Author: Marisa Jacobs, Director – Head of Immigration and Mobility at Xpatweb
How difficult is it really to obtain a work visa for a foreign skilled employee? In truth, extremely easy if you know what you need and how to go about it, but near impossible if you are inexperienced and make school boy errors. Here are some expert tips to help:
When an employee comes to render employment services in South Africa, make sure they get a valid short-term work visa. Do not take a chance and tell the immigration official this is only a business trip, when the purpose is work. It is easy to be compliant and not worth the risk. The process takes ten working days and the short-term visa is issued for three months, while it may be extended in South Africa for a further three months.
New foreign boss? Don’t stress
Getting a new boss from overseas is stressful enough, let alone making them think you are not competent in sorting out their work permit status and the family’s residency permits. Luckily, the intra-company transfer work visa is one of the quickest and cleanest visas to obtain. Just make sure you understand the rules and requirements upfront as one piece of incorrect guidance or supporting document, can put you back to square one. These take two months to obtain, end-to-end and where done effectively.
When you need that critical and rare skilled employee
What do you do when your business family just do not have an important skill that you need? There are some in the market, but they are rare and you just do not have the budget to attract and retain them?
The critical skill work visa route is a real game changer, mostly misunderstood and provides a brilliant and certain means to building a superior work force. You will be surprised to know the comprehensiveness of the qualifying skills. We have always been able to find a suitable category for a genuinely scarce skill in South Africa.
This category is also very attractive for the employer and expatriate. The employer gains a competitive edge on attraction and retention, as the visa is issued for the employer; whilst this category gives the expatriate the right to qualify in time for permanent residency in South Africa. One can rightly call this a win-win.
Do not make this crucial mistake
Stay away from the general work permit categories, except where you have a very large expatriate programme. This category has been made subject to an initial Department of Labour process, it has become virtually unobtainable. You will be promised an effective process, but after countless deadliness missed with impunity, you will still have no traction.
Waiving like a pro
The immigration laws of South Africa are very competently drafted legislation. This means that there are numerous special provisions which cater for situations which are unique and fail-safe clauses, which gives discretion where you need help, but need something special for your organisation. These include waiver provisions, which gives the department the right to waive certain legislative requirements.
Where you have a large project, or need to otherwise bring a large group of expatriates into South Africa, this is crucial for your expatriate programme.
The work visa process should not be an isolated one. The same way that all aspects of your family needs looking after, the fiscal planning for an expatriate cannot be in isolation with the work visa process. This includes contracting correctly as expatriates have different terms and conditions of employment, expert tax planning including international tax planning, exchange control and banking planning; and even catering for their employee benefits, as normal South African benefit programmes are mostly too expensive for them and also seldom suitable.
Photo caption: Marisa Jacobs
Author: Mariana Stander, Director, Tax Consulting
In the current economic climate, the possibility of retrenchment is becoming more of a reality for many South Africans. Employers need to understand the tax implications applicable to retrenchment packages to ensure that they leave the retrenched employees in the best possible financial position.
Understanding the tax implications of retrenchment payments
To qualify for the special tax rates applicable to severance benefits due to retrenchment, an employer must have paid a lump sum to an employee as a result of their employment having been terminated or lost for the reasons listed below:
Employees over the age of 55 or who have lost their jobs due to the incapability to perform their work (such as sickness or disability) will also qualify for the severance benefits.
The second point of importance is that the first R500 000 of a severance package is not subject to tax, as a once in a lifetime benefit (meaning once this has been utilised, any subsequent lump sums will be taxable). Any amounts above the R500 000 will be taxed at special tax rates applicable to severance benefits.
Thirdly, it is very important to know that any pro-rata bonusses and leave pay paid at the time of retrenchment will not be considered to be part of the severance benefit and will be subject to normal tax rates.
Utilising the special tax rates
To qualify for the special lump sum tax table, the employer needs to submit a tax directive to SARS. SARS will calculate the applicable tax rate based on the tax directive and the employer will pay out the nett amount to the employee. The employee needs to declare the severance pay on his/her income tax return.
An important point for retrenched employees to remember is that a severance benefit cannot be conserved in the employer’s retirement fund or in a preservation fund. If the employee wants to invest their retrenchment package, they can invest the after-tax amount in a retirement annuity fund.
Should the employee decide to transfer their retrenchment package to a retirement or preservation fund, it will cease to qualify as a severance benefit. Should they wish to access these funds before the age of 55, they will forfeit the tax-free benefit and will be taxed at the normal tax rates.
To ensure that retrenched employees get the best possible tax benefits on their retrenchment packages, employers are strongly advised to not only consult with Human Resource and Industrial Relations specialists when determining retrenchment packages, but to also consult with a tax specialist.
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, firstname.lastname@example.org, www.atthatpoint.co.za
Author: Marisa Jacobs, Director – Head of Immigration and Mobility at Xpatweb
When you employ a foreign national in South Africa, the rules and best practice are significantly different for them than normal employees. One can always fit foreign nationals into an existing human resource structure, but there is either a significant and unnecessary cost thereto, or plenty of administration. Here are some pointers to ensure you make the correct start:
Expatriate selection and preparation
The journey starts with sourcing the correct resource for the job, which is of critical importance and must be given the necessary thought. These considerations would include the emotional and psychological effects on an expatriate employee and their family and whether their family is accompanying the expatriate on the assignment or remaining behind.
Psychometric assessment that focuses specifically on a candidate’s ability to adapt to different people and situations as well as their ability to cope with pressures and set-backs can offer significant and useful insight to employers as to the suitability of a candidate and their likelihood to be successful on assignment.
Immigration and work visas
The work visa process needs to be tackled as soon as possible after a suitable candidate has been chosen. There are several steps to follow, which include identifying the correct category of visa for both the expatriate and their family, determining whether the applicant must apply in their home or host country, and then, most importantly, the process of collecting the necessary documents from both the employee and the employer.
This can be quite a lengthy process, especially where poorly managed and the sooner it gets underway the better. Work visas are easy to understand if you know what you need and how to go about it, but near impossible where you are inexperienced.
Tax planning and compliance
When employing expatriates, specific tax planning is required to ensure that, among other things, a non-residency tax status is secured and solely South African source (as opposed to world-wide) income is taxable and employee benefits such as housing exemptions are optimally structured.
Likewise, applying for SARS waivers on items such as home leave exemptions on rotational home leave trips can save companies large amounts of money. Obviously, of utmost importance is to ensure home and host country compliance at all times.
Expatriate remuneration can be a highly sensitive and contentious issue. It is therefore crucial that an objective and consistent methodology is used when adjusting an expatriate’s salary to the specific assignment for which they have been selected.
Employment contracts or secondment agreements must be setup to ensure correct wording from a work visa perspective, optimal tax planning and compliance as well as addressing standard expatriate items, i.e. aligning your agreement to leading market practice.
It is vital that an international mobility policy is formulated, taking into account market best practice, local laws and current business affordability. Companies would often make use of an “Assignment Cost Calculator” calculating the total assignment costs, including home and host country taxes.
Where employers bring in a group of expatriates for a fixed term period project, they often utilise an outsourced vehicle through which to employ professionals. Should it be a business consideration, one of the main benefits of this type of structure is to ensure complete confidentiality of remuneration. It also lessens the administrative burden of, for example, setting up a split payroll and administering offshore payments and Reserve Bank approval processes.
Other benefits ensure the correct bank account setup with exchange control, social security clearances and expatriate specific benefits. No expatriate should be forced to contribute to a South African based retirement scheme, as they do not plan to retire in South Africa (if they do, we are in breach of tax and exchange control).
Expatriates who are correctly selected and integrated deliver exceptional value to an organisation. However, end up with unhappy employees and there will be layers of frustration, as any human resource administrator who has been through this process can vouch.
Author: Tanya Tosen, tax and benefit specialist, Remuneration Consultants
What can be done to remunerate employees better? The simple answer is plenty. Yet many employers do not get the most out of employee package structuring. This is one of those areas where there are “too many experts”, and correctly so, as this spans the professional functionality of remuneration specialists, tax advisors, auditors, financial planners and trustees.
Therefore, depending on which professional you ask, you will get different responses, for example, tax advisors will comment on that there is no tax risk, whilst they have no experience in remuneration methodology and financial planning.
Conversely, trustees will always promote better retirement planning and more risk benefits, which are indeed important, but should this be more important than putting a child through the best possible education. The correct answers only come when you deal with holistic experts that can demonstrate to you an approach of “total reward statements”.
Tough times means no more holy cows
With economic times being what they are, employers cannot afford large increases. It also becomes difficult to give good increases if you are retrenching staff. The question then is, what can be done to pay employees better.
If you have ever offered an employee a job and needing to “gross-up” the package because the take-home pay is not enough, the reason is most likely not your costing of the job, but rather not having the correct package structure flexibility.
The Supreme Court of Appeal says you can Salary Sacrifice
On November 30th 2015, it was confirmed that the Supreme Court of Appeal has delivered a final judgement on remuneration structuring. The simple message is that it is absolutely legal to structure remuneration and allow a salary sacrifice. A word of caution before you proceed.
The principle has been confirmed. The Supreme Court of Appeal (SCA) made it very clear that a package structuring agreement and correct documentation, which will include policies and often a Package Structuring Tool, is compulsory. With no ambiguity, the SCA said it will simply not believe oral evidence and the actual legitimacy depends on correctly executed documents.
What is the Golden Rule
An employee should be allowed to structure their remuneration to meet personal financial requirements. Where this is not done, the employer is “paying” for benefits or allowances which employees do not want. This means hard earned employee remuneration is paid towards benefits which the employee does not value. It may make your employee benefit broker happy, but it does not mean anything for your employee. Rather give your employee the choice to utilize flexible benefits to maximize their package.
The most commonly allowed items to a flexible-package are retirement funding, group life, disability, income protection, funeral cover, employee vehicle insurance, travel allowance, company vehicles, medical aid, gap cover, thirteenth cheque etc.
Why do all companies not do this?
Employers are generally not well informed of what legally can be done. In addition, the functions within the company who should promote this flexibility are usually concerned about additional administration. The administration is actually not that much more, where you are currently administering the employee benefit provider and payroll systems.
What is New?
The budget 2017/18 had plenty of bad news for employers, but there has been serious relief given for employee child bursaries’.
Photo caption: Tanya Tosen
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