Alcohol in the Workplace

The year is coming to an end and with this comes the celebrations and functions that are either held at the employer’s premises or off site. Either way the question often arises as to what, if any, the employer’s obligations are when providing alcohol at these functions.

In terms of the OHS Act General Safety Regulation 2A. Intoxication.

  1. An employer or a user, as the case may be, shall not permit any person who is or who appears to be under the influence of intoxicating liquor or drugs, to enter or remain at a workplace.
  2. No person at a workplace shall be under the influence of or have in his or her possession or partake of or offer any other person intoxicating liquor or drugs.

Employee ‘intoxication’ is a major concern and you will note that the OHS Act has placed upon employers the duty of prohibiting persons to enter or remain at a workplace who appear to be under the influence of intoxicating liquor or drugs.

These restrictions, together with COIDA and the implications of a possible injury on duty, have legal implications for employers and you should ensure that not only is it vital that these provisions be communicated to all employees, but that you keep a record of these communications. Employers should be in a position to demonstrate that they have made an effort to try and manage employees’ conduct around alcohol consumption, or preventing them from driving when over the legal limit or in an intoxicated state during these functions.

At social functions on the employer’s premises, the employer should ensure that employees have ‘signed off duty’ prior to commencement of the function. This will avoid any possible claims of ‘injuries on duty’, and consider the following steps to reduce possible liability:

  • Advise employees regarding the desired behaviour during work functions. This could include the employer limiting the number of drinks for the duration of the function.
  • Providing access to breathalyser tests.
  • Place a disclaimer in the area or pub.

Whilst year-end functions should be occasions to unwind and relax with colleagues outside of the normal working environment, both employers and employees still have certain responsibilities around their conduct, and would be expected to consider that both interests are not negatively affected.

Affirmative Action and Employment Equity

Editor’s Note: we know some employers prefer to do their own employment equity reporting. To this end we have designed a DIY pack to help employers which includes checklists, notifications, nomination forms and communication plans and examples.

In terms of Employment Equity Act, 55 of 1998, issued in terms of Section 25(1) – Duties of a Designated Employer: Section 13

  1. A designated employer must implement affirmative action measures for designated groups to achieve employment equity.
  2. In order to implement affirmative action measures, a designated employer must:
    • Consult with employees; and
    • Conduct an analysis

Affirmative Action measures: Section 15 states that:

  1. Affirmative action measures are measures intended to ensure that suitably qualified employees from designated groups have equal employment opportunity and are equitably represented in all occupational categories and levels of the workforce.
  2. Such measures must include:
    • Identification and elimination of barriers with an adverse impact on designated groups
    • Measures that promote diversity
    • Making reasonable accommodation for people from designated groups
    • Retention, development and training of designated groups (including skills development)
    • Preferential treatment and numerical goals to ensure equitable representation. This excludes quotas.

Consultation: Sections 16 and 17 states:

A designated employer must take reasonable steps to consult with representatives of employees reflecting the diverse interests of the workforce. The analysis undertaken should include employees from across all occupational categories and levels of the employer’s workforce (from designated groups and employees who are not from designated groups).

Analysis: Section 19

A designated employer must conduct an analysis of employment policies, practices, procedures, and the working environment in order to identify employment barriers that adversely affect members of designated groups.

Employment Tax Incentive

Employment Tax Incentive – Claiming when not reported in a specific month.

The Income Tax Act allows employers to claim Employment Tax Incentive (ETI) until the end of each six-month cycle. As each six-month cycle ends with the EMP501 employer reconciliation process it seems obvious employers should be able to claim ETI up until their EMP501 is submitted. Not so according to the e@syfile software.

Assuming an employer has not submitted an ETI claim on the EMP201 for a particular month the obvious ways to claim during the six-month cycle would be to either add the additional valid claim on to the EMP501 or to amend the EMP201 for the month where the ETI should have been claimed (had all info been available at the time).

  1. Adding to the EMP501 – when one tries to do this e@syfile records an error stating that one cannot claim ETI on an EMP501 that is not reflected on the EMP201;
  2. Amending the EMP201 – e@syfile no longer allows the amendment of the EMP201 for ETI claims when the filing period to which it relates is finished.

E@syfile therefore prevents one from claiming the ETI within the six-month cycle. The best solution we understand is to use the Automated PAYE Dispute Management Process, but this is still to be tested fully.

UIF – As Applied to Learners

For a couple of years the Department of Labour has been talking about changes to the benefits to be provided to qualifying employees. These proposed changes have been widely published and discussed in payroll forums and at seminars.

The changes to the Unemployment Insurance Act, signed into law on 19 January 2017, have yet to be made effective. This Act deals with the payment of benefits, with changes to the ‘application’ of the Unemployment Insurance Act being introduced. Indications are the effective date will be 1 March 2018, but this remains to be seen.

The 2017 Bills make related changes to the ‘application’ of the Unemployment Insurance Contributions Act, which deals with contributions.

For both Acts, the provisions that excludes learners in terms of the Skills Development Act from contributing and being eligible to claim benefits, have been deleted. Once effective, the result of these changes is that all learners must contribute, and consequently be eligible to claim benefits.

Note however that both Unemployment Insurance Acts define an employee as per the Fourth Schedule of the Income Tax Act and exclude common law independent contractors, even if paid deemed remuneration (income reflected against IRP 5 code – 3616). The Fourth Schedule also defines the remuneration on which the contribution must be calculated, with some special exclusions. In my understanding, these exclusions do not apply to the learnership situation, and all learners will have to contribute.

To conclude, all learners will have to contribute, unless they are not an employee as defined, and contributions must be made unless the remuneration value is zero.

SARS Text Reminders – Pay your Tax

In early November, shortly after the 31 October mid-year employer filing season SARS “mistakenly” sent out thousands of text messages to individual taxpayers telling them their accounts were in arrears and they needed to act now to prevent legal action.

A very successful tactic I should imagine as there is little doubt this triggered many individuals to pay their taxes well before their due date. As a result, I would not be surprised if this “mistake” becomes a more regular practice.

Timing of payment of personal taxes:

The Income Tax Administration Act provides the following deadline for paying one’s personal taxes:

The taxpayer has until the ‘Second Date’ on their annual tax assessment to pay any Assessed Tax liability raised by SARS. After this date SARS will levy interest at a rate of 10.5% per annum until the liability is settled.

Taxpayers are usually granted a period of at least six weeks in those cases where assessments are finalised before the 15th of the month in which to pay the assessed tax due. Where assessments are finalised after the 15th of the month, taxpayers are usually given until the end of the second month, that is, a period of up to 10 weeks within which to pay the tax due.

In the majority of the cases where SARS has issued the above-mentioned text messages, the Second Dates are only 31 January 2018. Taxpayers are therefore within their rights to hold on to their money until 31 January 2018 without fear of interest being raised.

Tax Ombudsman Report on SARS Delaying Payment of Refunds

In September the Tax Ombudsman released their report on their investigation as to whether there was evidence to support the view that SARS were intentionally delaying the repayment of refunds to individuals.

The Tax Ombudsman’s report concluded that there was sufficient evidence to suggest SARS were delaying refund payments on purpose.

This is not a surprise. Over the past twelve to eighteen months we have received a number of complaints from clients. The reasons provided for late payments have been similar to those outlined by the ombudsman and include:

  1. The taxpayer or tax practitioner submits all the supporting documentation required by SARS via e-filing. The case is resolved after a couple of weeks and a ‘completion’ letter received. The taxpayer expects to receive their tax refund within a week or two but this does not happen. Contact is made with SARS and the taxpayer / tax practitioner is told that there is a ‘special stopper’ on the account. The taxpayer is told they must come in personally with their proof of address, ID, banking details and all the supporting documentation used to complete their return. The reason provided for this is the high probability of fraud on the taxpayer’s account.
  2. Tax returns are submitted with there being no request for verification. Taxpayers then receive a verification request some weeks later. Supporting documentation has then to be uploaded to SARS and in the process delaying the release of a potential refund by 3-4 weeks.
  3. Taxpayers after meeting all compliance requirements find that they do not receive their tax refund. After enquiring with SARS they are told that their banking details need to be validated. The taxpayer then must personally go into SARS to perform this process. This is particularly irksome where banking details have not changed and have been on the system for many years.

We wish there were a simple way to fix this. Alas the only way is to go into a SARS branch and try and address this directly.

Employee vs Independent Contractor? When to deduct employee’s tax.

SARS Interpretation Note 35 and SARS Interpretation Note 17 give guidance on the tests to be passed to distinguish between an independent contractor and an employee and in which circumstances employees tax (PAYE) should be deducted.

IN17 contains a flow chart illustrating the decision making process. In summary, the tests are as follows:

Question Deduct Employee’s
Tax (PAYE)?
Is the person a labour broker or are they remunerated by a labour broker? Yes
Is the person a personal service provider? Yes
Does the person meet all of the below criteria (if the answer is no to any of these questions then PAYE needs to be deducted)?

  • Are they resident in South Africa?
  • Do they have more than three employees of their own?
  • Can you confirm the person does not have to deliver the service mainly at the client’s premises and that control and supervision by the client is not present?
  • Is the dominant impression that of an independent contractor?
No

Company Car – Fringe Benefit Determination Process

If the company is providing a company financed vehicle to an employee for business and private use please follow the attached decision-making process:

Step 1
Is the vehicle acquired under an operating or finance lease?

If it is an operating lease then proceed to step 2. If it is a finance lease then proceed to step 3.

Step 2 – Operating Lease
If you believe it to be an operating lease can you confirm that it meets the following requirements:

  • The employer must lease the vehicle from a lessor in the ordinary course of the lessor’s business (not being a banking, financial services or insurance business);
  • The vehicle must be available to lease to the general public for a period of less than a month;
  • The costs of maintaining the vehicle (including any repairs to the vehicle necessary due to normal wear and tear) must be borne by the lessor; and
  • Subject to the claim a lessor may have against a lessee for failing to take proper care of the vehicle, the risk of loss or destruction of the vehicle must not be assumed by the lessee.

If the vehicle is confirmed to have been acquired under an operating lease (rental) the fringe benefit is based on the monthly rental and fuel cost to the employer.

Step 3 – Finance Lease
If the lease is a finance lease the fringe benefit will be calculated as follows:

  • Company to supply the ‘determined value’ of such vehicle. This value is the retail market value including VAT (but excluding finance charges and interest)
  • On a monthly basis, the employee having right of use of such vehicle will be taxed as follows:
    • ‘Determined value’ x 3.5% x 80% where the vehicle is not acquired with a maintenance plan (and the monthly business travel undertaken is less than 80% of the total travel. 20% is applied where the monthly business travel exceeds 80% of the total travel).
    • ‘Determine value’ x 3.25% x 80% (or 20% where business travel exceeds 80% of the total travel) where the vehicle is acquired with a maintenance plan.

In both cases the calculated fringe benefit is reduced by any consideration paid by the employee towards the cost of the vehicle.

Please note that to determine what method to use in calculating the taxable fringe benefit for the car you must first check whether the lease agreement is an operating or a finance lease. The rentals plus petrol method is only used for operating leases. For finance leases the retail market value at the time the employer obtained the vehicle must be used.

Please contact your payroll team or dave@hrtorque.co.za for further information in this regard.

SARS – Employment Tax Incentive Guide

In September SARS issued a draft guide to claiming Employment Tax Incentive (ETI). This is well worth reading. While ETI is a valuable tool for employers it is also one of the highest risk areas. If an employer makes a mistake then suddenly they can face a big bill for the PAYE they should have paid plus 10% penalties and interest. By the time a bill is received the amount can be significant and has the potential to cause liquidity issues.

The challenge with ETI is that systems (SARS and third party) have had their challenges and employers are sometimes faced with a bill even when they believe they have followed the rules correctly. It is important in these situations for employers to have kept proper records and to have confidence they can defend their claims.

Final Reminder – COIDA Annual Return of Earnings

The Compensation Commissioner has issued a final reminder for the submission of outstanding Return of Earnings for 2017.

An estimated return based on estimate earnings can now be submitted before the 31 October 2017.

On or before the 30th April 2017 (as extended by the recent notice) you are required to submit your Return of Earnings (ROE) submission to the Department of Labour, as is legislated under the Compensation For Occupational Injuries And Diseases Act (No. 30 of 1993). Each registered business must submit a separate return.

This Act replaces the Workmen’s Compensation Act and provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees in the course of their employment, and for death resulting from injuries and diseases. The benefits are paid from the Compensation Fund, which gets its money from compulsory contributions paid by employers. All employers carrying out business within the Republic of South Africa are required to register.

If you have not requested this service from us in the past and require us to complete and submit this return on your behalf, please contact us on info@hrtorque.co.za. If we have submitted for you in the past then we will complete your return and send you the figures before submission. The cost for this service is R702.00 per return (excl. VAT).