Sage announces it will discontinue statutory compliance support

In a recent announcement, Sage confirmed that from the 1 October 2019 they will no longer provide tax and compliance advisory services to customers in South Africa, the rest of the Africa region and Middle East.

This is a massive announcement for the industry as many users of Sage have benefited over the years from their regular tax and statutory updates as well as the comfort they could rely on the software to provide them with outputs consistent with the legislation.

I am sure it could not have been an easy decision for Sage to make and we can only speculate that this reflects the increasingly difficult environment we find ourselves in where maintaining compliance is extremely difficult not only because of the complexity of our legislation, but also because of the differences in interpretation applied by the authorities. This creates significant risk for software developers and we assume must have played a key part of Sage’s decision.

The challenge for employers using the Sage products is that while they have committed to trying to make the software compliant they have suggested clients contact tax practitioners (business partners) about compliance issues. The real burden for linking what tax practitioners then say about the legislation and what actually happens in the payroll system will fall on the customer significantly increasing the risk of getting things wrong (and facing the consequences).

The advantage of having a compliance support function within a software developer is the ability to practically think through new legislation before developing solutions and also being the first to hear about issues that arise with clients. This feedback loop is now gone.

I believe this will make it harder for Sage to continue offering a quality product (hopefully I am wrong) and make it harder for internal payroll administrators to do their jobs – they will now be fully responsible for compliance and won’t be able to fully rely on the system.

Faking qualifications – now a criminal offence

President Cyril Ramaphosa has signed the National Qualifications Amendment Bill into law. This means that South Africans who are found guilty of misrepresenting their qualifications could face a harsh fine, up to five years in prison, or both.

This is not limited to the submission of a CV, but could also include making the claim on social media platforms such as Facebook or Twitter.

Anyone, not just employers, can report people making false claims to the South African Qualifications Authority, which will publish a national name and shame list of fraudulent credentials.

The Act goes further to also impose potential fines and imprisonment sanctions for educational institutions who make false claims.

Payroll Fraud Audit – new service

As financial conditions get tougher, we have heard of an increased level of financial fraud in South Africa. With the level of cash flowing through payroll there is a high likelihood of fraud in this area.

HRTorQue has launched a new service to perform either a review or audit of payroll depending on client preferences.

This service is aimed at identifying the risk of fraud within the payroll process and includes a number of checks to identify whether actual fraud might exist.

We specifically look at the following areas:

  • Timesheet Fraud (hours not actually worked)
  • Manipulation of payroll calculations
  • Ghost employees
  • Commission / bonus fraud (overstated performance)
  • Reimbursable expenses (over-claiming)
  • Payroll controls and approval

For more information please contact [email protected].

SARS Intention to Validate Tax Certificates

From February 2020, SARS have indicated an intention to validate the amounts shown on tax certificates to the PAYE, UIF and SDL actually deducted on those certificates.

What they mean by this is they will take the taxable earnings amounts, run them through their calculators and work out (within a margin) whether the correct amounts of tax were deducted. Where an employee has worked for a full year this is unlikely to be an issue, but this may lead to a larger number of audits where the forecast annualised calculation used by payroll systems results in materially different figures for the full year.

Implementing Time and Attendance Systems Successfully

A large number of employers are unhappy with their time and attendance systems. When we look into their cases we see a few common themes:

1. The Hardware
The hardware for time and attendance is often the same throughout South Africa. Biometric (fingerprint or facial recognition) Chinese built platforms that tend to function as they are intended i.e. to record when a person clocks in and clocks out. They are usually quite reliable and the only time they tend to be an issue are where they are poorly located on the site (allowing employees to bypass them) or don’t have back-up power or a stable wi-fi or ethernet connection meaning data for large patches is unavailable or unreliable;

2. The Software
There are various vendors of different sizes providing Time and Attendance software in the market. The software can be of varying quality with the most significant attributes impacting the client being:

  • Can the data be reliably extracted to excel?
  • What rules can be set in the system (see below for further discussion on the rules) and are these reliably translated to the data?
  • What is the setup and after sales support like? It is this attribute which causes some of the biggest frustration for employer as the time and attendance data is critical for prompt payments to staff, but they often feel let down by the after sales support;

3. The Rules
Most employers who are new to time and attendance systems assume they are plug and play i.e. once installed they are easy to use. In practice the two most important elements to getting this right are setting the rules and managing the process (see point below). By setting the rules we mean establishing in the software how the system should treat unusual situations e.g.

  • If an employee is 10 minutes late is this allowable or should it be treated as short time;
  • Inputting shift schedules into the system so the system automatically reflects overtime and normal time correctly;
  • Correctly calculating and averaging hours according to the BCOE as opposed to calculating overtime on a daily basis (this can significantly increase costs for an employer if done incorrectly);

In many cases the employer doesn’t spend any time on this aspect and by the time it is implemented it is difficult for them to revise their practices as they have set a precedent. Badly set rules cost money and make reconciling the hours for payroll time consuming and challenging.

4. Managing the Process
This is the process of extracting the data for the period, reviewing it for any anomalies, following up with management and revising / redefining any incorrect records. We have never seen an employer without some data issues to resolve in a period. These could be trying to understand why an employee worked for 18 hours straight (usually they didn’t clock out); trying to adjust time where there has been a change in the shift schedule and specific employee data is incorrectly reflected; or investigating employee absences. Irrespective of the cause, the biggest mistake we see made by employers is this task is allocated to their payroll or HR team to manage at the last minute just before they have to run payroll. By this stage there is no time to check with line managers. It is far, far better for the data to be daily or weekly and signed off by line managers. This promotes the right behaviour and significantly improves the quality of the data.

5. Integration with Payroll
For many employers, this is one of the key attributes they look for in their software, but in practice this does not improve the chances of a successful implementation. It is the old problem of GUGO (Garbage In Garbage Out). If the rules are bad and the process is badly managed, it doesn’t matter whether the system integrates or not. Sometimes it makes it worse because nobody actually checks the data and they assume it is correct.

6. New Software and Apps
Time and attendance is a pace where we expect new applications and AI to make a significant impact. There are already apps to allow for monitoring of employees through the GPS on their smart phones and for facial recognition cameras to track individuals around a site. However, the expense and software development to fully implement these have not really been tested in South Africa to the best of our knowledge. That said, even if you do have these enhancements you will still come back to the following two critical success factors in getting time and attendance right:

  • Set the rules correctly in advance.
  • Manage the process daily/weekly to correct anomalies and get line managers to sign off.

Botswana Minimum Wage

The Ministry of Employment, Labour Productivity and Skills Development has published a notification informing the public that the Government of Botswana has approved an increase for minimum wage rates for 2019/2020.

The adjusted minimum wage rates took effect on 1 July 2019.

Trade / Industry Basic Minimum Wage
Building, construction, exploration and quarrying industries P6.77 per hour
Wholesale distributive trade P6.77 per hour
Manufacturing, service and repair trades P6.77 per hour
Hotel, catering and entertainment trades P6.77 per hour
Garage, motor trade and road transport P6.77 per hour
Retail distributive trade P6.01 per hour
Security guards P6.77 per hour
Domestic service sector P1,000.00 per month
Agricultural sector P1,000.00 per month

Employers are advised to adhere to the newly stipulated rates. Failure to do so will be a violation of s138 of the Employment Act, Cap 47:01 and punishable in terms of s151(d) of the same Act.

Cost Savings through Data Management – Variable Pay

For larger employers and those with wage employees, variable pay tends to form a material part of the remuneration paid to employees (by variable pay we mean any pay that varies from pay period to pay period dependent on variable factors which may or may not include performance). Variable pay elements could include commissions, performance bonuses, overtime and certain allowances. Overtime tends to be the main element of variable pay, but this is not always the case.
Many employers track time using time and attendance systems, but very few monitor and proactively manage variable pay despite this being a sizeable cost for the organisation.

Significant cost savings can be made by following the process below:

  • Data Collection – collect data on employee time through an appropriate Time and Attendance system and process (see our separate article on how to set this up properly) and preferably by collecting individual employee data in a suitable HR or payroll system (Note: it is difficult to proactively manage anything if you don’t have good data);
  • Analyse the data to identify patterns:
    • Which employees are racking up the most overtime (look at trends)
    • Which departments / depots / locations / teams see the most overtime? Is this expected?
    • Is the reason for the overtime clear?
      • Staffing shortages
      • Heavy project loads / specific projects
      • Employees looking for extra pay – no discernible reason
    • Is overtime being paid according to legislation, union rules?
    • Are other allowances in line with union/bargaining council rules or have some allowances crept in because of legacy arrangements?
  • Consider ways to improve work practices and/or communication
    • Communicate the company policy to employees and managers;
    • Utilise tools to notify managers where overtime is becoming excessive;
    • Monitor and resolve employees claiming excessive overtime;
    • Proactively plan for staff shortages by using alternative staff or changing shift patterns;
    • Consider cross training in bottleneck areas to reduce the workload on key employees or teams;
    • Identify scarce skills and bottle necks and implement plans to address these;
    • Set targets for managing variable pay and track variable pay against output to make sure variable pay is reflected in improved efficiency / performance

It is also helpful to put a cost figure to overtime and variable pay and set targets for managers to reduce and hit lower targets.

While in South Africa we tend to focus on employees entitled to overtime under the BCOE, it is also important to consider work practices for salaried employees and make sure we as employers don’t create a culture of working overtime just for the sake of it. Where this is an issue consider better communication, limiting meetings to maximum lengths (of say 45min or an hour) and reducing the impact of team meetings.

UIF Compliance Certificate Mandatory for any Government Tenders

Originally mentioned in 2018 by the Department of Labour, rumour has it that it will become standard for entities trying to procure government work to have an UIF compliance certificate. The guidance on how to obtain this certificate is available on this link.

Critical to planning for this is the two week turnaround time to get the certificate so businesses may wish to apply on a regular basis or plan very well.

CCMA – Prescription and Holiday Pay

Editor’s Note: the risk in this instance can be managed with proper documentation and processes. HRTorQue’s HR support product is ideally positioned to help employers with this type of risk.

In a recent CCMA ruling, an arbitrator sided with an employee and argued that given the difficult financial climate, prescription periods should be relaxed and required an employer to pay the employee for disputed holiday pay. Central to the argument was the fact the employer could show no evidence that the employee had been shown and understood the company’s policy on holiday pay.

While the case may be referred, a precedent has been set.

It is critically important for employers to manage their potential liabilities by making sure of the following:

  • They have comprehensive up to date policies and procedures which are consistent with their contracts of employment
  • They have a proper induction process where employees are taken through the policies and sign the documentation; and
  • They have a proper exit process where the employee is once again taken through all exit steps and confirms their understanding of any final payments;

With the right steps in place, it is difficult for an employee to say they were not aware of something, even if many years have passed.