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

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

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

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

Payslips are among the most important documents people receive, yet few pay enough attention to them, says Nicolette Nicholson, director at the South African Payroll Association (SAPA).
 
“Too many people just see their payslip as confirmation that their salary has been paid and they can relax,” she says. “In fact, it’s an extremely important document and it’s worth checking it carefully to make sure it is accurate. Mistakes could cost you dearly in the long run and you are responsible for making sure the payslip is accurate.
 
“Everybody should file all the payslips they ever receive and keep them forever!”
 
Nicholson continues that a payslip is first and foremost the irrefutable record of a person’s work service for any employer. It provides factual proof of the jobs he/she have held and what they were paid. It’s also the receipt for work performed and should be carefully compared with the letter of appointment, contract or other official documents to ensure that a person’s work is being properly rewarded. Also confirm that the correct employer name and address appears on the payslip.
 
Payslips typically have four main types of information: the fixed salary or contract of employment; the variable income for things like overtime; the deductions area, which would include statutory and personal deductions; and the statistical area, which includes annual and sick leave, job description and so on. Job descriptions are often omitted to avoid potential conflict between employees, Nicholson notes, but this is not good practice.
 
Deductions
A particular point to notice is that personal deductions cannot exceed 25% of a person’s gross pay, and businesses have the responsibility of protecting their workers’ interests here. This means, for instance, that a company’s payroll department has the obligation to act on statutory deductions and in the case of an emolument order to contact the attorney if the garnishee exceeds this ceiling and guide the employee to make arrangements to lower the repayment value on the court order. However, the onus still falls on employees to check these deductions carefully.
 
Staying with deductions, Nicholson says that it is also critical to check that contributions to pension or provident funds, among others, have been properly made. If the incorrect deductions have been made, it will affect retirement income and pay-outs, as well as death benefits.
 
Another important figure to check is tax and unemployment insurance deductions. The employee should also ensure that these deductions have actually been paid over to the taxman and Department of Labour respectively on the IRP5 certificate issued at the end of the tax year.
 
“These authorities will hold the employee liable alongside the employer if the right taxes are not paid,” she adds.
 
Structuring
Payslips will also reflect how an individual’s pay is structured and it’s prudent to make sure that this structuring is legal and harmonises with the job description. For example, travel benefits that are simply there to help reduce the tax liability are not advisable. Tax evasion, or actions aimed at not paying tax, is a very serious offence and carries jail time; while tax avoidance that refer to using legal ways to reduce tax, is less serious, but can attract a fine of up to 200%.
 
Nicholson puts forward that it is good practice to ask for a dummy payslip before accepting a job. This will enable a person to determine whether the deductions are fair and that take-home pay is at the expected level.
 
“If there’s something on your payslip you don’t understand or don’t agree with, take it up with your immediate boss, who will escalate to the payroll department,” Nicholson concludes. “If you don’t get satisfactory answers, your union representative should be able to help.”

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