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

Author: Lavine Haripersad, Vice Chair, South African Payroll Association (SAPA)
 
The year is rushing to an end and many South Africans are looking forward to a well-deserved break. It has been a difficult year for most companies with the unprecedented negative economic and political climate.  Companies are battling to be profitable. 
 
It is also a time of year where many employees have an expectation of receiving some reward in the form of an annual bonus. A bonus is different from a 13th cheque, as the payment of annual bonuses is not guaranteed. The employer can decide whether he wants or is able to reward his employees by paying a bonus. If it has never been the practice there is no fear that the business falls foul of the labour laws.
 
If the company has a policy of paying a guaranteed 13th cheque which is stipulated in the employee’s employment contract, it will be a transgression of the labour laws if the payments are not made.  And, if the company habitually pays out bonuses, but this year they cannot afford to do so, it has to inform its employees well in advance that it is deviating from its normal practice.
 
Ideally employees would be informed at least six months before the time that there will be no bonuses to ensure there are no expectations of getting one. People tend to over-commit themselves if they have an expectation of getting a bonus at the end of the year. Many spend the bonus long before they receive it and this can cause hardship or even greater indebtedness.
 
Performance-linked bonus
Many companies have also established a policy of “performance linked bonuses” where performance targets are set at the start of a financial year. Specific performance targets are set for individual employees, mainly those who are in senior management positions who have a direct influence in the way the company is run and perform.
 
The bonus is normally calculated as a percentage of the employee’s remuneration and the company should have a clear policy in place, which sets out the criteria that have to be met in order for the bonuses to be paid out.
 
In most instances there will be a component of business performance targets to be achieved for the company. It is quite likely that the business may have performed well, but certain individuals were unable to meet their individual performance targets, or the other way around.
 
The policy must be clear about how the bonuses will be calculated and this must be completely transparent.
 
Impact of no bonus
Despite receiving forewarning that annual bonuses will not be paid out, it certainly is demotivating. As this potentially affects productivity, it would benefit a company greatly if it is open and transparent about its financial situation and future prospects of re-introducing bonuses.
 
Furthermore, companies can find other, less expensive ways of motivating its employees if they are unable to afford bonuses. These include days off for years worked or rewarding overtime with days off. It may even include a wellness day at the office or allowing for flexible working hours in certain circumstances.
 
The fortunate ones
Employees who are in the fortunate position of receiving a bonus should be cautious not to spend it all on holidays or gifts, but rather to use it wisely to reduce debt, for instance.
 
Many companies have a policy of a 13th cheque that is paid at the end of the year.  This payment is guaranteed if it forms part of the company’s total cost to company. The employment contract will stipulate whether the employee gets a guaranteed 13th cheque, or a bonus that depends on individual performance or the performance of the company.
 
Employees must ensure that this is clearly stipulated in their employment contracts. If there is no mention of a 13th cheque, the employer is not obliged to pay it.  However, if it is clearly stipulated in the contracts, and the company does not honour this agreement with its employees, it amounts to unfair labour practice.
 
Even in tough times it is expected that the company makes provision for the payment of the 13th cheque. Companies are committed to this payment in the same way they are committed to paying salaries.
 
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

The gig economy (also known as the ‘sharing’ economy) has been in the media quite recently. Issues related to Uber drivers in the United Kingdom, for example, is just one example of how the digitisation of services, globalisation and the rise of independent contractors are changing the way we differentiate between ‘employees’, ‘service providers’ and ‘contractors’.

Cathie Webb, Director of the South African Payroll Association, says owing to available business models today varying greatly, it would be nearly impossible to create a one-size-fits-all approach that would apply to all workers. Despite this, the focus should be on ensuring that people are compensated fairly and legally protected in our changing, increasingly flexible economy.

Why payment and accountability becomes a complex issue
“The reason why it’s difficult to create a clear-cut payment strategy for gig workers is because there are different types of working situations. A worker could be using an international app to find work and deliver products or services and there wouldn’t necessarily be a local intermediary company involved, which would make payment accountability a more complex legal issue,” says Webb.

The United Kingdom recently ruled that Uber drivers aren’t ‘self-employed’ and should earn the national living wage. This decision has been appealed and negotiations are ongoing, but it highlights the way that many businesses may need to change their models and definitions regarding ‘employee’ vs ‘contract worker’.

Other examples of the gig economy are running smoothly. Etsy allows craftsmen to market their products to an audience that they wouldn’t normally be exposed to and Fiverr.com enables professionals to share their skills in an international marketplace.

“These are easier gig economy scenarios because an invoice is sent to a customer and the intermediary or website takes a cut. This is like paying rent for a shop floor space,” says Webb.

Clarity in work contracts are needed
In South Africa, the national Income Tax Act has guidelines to establish whether a person is in standard or non-standard employment, along with guidelines as to how these workers should be compensated and taxed. One of the key elements is ensuring that the employment contract is correctly formulated.

“Essentially, if someone is giving one’s capacity to serve at the disposal of the company, that person is an employee.  If the person is producing a product or providing a service for a company, then the person is a private contractor.  This detail should be clearly defined in the contract between the two parties,” says Webb.

There are also many other guidelines by the South African Revenue Service that can be used to test whether a person is an independent contractor or an employee. The number of hours spent on the company’s premises, the amount of supervision that is required by the company, and whether the contractor employs additional people, for example, can indicate whether a worker should be submitting invoices each month or should be paying to Pay As You Earn (PAYE) tax. 

​“This is a complex issue and there will undoubtedly be many more conversations around the compensation and benefits that apply to gig economy workers.  What needs to be determined is whether the gig economy worker is as free is we believe to manage their own output, deliverables, and earnings,” 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

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