The payroll professional has access to a vast repository of knowledge that can fundamentally change how employees engage with their income and the organisation.
 
While the payroll expert may innately understand how tax, medical aid and budgets fluctuate, for the employee this can be a number-filled minefield that makes little sense. By sharing knowledge and insight, the payroll practitioner could transform how employees feel valued by their organisation.
 
“People’s crises are often financial,” explains Cathie Webb, executive at the South African Payroll Association (SAPA). “They want to know why medical has gone up by 10% when their salary has only risen by a consumer price index related 5%, how to balance their budget, and how taxes impact on their finances.
 
Not all employees understand why they are taxed, who is responsible for the rules around taxation, and what impact this has on their daily lives.  Payroll should take on the role of educating and supporting employees, providing them with insight into new regulations and price hikes and how these will affect them in the future.”
 
By using foresight and planning, payroll can deliver relevant and timely advice to employees. Not when the changes hit, but in advance so everyone has time to prepare.
 
Proactive payroll pays off
“Share your knowledge through group sessions where you educate and inform people, not just one on one sessions that eat into your time,” adds Webb. “Use events such as National Payroll Week (every September!) to let people know what you do and why your expertise is invaluable.”
 
Many payroll practitioners find the idea of preparing regular training sessions outside their comfort zone, but these can really make a difference in how they engage with employees. In instances where the organisation is spread out across various branches, often those in the outlying areas have no idea what is going on. This is where payroll can shine.
 
“Payroll is the business internal shop window,” says Webb. “The information that comes out of payroll tells people a lot about how much the business cares about them. By proactively disseminating information from head office, payroll can show employees how much their needs are valued.”
 
If employees are battling with savings or budgets, perhaps introduce a savings scheme which they can access in December or when their main school fees are due. It’s an easy thing for payroll to do and it adds so much value. Another idea could be to implement a solution such as a debit card that doesn’t need each employee to FICA, but allows them to keep their cash secure.
 
“Look at how you are presenting your pay information to your employees as your payslip alone can add inordinate value,” says Webb. “Don’t have employees wait a week after payday to receive their payslip.  Consider sending an SMS to let them know they have been paid. Ensure that people are paid at the same time every month – it’s unfair to shift dates and times when they are relying on their funds.”
 
It says a lot about a company if its staff aren’t paid promptly or regularly.  Things can go wrong, though, and if they do, payroll can be the light that shines on the problem, giving people plenty of warning, explaining what has happened and giving clear timing as to when it will be resolved. Communication around payment failures is crucial and payroll should lead the charge.
 
“Finally, it is worth giving the ideas employees bring to payroll some thought, and proactively approaching management if they have value. Remember that a small thing can make a big difference to employees and their morale,” 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

What it means to be a third-party agent for SARS

Few employers or employees truly understand what it means when you are nominated by The South African Revenue Service (SARS) as a third-party agent, which often results in a matter that could be resolved speedily lingering unnecessarily and impacting both parties.
 
In this instance a Payroll professional is in a prime position to help manage the process.
 
“Your company’s Payroll administrator performs many services that can alleviate a company’s administrative burden,” says Arlene Leggat, a director at the South African Payroll Association (SAPA).
 
How it works
If a taxpayer fails to submit their returns, or to pay their income tax, SARS will apply penalties every month until their returns are received and all amounts owed are settled.
 
However, if a penalty is outstanding for over two months, the Tax Administration Act allows SARS to appoint any person, including an employer, to hold money for that taxpayer as SARS’ agent. If nominated as such an agent, that person/organisation will be sent an AA88 Notice showing an amount to be withheld from the employee’s income, which is to be paid to SARS by the due date shown on the form.
 
It’s important to understand that when you, as an employer, receive an AA88 Notice, you become legally accountable for the payments. Penalties against an employee with unpaid tax will stop, but for outstanding returns penalties will be applied until the forms are submitted. Failure to adhere to the AA88 instruction will result in the agent being penalised for late payment.
 
A separate penalty will be incurred for each month that the employee fails to submit their tax return. Every three months SARS will accumulate this debt and issue an AA88 to the Employer (Agent).  SARS will also regularly send the agent an AA88 Reconciliation Statement showing any paid, cancelled or outstanding amounts for all employees against which an AA88 has been issued.

What Payroll should do
Any Payroll department should be familiar with the entire AA88 system, how to process payments and how to resolve issues of all kinds.
 
If you’re unable to make deductions, as will be the case if the taxpayer has left your employment, Payroll should inform SARS of this situation immediately, via the @EasyFile system.  On receipt of an AA88, Payroll should inform the employee that deductions will be made, ensure they understand their obligation, and assist them with settling their debt promptly.
 
If the AA88 is for outstanding taxes, Payroll must ensure the employee knows why the deductions are being made to avoid that a sudden cut in pay might be perceived as trickery on the employer’s part and the worker becoming demotivated and unproductive.
 
If the employee hasn’t submitted their return, Payroll should inform them that penalties will accrue until they’ve done so and explain the process to be followed. If possible Payroll may even offer assistance in completing and submitting such returns. They would require one of their Payroll team to be a registered Tax practitioner in order to do so.
 
An employee who earns under R350 000 for the tax year isn’t required to submit a tax return. However, mistakes can creep in and penalties are applied in error. If Payroll receives an AA88 Notice that appears to be penalties for late submission (usually increments of R250), they must encourage the employee to take it up this with SARS to resolve as soon as possible
 
If the deduction will cause the employee financial distress, Payroll should inform the employee that they can reduce the deductions by proving to SARS they cannot afford it. The employee must gather information about their expenses and submit this to SARS. If SARS deems the case valid, it may split the payments into more manageable monthly installments.
 
Payroll should also keep the employee updated on deductions, especially in the case where unsubmitted returns yield new penalties every month. In this way, the employee can see the dynamics and that their employer is not withholding pay unfairly.
 
In addition, if any refunds are due to the employee because of double payments, Payroll can inform them of the process to be followed apply for a refund. And if the employee leaves the company or dies, Payroll should apply for cancellation of further AA88s and refunds for any payments made afterwards.

Education
It would be greatly beneficial for any company to send Payroll personnel that are not acquainted with processing AA88s to SARS’ free workshops to ensure they have the latest information and requirements at their disposal.

​Value-added service
“Make sure your Payroll department isn’t only processing AA88 claims endlessly, but providing a value-added service that keeps your workers happy, motivated and productive,” says Leggat. “They should always strive to help employees protect their income and reduce the administrative burden on your company.”

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 not uncommon for a payroll to be consistently managed so poorly that workers threaten to strike over incorrectly administered pay. Often, the person administering the payroll is not adequately qualified for the job.
 
Lavine Haripersad, a Director of the South African Payroll Association (SAPA), says such risks are why hiring accredited payroll practitioners is so important. Yet, many employers don’t realise how much skill it takes to run a payroll. “There are literally hundreds of legal requirements and specialised procedures to follow,” she says. “It’s therefore critical that organisations have professional payroll administrators who know, understand and can practically implement them.”
 
So what do the top payroll administrators know (that business managers sometimes don’t)?
 
Correct Procedure
Payroll consists of various processes that must be correctly executed. “Qualified payroll administrators know these processes intimately,” says Haripersad. “These processes include record keeping, employee take-on, month-end procedures, year-end procedures, and more.”
 
Calculations
There are many complex payroll calculations related to tax, medical aid, pension funds, provident funds, allowances, reimbursements, deductions or bonuses. A payroll administrator knows how to perform them in accordance with the latest legislative requirements.
 
The law
Payroll is governed by an extensive set of legal and regulatory requirements. Payroll administrators are trained in the law and ethical governance, and keep themselves updated on new standards as part of their duties. “So they act as advisors to their organisations, guiding them in the right direction to avoid legal problems,” says Haripersad.
 
Information management
Payroll information and data must be collected, stored, secured, destroyed and used in accordance with various laws and accepted procedures. “The safeguarding of employee data must adhere to the Protection of Personal Information Act,” warns Haripersad. The proper information must also be submitted to the government at defined intervals. And correctly calculated payroll aggregates must be reported to accounting for recording in the general ledger. “Payroll administrators are well versed in the function of information inside and outside the organisation.”
 
Tax
Employee tax is so critical it demands special attention and skills only a professional payroll administrator can provide. This is especially true of larger organisations where the taxable portion of intricate remuneration, allowances, expense claims, deductions, bonuses or perks schemes is difficult to determine.
 
Ethical practices
Accredited payroll administrators are specifically disciplined in ethics and bound to the association’s Code of Professional Conduct. Not only do payroll administrators have an authoritative standard to work to; employers also have in SAPA a means to resolve unethical or unprofessional behaviour. The same can’t be said for non-certified administrators.
 
Project management
Payroll administrators are also trained to work in dynamic environments like project management where each payroll project might be different from the last. They therefore have project management training and can often act as project administrators.
 
Strategic advisors
Overseas companies see payroll for what it is - a key business enabler. International payroll administrators can work towards a Master's Degree in payroll management and provide direction to national and global payroll initiatives. But even a single organisation can derive such value from a well-trained payroll administrator.
 
Payroll administrators offer a wealth of knowledge that an employer can leverage to their benefit. Says Haripersad: “If organisations see payroll administrators as managers rather than workers, they will appreciate the strategic value they stand to gain from their input.”

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

When changing jobs or retiring, it is very important to ensure that the correct tax treatment is applied—or both employer and employee could find themselves at risk.
 
Author: Lavine Haripersad, Vice Chairman, South African Payroll Association
 
When employees leave a company, whether to move to another job or to retire, it is important to ensure that the payroll department applies the correct tax treatment.
 
Typically, the reason for the employee leaving determines the way the final payments are treated by the taxman. Failure to apply the correct principles could make the company vulnerable to penalties from SARS, and the employee could find him- or herself having to make arrangements to pay back some money to SARS on assessment
 
Reasons for leaving
If one looks at the most common reasons for people leaving their current employer, it becomes easier to understand the type of tax regime that should be applied. Employees should make it their business to understand the broad principles and raise any queries, in order to avoid having to make unexpected repayments later. Reasons for departure include:
 
•          Resignation. When an employee resigns, his or her final payment will typically include a pay-out for any untaken leave, pro rata bonuses and notice pay, if applicable. These payments are subject to normal income tax, and the payroll department does not need to obtain a tax directive.
 
•          Operational requirements. This covers both retrenchment and redundancy, both of which result from the operating conditions in which the company finds itself. In the case of redundancy and retrenchment, HR has to apply the rules prescribed in the Labour Relations Act, 66 of 1995, which requires the employer to make a severance payment of (a minimum of) one week’s pay for every completed year of service.
 
For tax purposes, this redundancy lump sum payment must be treated as a retirement lump sum payment. A portion of this lump sum is free of tax (although this will be affected by any previous lump sum benefits obtained). In order to obtain this highly desirable benefit, the employer must first obtain a tax directive from SARS.
 
The tax regime in respect of these severance pay-outs is that the first R500 000 is not subject to tax, the next R200 000 is taxed at 18 percent, the subsequent R350 000 at 27 percent, and all amounts above R1 050 000 at 36 percent. As already noted, these figures have to take into account any previous benefits claimed during prior redundancies.
 
Most importantly, it must be remembered that notice pay, leave pay and pro rata bonuses that are also paid at the time of termination are not part of the severance benefit, and are subject to normal tax.
 
•          Mutually agreed separation. When the relationship between employer and employee breaks down, the parties might agree to an amicable parting of the ways to avoid legal disputes. In such cases, a gratuity or final settlement payment is usually made. It will usually be determined following the guidelines for retrenchment packages in Section 41 of the Basic Conditions of Employment Act.
 
The critical point to note here is that because this payment is not made on the basis of operational requirements, it does not constitute a severance benefit. Thus, a portion of this payment may not be treated as a tax-free pay-out, as in the case of a severance for operational requirements.
 
This means that the mutual separation gratuity will be treated as part of the employee’s normal remuneration, and will thus be taxed as such.
 
What can you do?
In conclusion, let us stress two points. The first is the one already made, namely that the reason for the termination of the employment relationship will determine how the final payment will be taxed. While the onus is on the employer to ensure that the correct tax regime is followed, if the employee has insufficient tax deducted, he or she will still be liable for the unpaid tax to be paid to SARS—even if the discrepancy only comes to light after some time has elapsed.
 
If employees are unsure, they should first discuss the matter with the payroll department and, if necessary, consult an independent tax practitioner.
 
The second point to emphasise is that to prevent mistakes happening, the traditional communications gap between HR and Payroll needs to be closed. Both parties should make active efforts to improve this situation because if HR makes the reasons for the termination absolutely clear, it is easier for Payroll to apply the correct tax regime. In the end, everybody will benefit, including the employees.
 
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

Why you should avoid misusing sick leave
 
When it comes to the issue of leave, one of the biggest challenges facing both employer and employee is the misuse of sick leave. A recent study by Occupational Care South Africa and Statistics South Africa found that an average of 15% of employees are absent on any given day, and that only one in three of those absent are actually sick.
 
This is costing the South African economy an estimated R16-billion a year.
 
“The pressure on the organisation isn’t letting up and employees need to remember that they have a job because their employer needs them to fulfil a function,” says Cathie Webb, Director, South African Payroll Association. “If you aren’t there, someone else has to stand in for you so it is important to take your employer into consideration when using your leave, especially sick leave. Some people see their sick leave allowance as a target, rather than something to be taken when absolutely essential.”
 
Not only does the abuse of sick leave cost the organisation in terms of productivity, but the employee will have to use their annual leave should they suddenly need extended leave to recover from an operation, for example. Once that is used up, they will then be on unpaid leave, which will affect them financially.
 
“Employers are much more likely to be approachable in terms of alternative ideas in an emergency if an employee doesn’t have a history of abusing leave,” says Webb, adding that the wisest course of action is for employees to remain within the rules around sick leave.
 
Also important to note is that companies are not legally required to offer the benefits of additional leave elements, such as study or religious leave. On the contrary, many companies are reducing leave allowances due to the current poor economic climate.
 
Employee Responsibility
While some companies do not stipulate leave in their contracts, others have very precise regulations and it is up to the employee to know how their company handles the issue of leave.
 
“It is common practise, and legally required, for companies to detail the number of leave days  to which an employee is entitled in their employment contract,” says Webb. “While it is good practice to reflect the leave balance due to an employee on payslips, this is not a legal requirement.”
 
In cases where a company does not provide leave information in their contract, the Basic Conditions of Employment Act applies. This is broken down into three distinct categories namely, annual, sick and family responsibility. Employees are entitled to 15 working days per year for annual leave, 30 working days over a three-year period for sick leave and three days per year for family responsibility leave, if they work a 5-day week.  A six day working week accrues accordingly.
 
Webb conclude that as an employee of a company the onus thus falls on you to understand exactly what your rights are when it comes to leave. Know what you are entitled to, how it is structured and the rules which dictate it.
 
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