The challenges that small businesses in South Africa face are unique and often complex. South African Payroll Association (SAPA) Executive, Arlene Leggat, says there are several things that small business owners should keep in mind regarding their payroll system, and their obligations to ensure they comply with the law, and set their businesses up for success as they grow and expand.
 
“Many times, a small business’ payroll evolves organically. When a company starts out, its payroll may consist of just a handful of employees. Only after the first person resigns or an employee gets dismissed do problematic pitfalls in a small and haphazard payroll system lead to major problems,” says Leggat.
 
Responsibility towards employees and SARS
A small business needs to register their business with SARS and all the relevant legislative bodies even if it is not yet paying tax. It may seem more efficient to simply pay employees from the company’s bank account without having to deal with all the administration involved with printing pay slips and deducting UIF, but this approach can lead to run-ins with the law.
 
“All employees are required by law to receive a payslip, and to contribute to UIF. This may be an onerous task that seems unnecessary in the beginning, but if a dismissed, retrenched or disgruntled employee tries to claim UIF and can’t, there are serious repercussions for the business owner. Business owners who neglect to do this can be served with penalties and fines,” says Leggat.
 
Small business owners also need to make sure that whatever deductions are made to employees’ salaries are paid over to SARS. It can happen that a new or growing company runs into cashflow issues and neglects to pay the tax that has been deducted from workers to the revenue authority.
 
“Ignorance will not protect you against the law and neglecting to pay an employee’s tax to SARS constitutes fraudulent activity,” says Leggat.
 
When to consider outsourcing
While she doesn’t believe that outsourcing payroll and accounting duties is a sustainable solution for all businesses, Leggat believes it does make sense for many small companies who are either just starting out or growing.
 
“If your business is still new, then outsourcing your payroll needs to an accredited and experienced professional is advisable. This way, you have the peace of mind that comes with knowing someone is dealing with the authorities on your behalf, making sure your employees’ tax certificates are completed and submitted on time, and that a knowledgeable person is staying on top of everything for you,” says Leggat.
 
Instead of entrusting your payroll to a friend or acquaintance who only has limited knowledge of payroll systems and accounting, rather enlist in a course to upskill yourself on what your responsibilities are as a new business owner.
 
“There are many one-day courses offered by government institutions that are aimed at empowering entrepreneurs with the knowledge they need to set up their businesses and comply with South African legislation. Payroll and accounting may not be your core competencies, but your business is your responsibility and you need to be driving your payroll strategy correctly from the very beginning,” concludes Leggat.
 
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

Technology is changing and so is payroll software. While the advancements in payroll systems come with several benefits, these systems could also be exposing employers and their employees to online security threats, says Arlene Leggat, Director at the South African Payroll Association (SAPA).

“In the past, Human Resources and Payroll personnel would be the ones processing everything from timesheets to leave forms. If an employee’s banking details changed, they would need to notify the appropriate Payroll administrator to make sure their salary makes its way to the correct bank account. The next generation of payroll software has made it possible for employees to manage many of these tasks themselves,” says Leggat.

More sensitive information transferred electronically
Tasks that usually required paper trails and approvals, such as travelling allowances and overtime claims, can now be processed online, which leads to an increased amount of personal information being shared via web portals.

“As a Payroll company or a Payroll department, you will have a lot of employee related personal information at your fingertips. The more open and accessible your payroll system is, the more attention you need to be paying to things like firewalls, internet security, cyber threats and general information technology safety,” says Leggat.

Employers legally obliged to protect employees’ privacy
Employers now also have a legal obligation to protect their employees’ information thanks to the POPIA (Protection of Personal Information Act).  This legislation sets conditions for how personal information can lawfully be processed; it has been signed by the President and is now the law.

“Companies are responsible for making sure they are complying with this Act. It’s not only companies in the Financial Services and Healthcare sectors which need to understand their rights and responsibilities regarding personal information processing – any company who uses online payroll processing has to make sure they are protecting their people from harm as well as protecting their right to privacy,” says Leggat.

​International companies have an extra set of privacy concerns to deal with on top of the POPI Act. The GDPR (General Data Protection Regulation) was adopted by the European Parliament in early 2016 and while many of the stipulations are similar, a business will need to comply with both acts if they are transferring personnel and payroll data across borders.

“A company in South Africa may be outsourcing their Payroll function to their European counterpart. In this case, they would need to comply with both the GDPR and POPIA legislation. They are different flavours of data protection laws, but it could be necessary for you to tweak your Payroll processing strategy so that you have a global view and comply with what is common among them,” says Leggat.

Be future-ready
People are already wary of sharing their personal information, cell phone numbers, credit card numbers and addresses online. Having a future ready Payroll software solution can make your business more efficient, but it’s an employer’s responsibility to make sure that their employees are comfortable using it as well.

​“Companies need to take data protection seriously and their staff needs to know that their privacy is a top concern if you want widespread uptake in these systems,” concludes Leggat.

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

 In reviewing the South African Reserve Bank (SARB) and National Treasury’s joint consultation paper for regulatory proposals on payroll deductions, Arlene Leggat, an executive of the South African Payroll Association (SAPA) has suggested that limiting voluntary deductions would be the preferred route to follow.
 
The recently released document also posits two other mutually exclusive options for dealing with SARB’s concerns about the increase in the number of entities offering voluntary payroll deduction services. These include disallowing voluntary deductions completely or allowing unrestricted voluntary deductions with non-preferential treatment of creditors.
 
Regardless of the option adopted, certain basic requirements will apply. These include an authenticated mandate from the employee; no more than 25% of an employee’s salary being committed to deductions of any kind; statutory and legal deductions taking priority over voluntary deductions; and employers not being obliged to provide payroll deduction services for voluntary deductions.
 
However, Leggat affirms that the payroll function should be dedicated to the payment of employee salaries and earnings, and little else. “Although payroll is obliged to make statutory deductions required by law, it shouldn’t be reduced to a debt collection service,” she says.

What are voluntary payroll deductions?
Employers may be enticed by a financial services provider to offer products, like funeral plans, at a discounted rate to staff, or to collect amounts such as loan repayments, on its behalf. However, these voluntary deductions are made by the payroll department before a worker is paid and therefore fall outside the regulated financial system that comes into effect after income has been deposited into employees’ bank accounts. This is permitted by law provided an employee agrees to the deduction.
 
SARB worries that this lack of regulation exposes over-indebted workers to higher financial risk, creates the opportunity for financial crime, and gives preference to one vendor over another, fostering anti-competitiveness. Even creditors who have obtained a court order for recovery of debt are given lower priority than those enjoying payroll deductions.

SAPA’s stance
In her response, Leggat says that “since medical aid and pension are essentially voluntary, the first option would rob workers of typically accepted benefits.”
 
She also rejects the third option outright. “It’s completely unacceptable from a payroll perspective. With the sheer number of providers and services available, each with its own instructions, payroll would sink into administrative chaos.” For example, if an employer fails to deduct the correct amount for a life insurance policy and the employee subsequently dies, who will be held liable if the service provider refuses to pay out? “Now multiply this by a hundred and imagine the sheer pressure payroll will face to get each deduction just right.”
 
Ultimately, Leggat admonishes organisations to protect the integrity of the payroll function. “Payroll is meant for payroll,” she says. “Don’t overload it with alternative duties at the cost of good service.” Finally, Leggat warns that any option adopted by SARB will have a massive impact on how payroll departments are run, what resources are required, and the benefits employers decide to offer.
 
SARB has invited the public to submit their comments on the proposed remedies by 30 April 2018.
 
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

Flexi time, home based jobs and remote workforces are a growing trend in South African businesses. While this type of flexibility is a selling point for employers and something that workers are actively seeking out, companies also need to consider how this can change the way they manage their payrolls, says Arlene Leggat, Executive at the South African Payroll Association (SAPA).

“Like elsewhere in the world, the way in which we work is changing. People want a better work-life balance and they want to be able to work how, where and when they like. An increasing number of South African businesses are accommodating these needs not only to attract and retain talent, but out of necessity,” says Leggat.

The 2017 TomTom Traffic Index showed that cities such as Cape Town and Johannesburg are the most congested cities in the country and people lose days and possibly weeks each year due the time they spend in their cars travelling to and from work. This congestion also has a broader impact on the economy. According to former Johannesburg mayor, Parks Tau, the economic impact that results from congestion in South Africa is over R1-billion per year.

“Spending hours in traffic each day, whether travelling in one’s own vehicle or using public transport, is not conducive to having a good work-life balance and it’s not helping a company’s bottom line or the South African economy. The technology that we have at our disposal, such as smartphones and internet connectivity at home, means that for many roles it’s no longer necessary to work from an office every day,” says Leggat.

Switching to output-based deliverables
One way that a remote workforce impacts payroll is through the lack of work time indicators that have traditionally been drawn from access control and/ or time and attendance systems. If a company relies on security systems to track the movement of staff to determine their remuneration, then they may need to consider other ways of measuring a person’s output.

“A business that wants to enable a remote workforce can’t function as a clock watching shop. Employers need to not only be more trusting and open minded for this to work, but they will need to restructure many employees’ roles so that their remuneration is based on Key Performance Indicators and output as opposed to time spent on the premises,” says Leggat.

A solution that companies can consider is to enforce ‘core business hours’ for all employees, regardless of where they are based. A company could, for example, make their core business hours from 9am and 2pm and office-based as well as home-based workers are required to be online and available for meetings and calls during these times.

Trust, responsibility and accountability is key
Before overhauling your business structure to include remote working, companies need to fully understand how they are going to assess employees’ output and time-based work.

​“There are ways to track the time a person spent on a company’s network or systems, but instead of policing people, it’s better to create a trusting relationship with employees so that responsibility and accountability issues are understood and ironed out from the beginning,” concludes Leggat.

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 used to be a stigma attached to those who hop from job to job, raising their salaries and expectations along with their restless move from organisation to organisation. Considered flighty and a risk to the company, job hoppers were perceived as less reliable than those who set down roots and reputation.
 
However, the millennial generation sees job hopping as leaping towards new opportunities, and research is showing that they aren’t “flaky escapees”, but stronger recruits because of this trend. Still, whether flaky and fanciable or building a serious career trajectory, job hoppers of any age should keep their financial future and security top of mind.
 
“Job hopping can be a double-edged sword and it is important to consider factors such as UIF, savings and pension as you move,” advises Arlene Leggat, Director, South African Payroll Association.
 
UIF stands for the Unemployment Insurance Fund and it is an emergency savings account designed to support individuals when they are between jobs and battling to find work. If job hoppers tap into these funds while they look for the next big thing, then they are running the risk of not having a safety net in times of real hardship.
 
“UIF works on a credit basis,” adds Leggat. “The more you contribute, the more credits you build. If you are unemployed you can claim those credits, but ideally you should save them for a real emergency.”
 
A professional stance
It is also worth remembering that many organisations still work on a ‘last in, first out’ policy when times are tough and retrenchments are in the pipeline. Job hoppers are more likely to be in the firing line and their short time at the company will mean a small severance pay and financial risk.
 
“Another consideration is your pension,” says Leggat. “If you take out one third of your pension every time you leave a job, that’s money you are lopping off your retirement package. Many of the younger generation of job hoppers don’t think about this and it is important. Keep that that money sitting there and growing until you hit retirement age rather than spending it on a new car when you change jobs.”
 
To ensure your pension remains stable, never take the funds out when moving company unless you absolutely must. Then open a preservation fund that can move with you – transfer your pension from one company policy to the next, but use the interest gained in the preservation fund to bolster it.
 
Leggat also advises that you have at least six months of salary put aside before job hopping. If you are retrenched with one week’s salary, you will then have something substantial to support you. She also recommends putting a percentage of your salary into a savings fund each month.
 
“It doesn’t have to be a massive amount, around 7-10% of your gross income,” she concludes. “You then have a nest egg to keep you going when times get tough. Rather follow this strategy than tap into your pension or UIF as those funds are vital for your long-term financial security.”
 
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

Companies in South Africa must meet their legal obligation to ensure that their employees are paid fairly, or prepare themselves for the consequences. This is the advice offered by Arlene Leggat, a Director at the South African Payroll Association (SAPA). “Specifically, they must have a documented system for determining the value of an employee’s job and it must be applied consistently across their workforce,” she urges.

Unfair discrimination and pay
As per the Constitution of South Africa, the Employment Equity Act 55 of 1998 as amended prohibits any person from unfairly discriminating, directly or indirectly, against an employee, in any employment policy or practice, on one or more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language or birth.
 
According to Leggat, “Although the legislation covers a broad range of issues, such as recruitment practices or career development, pay is a core concern because it’s why people work in the first place. Discrimination in this basic area means they’re being unjustly deprived of a better way of life.”
 
Employers are obliged under the Act to eliminate unfair discrimination in respect of pay. They must also ensure that differences in terms and conditions of employment between their employees who are performing work that is the ‘same, substantially the same or of equal value’, do not arise because of the above factors. However, where those factors are considered in terms of an affirmative action programme, it is not unfair discrimination.

Auditing inequality
The Code of Good Practice on Equal Pay/Remuneration for Work of Equal Value (Government Gazette No. 38837 of 2015) sets out practical guidelines for employers to audit their pay policies on an annual basis to identify inequalities.
 
Using this companion to the Act, they must determine which jobs should be audited and if:
a) jobs being compared are the same, substantially the same or of equal value;
b) if there are differences in the terms and conditions of employment regarding pay for these jobs; and
c) if these differences are non-discriminatory and can be justified.
 
When evaluating jobs, employers should consider the responsibilities demanded of the work; the skills, qualifications (including prior learning) and experience required; the physical, mental and emotional effort needed; and the working conditions of the job. They should also take special precautions not to evaluate female-dominated jobs using the same criteria as male-dominated jobs.
 
However, the law doesn’t demand that all employees doing similar work should be paid the same. Certain factors must be considered, like seniority, above-average capability, personal performance (provided the same evaluations are applied  equally), freezing an employee’s pay after demotion until it aligns with fellow workers, shortage of a particular skill, or any other non-discriminatory factor.
 
Employers should familiarise themselves with the Act and the Code of Good Practice to ensure that they satisfy all requirements. “Although they’ll receive ample opportunity to get their houses in order,” warns Leggat, “non-compliance will eventually amount to legal woes which are better avoided.”
 
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

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

It’s personal tax season again and millions of South Africans are busy filling out their tax returns. To avoid any delays in this widescale process, payroll departments across the nation must work quickly and in strict compliance with the law. Failure to do so could result in heavy penalties for their organisations.
 
Arlene Leggat, a director at the South African Payroll Association (SAPA), says that, to satisfy all statutory obligations, not just tax regulations, payroll practitioners need to be suitably qualified. “Payroll plays a leading role in any organisation’s governance and compliance efforts. To reduce risk, employers must ensure their administrators are competent.” But how can they guarantee that this is the case?

Practitioners and good governance
Payroll practitioners should be driven by good governance practices and must stay abreast of current legal requirements. For example, the recent Protection of Personal Information (POPI) Act places an additional burden on businesses to carefully manage and protect any personal information they store or process about their workers. Practitioners must be aware of such developments and understand how to remain compliant with them in the course of their duties.
 
According to Leggat, as compliance requirements increase, more companies are realising the importance of a professional designation. “SAPA is the recognised regulatory body for payroll practitioners in South Africa,” she says. “When companies hire outsiders, there’s no guarantee they’ll get someone who is competent in their field, and the risk of falling short in their legal obligations is growing year by year.”
 
To be awarded one of SAPA’s professional designations, applicants must have the relevant qualifications and experience needed to perform their duties at junior, mid or senior levels. But even after becoming a member, they’re required to continually improve their payroll skills and knowledge.

CPDs
A core component of ensuring SAPA members understand good governance practices and compliance with legislation is the association’s continuous professional development (CPD) programme. Members must accumulate a set number of CPD points every 2 years to retain their SAPA title. This can be achieved by attending SAPA-approved courses, each carrying a predetermined number of points.

Code of ethics
In addition, members are bound to a code of ethics and any breach could result in their membership being revoked. This gives employers the assurance that their payroll officer strives to conduct themselves in a manner befitting their legal and moral responsibilities. In addition, organisations have in SAPA a channel through which to voice any grievances.

Hiring for compliance
Leggat advises companies to avoid the dangers of non-compliance and promote good governance by hiring SAPA approved payroll practitioners. “We sometimes read of incidents of payroll fraud or noncompliance, and this is usually the result of employing unregulated administrators. For members of a professional body, there are too many controls in place, so poor conduct puts their careers at risk. Therefore, our designations alone promise a high level of compliance and governance.”
 
Employers and unregistered practitioners are invited to enquire about the benefits of SAPA membership.
 
SAPA will be hosting its annual conference this year titled Portraits of Success as follows:

• Johannesburg from 6 to 7 September
• Cape Town on 12 September
• Durban on 14 September

 
To register visit http://www.sapayroll.co.za/Events/Conference.aspx

​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: Arlene Leggat, Director at the South African Payroll Association (SAPA)
 
The Minister of Labour announced an amendment to the “scale of benefits” described in the Unemployment Insurance Act, 2001 (Act No. 63 of 2001) on March 17th this year, to be implemented from April 1st. The statement has caused much confusion across the payroll function, affecting employers, payroll departments, payroll consultants and payroll software vendors.
 
The question on everyone’s lips is: if the benefits have changed, should the contributions payable by employees increase in step with the new targets? In this article, I’ll deal with the problem, its cause and the solution.
 
The problem
Firstly, the wording is misleading. The announcement uses the term: “scale of benefits”. However, the figures mentioned are actually the limits of benefits to which UIF applicants are entitled, i.e. they can’t claim amounts above this ceiling. The scale of benefits refers to brackets of income previously earned by a beneficiary and the corresponding percentage of that income they may claim at each level. These brackets might not even be affected, and the articulation of the change could have been clearer.
 
Secondly, UIF benefits are perceived to be closely associated with UIF contributions. So, payroll practitioners assume that changes to the first will have a direct impact on the latter. To compound the confusion, changes to both have historically been implemented together on 1st April, and the updating of payroll systems is a given. Therefore, many practitioners were led to believe that contributions must be included when, in fact, payroll is not affected at all.
 
Contributions fall within the ambit of the National Treasury and are governed by the Unemployment Insurance Contributions Act of 2002. Benefits, however, are distributed by the Department of Labour and are regulated by the Unemployment Insurance Act of 2001.
 
While each law sets brackets against which contributions must be deducted or benefits paid, these tables need not correlate. This can be seen in a 2015 draft bill raised by then Finance Minister, Nhlanhla Nene, which proposed a reduction in UIF contributions. Government Notice 187 of March 2015 assures the reader that “The proposed contributions reduction would not reduce the unemployment insurance benefits payable to beneficiaries.” Although the bill never passed, the notice highlights that contributions ceilings need not match benefits ceilings.
 
Thirdly, since each function is managed by a different Minister, an amendment by one Minister does not constitute an amendment by the other. By law, each Minister must announce any changes separately by way of government gazette.
 
Still, amendments by the Minister of Finance regarding UIF contributions must be made in consultation with the Minister of Labour and the UIF Commissioner, and vice versa. This suggests a high level of collaboration and correspondence between the two offices. Surely, at such close quarters, consideration should be given to communicating the status of each law in regards to the other. In other words, the confusion should have been anticipated and addressed as part of the legislative roll-out.
                                                                                               
The source of confusion
It’s the payroll practitioner’s duty to understand the laws governing their function. However, by the number of queries received by SAPA from parties across the industry, it’s obvious that the change was not communicated effectively enough to clarify its scope and implications.
 
SAPA representatives contacted the UIF in an attempt to offer our members an official response. Surprisingly, the UIF representatives with whom we corresponded assured us that the amendment was applicable to both contributions and benefits. But when pressed to provide a gazetted announcement by the Minister of Finance, they were unable to do so.
 
Currently, the matter is under investigation with the UIF and we’ve received no further information.
 
It seems obvious that the source of confusion is a lack of coordination between the relevant lawmakers and their departments, and poor communication to the public in general.
 
What should you do?
First, don’t jump to any conclusions. Last year it was reported that the UIF had amassed a R99-billion surplus. Therefore, they might be in no hurry to increase contributions until they have to. SARS seems to confirm our thinking, with the existing limits still displayed on their UIF web page at the time of writing.
 
Next, obey the law. Until the Minister of Finance gazettes any changes to the UIF contribution structure in accordance with the Act, it should be business as usual. Do not update your payroll software’s tables or deduct higher contributions from employees because, without official notification, this could prove illegal.
 
SAPA will continue to pursue this matter and keep its members abreast of developments.
 
Photo caption: Arlene Leggat, Director at SAPA

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