippling levels of anxiety or fear, and excessive sweating.
 
“Whether or not a person would qualify for the support of the fund depends on a number of factors,” says Webb. “They would need to see a psychiatrist who would confirm they have PTSD and they need a certificate which verifies the diagnosis. Employers should also remember that they have to apply for the fund within six months of the incident taking place in order to ensure their employee is given the support and time off that they need.”
 
In addition to the above parameters, the employee will also have to go to a panel to confirm whether or not they need to be booked off or if they are eligible for the compensation fund.
 
It is the employer that needs to submit the claim and employees’ money will be send to their employer’s address. If employers do not send in the forms or the claims takes too long, the employee must contact the nearest labour centre and report it.
 
The ideal employer
“PTSD is a delayed or protracted response to an exceptional catastrophic event which causes distress and can have a long-term impact on an employee,” says Webb. “The employer has to recognise the symptoms within the person, but also be aware of the events themselves.”
 
The employer needs to assess the situation and note if someone is always battling to cope with their role after an incident. For example, this could be a member of the military forces that experienced a violent incident. They need to be aware of the symptoms of PTSD and have a workplace ethic which supports staff when it comes to stress or trauma.
 
Although the act caters for employees that are faced with PTSD, it remains the employer’s responsibility to ensure that other layers of work-related stress are catered for, creating a positive working environment throughout the business. 

​ENDS

MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, 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

South African air carriers and operators are increasingly seeing the rest of the continent as an attractive growth target. No matter what particular business model they adopt in the target country, they are likely to find themselves seconding pilots, cabin crew, engineers and other employees to their in-country operations. In general, these expatriates would remain on the payroll of the South African or parent operator.
Making salary payments to crew working in another country raises a whole set of inter-related issues that payroll professionals need to consider carefully. While not exhaustive, the following are some of the key areas to think about:

Draft a cross-border remuneration policy 
It is critical that the operator has a policy in place that sets out the principles relating to how the company deals with employees working across borders. The policy should protect the interests both of the company and its employees. Many of the subsequent points would be integrated in the policy, as well as in the individual employee contracts. A payroll professional would be best suited to advise air carrier owners on what this policy should look like.

Ensure that the employee is not disadvantaged by his or her secondment
One important principle is that the employee should not be financially or otherwise disadvantaged by the requirement to work in a foreign country. At a practical level, this means considering carefully what the tax rules in the host country are—tax rates might be higher or tax compliance more complex—as well as the terms of the double taxation agreement between South Africa and the host country (if there is one).

An added consideration here would be to consider how much time is expected to be spent outside of the Republic, and the impact this would have on tax. For example, it might be that the package is structured based on the fact that the employee is expected to be exempt from paying tax in South Africa because he or she is out of the country for more than 183 days in aggregate, 60 of which are continuous, in a 12 month period. Thought needs to be given to the impact of the employee forfeiting this tax exemption by having to make an unplanned trip home, either for business or personal reasons. If deemed a South African resident by SARS, an individual would be liable for normal taxes, including PAYE, and this could be hugely negative if the exemption condition is not met. How to handle such unexpected events should be covered in the policy.

These kinds of complexities, and the fact that the unexpected could happen, means that many operators actually opt for simply paying a home nett salary and taking care of the employee’s tax themselves on behalf of the employee. Although this approach has the virtue of simplicity, it must also be recognised that SARS will treat this payment of employee PAYE as a payment of the employee’s debt. This is seen as a taxable benefit in the hands of the employee and thus increases the employer’s the cost of the employee.

Structure the reward package carefully for tax compliance
While ensuring that the employee is not disadvantaged, it is equally important that his or her cross-border package complies with the tax regimes in both countries. In practice, employees on secondment are usually paid a premium in the form of a hardship allowance or similar subsistence allowance, and this should be structured in a way that is beneficial to the employee while remaining tax-compliant in both countries. Both employee and employer need to fulfill their tax obligations to the host and home countries, and tax evasion should be avoided as it is a criminal offence.

Give thought to medical aid and evacuation
While an individual is on secondment in a foreign country, he or she would need to continue paying South African medical aid in order to avoid late joiner penalties. Late Joiner Penalties may be imposed on members over the age of 35 if they have not belonged to a medical aid before, or if they have had a break of more than 90 days from a medical aid. Depending on the number of years that they have not belonged to a medical aid, a late joiner penalty will be added to the member’s monthly contribution and worked out as a percentage of the contribution based on the total number of years a member has not been on a medical aid since the age of 35 years. But he or she would also need medical cover in the foreign country. Who pays for this, and what are the arrangements if urgent repatriation for medical or other reasons is indicated?

Does the employee’s death benefit cover cross border deaths?
Death is normally not a topic that forms part of general discussions, but an employer needs to make sure that the policy in place to cover death covers cross border eventualities. An employer might find themselves in trouble if such an event occurs and the employee was not covered outside the borders of South Africa. Ensure that proper precautions are in place as this can also result in an increase to the cost to the company.

In conclusion, it should be apparent that this a complex area, and the payroll policy needs to be robust in order to copy with different eventualities. My advice would be for air carrier owners to work closely with a payroll practitioner that specialises in cross border remuneration structuring to understand the issues fully, and to structure the company policy and individual employment contracts.

One might find that the cost to the company is much higher than budgeted for as the secondment could result in unanticipated costs if not thought through thoroughly before drafting both the business contract and the employee contract.

​ENDS

MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, 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 Nicolette Nicholson, Director, South African Payroll Association (SAPA)
​

​South African companies— as well as many global multinationals—are increasingly seeing the rest of the continent as an attractive growth target. No matter what particular business model they adopt in the target country, they are likely to find themselves seconding specialist staff to their in-country operations. In general, these expatriates would remain on the payroll of the South African or parent company.  
 
Making salary payments to an employee working in another country raises a whole set of inter-related issues that payroll professionals need to consider carefully. While not exhaustive, the following are some of the key areas to think about:
 
Draft a cross-border remuneration policy
Chances are there will be more than one employee affected, so it is critical that the company has a policy in place that sets out the principles relating to how the company deals with employees working across borders. The policy should protect the interests both of the company and its employees. Many of the subsequent points would be integrated in the policy, as well as in the individual employee contracts. A payroll professional would be best suited to advise business owners on what this policy should look like.
 
Ensure that the employee is not disadvantaged by his or her secondment
One important principle is that the employee should not be financially or otherwise disadvantaged by the requirement to work in a foreign country. At a practical level, this means considering carefully what the tax rules in the host country are—tax rates might be higher or tax compliance more complex—as well as the terms of the double taxation agreement between South Africa and the host country (if there is one).
 
An added consideration here would be to consider how much time is expected to be spent outside of the Republic, and the impact this would have on tax. For example, it might be that the package is structured based on the fact that the employee is expected to be exempt from paying tax in South Africa because he or she is out of the country for more than 183 days in aggregate, 60 of which are continuous, in a 12 month period. Thought needs to be given to the impact of the employee forfeiting this tax exemption by having to make an unplanned trip home, either for business or personal reasons. If deemed a South African resident by SARS, an individual would be liable for normal taxes, including PAYE, and this could be hugely negative if the exemption condition is not met. How to handle such unexpected events should be covered in the policy.
 
These kinds of complexities, and the fact that the unexpected could happen, means that many companies actually opt for simply paying a home nett salary and taking care of the employee’s tax themselves on behalf of the employee. Although this approach has the virtue of simplicity, it must also be recognised that SARS will treat this payment of employee PAYE as a payment of the employee’s debt.  This is seen as a taxable benefit in the hands of the employee and thus increases the employer’s the cost of the employee.
 
Structure the reward package carefully for tax compliance
While ensuring that the employee is not disadvantaged, it is equally important that his or her cross-border package complies with the tax regimes in both countries. In practice, employees on secondment are usually paid a premium in the form of a hardship allowance or similar subsistence allowance, and this should be structured in a way that is beneficial to the employee while remaining tax-compliant in both countries. Both employee and employer need to fulfill their tax obligations to the host and home countries, and tax evasion should be avoided as it is a criminal offence.
 
Give thought to medical aid and evacuation
While an individual is on secondment in a foreign country, he or she would need to continue paying South African medical aid in order to avoid late joiner penalties. Late Joiner Penalties may be imposed on members over the age of 35 if they have not belonged to a medical aid before, or if they have had a break of more than 90 days from a medical aid. Depending on the number of years that they have not belonged to a medical aid, a late joiner penalty will be added to the member’s monthly contribution and worked out as a percentage of the contribution based on the total number of years a member has not been on a medical aid since the age of 35 years. But he or she would also need medical cover in the foreign country. Who pays for this, and what are the arrangements if urgent repatriation for medical or other reasons is indicated?
 
Does the employee’s death benefit cover cross border deaths?
Death is normally not a topic that forms part of general discussions, but an employer needs to make sure that the policy in place to cover death covers cross border eventualities. An employer might find themselves in trouble if such an event occurs and the employee was not covered outside the borders of South Africa. Ensure that proper precautions are in place as this can also result in an increase to the cost to the company.
 
In conclusion, it should be apparent that this a complex area, and the payroll policy needs to be robust in order to copy with different eventualities. My advice would be for business owners to work closely with a payroll practitioner that specialises in cross border remuneration structuring to understand the issues fully, and to structure the company policy and individual employment contracts.
 
One might find that the cost to the company is much higher than budgeted for as the secondment could result in unanticipated costs if not thought through thoroughly before drafting both the business contract and the employee contract.

ENDS

MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, 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