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.

Amendments to LRA Create a New Basis for Strike Interdicts

Author: Neil Coetzer Aitken (source: Cowan Harper Madikizela Attorneys)

On 20 March 2019, the Labour Court handed down judgment in the cases of Mahle Behr SA (Pty) Ltd and NUMSA & Others (D448/19) and Foskor (Pty) Ltd v NUMSA & Others (D439/19). In those matters, the Labour Court interdicted NUMSA from engaging in strikes on the basis that the Union had failed to conduct a secret ballot, as required by section 19 of the Labour Relations Amendment Act 8 of 2018.

The Labour Relations Amendment Act came into effect on 1 January 2019 and made it compulsory for Unions and employers’ organisations to include in their constitutions certain provisions dealing with means to ensure that secret ballots are held prior to engaging in a strike or lock-out. In addition, section 19 of the Amendment Act placed an obligation on the Registrar of Labour Relations to consult with the Unions and employers’ organisations on the most appropriate means to amend their Constitutions and to issue a directive to those Unions or employers’ organisations setting out the date by which such amendments should be affected. The Registrar is required to do this within 180 days of the commencement of the Amendment Act.

Importantly, section 19 also provides, inter alia, that a Union must conduct a secret ballot of its member before engaging in a strike, until such time as it has complied with the Registrar’s directive. It was common cause in the matters before the Labour Court that NUMSA’s constitution did not comply with sections 95(5)(p) and (q) of the Labour Relations Act 66 of 1995, as amended (“the LRA”) in that it did not provide for certain requirements concerning balloting processes.

The Labour Court pointed out that while section 67(7) of the LRA provides that a failure of a Union to comply with a provision in its constitution regarding a ballot may not give rise to or constitute a ground for any litigation concerning the legality of the strike, this section only applied to Unions that had complied with the requirements of section 95. NUMSA had not complied with those requirements.

NUMSA argued that the provisions of section 19 constituted an infringement of the respondent’s constitutional right to strike and, further, that section 19 was in any event not applicable since the obligation to conduct a secret ballot arose only after the Registrar issued the directive.

The Court found that neither of these arguments had any merit. The Court held that in order for a Union to avoid the consequences of section 19, NUMSA simply had to comply with section 95(5)(p) of the LRA. Section 19 requires simply that the Union conduct a secret ballot of members and such a provision, the Court held, did not infringe the right to strike.

The Court also concluded that the provisions of section 19 are clear and unambiguous and the Court was obliged to give effect thereto. It found that the legislation’s purpose was to ensure that a secret ballot was conducted by a Union prior to engaging in a strike during the transitional period following the enactment of the Amendment Act. The Court held that the requirement is peremptory and applies only to registered Unions whose constitutions do not contain a balloting requirement.

On this basis, the Labour Court interdicted NUMSA from engaging in any strike.

The judgment may be controversial for a number of reasons, including the Court’s interpretation of section 67(7) of the LRA. Nevertheless, it is likely that other employers may also now seek to interdict Unions and their members from engaging in strikes until such time as the Unions’ Constitutions have been amended to comply with the provisions of section 95 of the LRA. To that extent, the judgment is a positive development signalling an important shift towards improved governance and accountability for Unions.

Taxation of Foreign Employment Income – Individual’s Perspective

In March 2020, the South African amendment to the taxation of foreign employment income will come into action. This amendment brings into remuneration (taxable income) all foreign employment income for South African resident tax payers subject to an exemption of one million Rand. For an individual the solution to this challenge may not be as complicated as they think; and financial emigration is not necessarily the solution.

“There shall be exempt from normal tax any form of remuneration to the extent to which that remuneration does not exceed one million Rand in respect of a year of assessment and is received or accrues to any employee during a year of assessment by way of salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance including any income referred to in paragraph (i) in the definition of gross income in section one or an amount referred to in section 8, 8B or 8C, in respect of services rendered outside the Republic by that employee for or on behalf of any employer if that employee was outside the Republic.”

In deciding whether an individual may be impacted by this change in legislation and what their best options might be the following tests would need to be applied:

  1. Whether they are South African tax resident as they would not need to disclose foreign employment income if they are not resident (this test would need to be applied for all years post their last South African tax submission). This test would require looking at both the following:
    a. Whether they are ordinarily resident in South Africa; and
    b. Whether they meet the Physical Presence Test
  2. They would then need to consider whether their income might be excluded on the basis of a relevant double tax agreement (DTA) between South Africa and the relevant country in which the income is earned (e.g. clause 14 of the UK South Africa DTA by way of example)

If they are tax resident in South Africa under the first part and are not protected by a DTA then the legislation would apply to all their employment income (remuneration and any fringe benefits). 

It is important to note that even if the tests show they are not currently tax resident, if they choose to financially emigrate they would still need to consider the tests above each year as they may subsequently become RSA tax resident again. Financial emigration is a Reserve Bank process and not a tax process and while a SARS clearance letter is required for this process it does not trigger a de-registration for tax nor does it stop SARS from reviewing your residency each year. 

An individual may therefore face a number of choices:

  1. Leave their position as is i.e. don’t change their financial emigration status, but make sure their tax affairs in South Africa are in order. This would likely entail submitting an annual income tax return in South Africa each year. If they are not RSA tax resident then they would declare no foreign income on the return unless they had income from a South African source (e.g. income from assets in South Africa). We would consider this the most pragmatic solution; or
  2. Elect to financially emigrate. This would only be a financial emigration and would not, based on current legislation, impact their ability to hold a South African passport. If they do decide to financially emigrate a number of steps would follow:
    a. They would need to make sure their tax affairs are in order, submit all outstanding tax returns to SARS and apply for a tax clearance certificate and permission to financially emigrate.; and
    b. Submit an application to the Reserve Bank for financial emigration.

Importantly, financial emigration triggers a capital gains disposal – this would mean as part of the process they would need to calculate the capital gains on their global assets and declare these to SARS and pay any tax owing (This is a notional calculation and would not mean they have to actually dispose of all their assets). The benefit would be any future capital gains post the date of financial emigration would not be taxed in South Africa unless they subsequently became tax resident again.

Conclusion

There are various options open to individuals to manage the new legislation in relation to foreign employment income. Financial emigration is not however the best nor a clear-cut solution to the challenge. In fact, no steps can be taken that could completely remove any risk of SARS trying to rule the individual is ordinarily resident in South Africa. However, by taking some basic steps we believe it is possible for the individual to mitigate most of this risk albeit they may need to monitor this carefully on an ongoing basis.

The Future of Work – Big Data, Data Analytics & Artificial Intelligence (AI)

Editor’s note: Industry 4.0 is coming. The purpose of our series is to get employers thinking about ways to use this new technology to improve their business; and for HR professionals to understand the impact this might have on the workforce and their own roles requiring greater analytical abilities.

In our third edition of the Future of Work, we look at the evolution of the “social enterprise” with an increased external focus for all members of the organisation combined with increased collaboration by employees within teams.

Historic Model

The traditional organization is very hierarchical with significant energy wasted by most employees on inward focused activities with little connection to the end customer.

The Social Enterprise

With the support of technology, it is anticipated the Future of Work will allow successful businesses to be much more focused on the end customer. This will be accompanied by increased collaboration between employees, with employees likely to be organized in a multi-functional “network of teams” as opposed to hierarchical structures. The team dynamic is anticipated to support greater problem solving, improved decision making and flexibility.

Impact on HR

According to a 2019 Deloitte study the impact on HR is to look at employees differently with a focus on:

  • Accessing capabilities not just people;
  • Embedding learning into all parts of an employee’s role to improve decision making abilities;
  • Promoting mobility as a means of development and engagement; and
  • Leveraging technology

Where We are Today

Collaboration tools and other technology are already available in theory to promote improved interaction between teams and to set up teams into more flexible units. The challenge in practice and particularly in South Africa seems to be the following:

  • Recruitment & Leadership – finding the right talent and leadership to be able to manage nimble teams;
  • Organisational memory and established businesses – for many of the established businesses a change of this magnitude comes with significant risk and corporate memory tends to come with its own inertia;
  • Training – while there are better online and augmented reality tools emerging, training for problem solving as opposed to traditional topics is not quite there yet;
  • Cultural and legacy barriers – the Social Enterprise model assume an inclusive organisation where diverse views and people are encouraged with the aim of improving problem solving and creating a better connection to end consumers. There is much that still needs to be done in this area.

Derivative Misconduct – Constitutional Court Ruling

The Constitutional Court recently handed down an unanimous judgement in the matter between NUMSA and Dunlop which dealt with the concept of derivative misconduct, providing clarity on this issue and the tests to be considered particularly where employees cannot be individually identified as being part of an incident. 

Employees, all members of NUMSA, embarked on a protected strike pursuant to a wage dispute. As the strike continued it became increasingly violent with many of the employees committing serious acts of misconduct. An interdict was sought and granted in an effort to deter the violence and misconduct, alas to no avail.

The employer subsequently dismissed all the striking employees pursuant to their alleged misconduct during the strike on the basis of derivative misconduct. Challenging the fairness of the dismissals, NUMSA brought the matter before an arbitrator at the CCMA, and the arbitrator in coming to his decision distinguished the dismissed employees into three different categories:

  • Those positively identified as committing violence;
  • Those identified as present when the violence took place but who did not physically participate; and
  • Those not positively and individually identified as being present when the violence was being committed.

The Arbitrator found that the first two groups had been fairly dismissed, but that the third group’s dismissal was substantively unfair and ordered their reinstatement. On review in the Labour Court (LC), the court set aside the Arbitration Award and found that the employees had been fairly dismissed. NUMSA then lodged an appeal before the Labour Appeal Court (LAC) where the LAC upheld the LC’s decision.

NUMSA then brought the matter before the Constitutional Court (CC) where the court considered the historical understanding of the concept of derivative misconduct as that of a common law duty on the employee to act in good faith and in the best interests of the employer (the reciprocal duty), while in return the employer has the general duty of fair dealing with its employees.

The court described the expected duty on the employee to disclose the misconduct of fellow employees; while the employer had the obligation to offer protection and guarantee the employee’s safety while doing so. The court found that the reciprocal duty argument had failed due to the absence of appropriate safety and protection by the employer once an employee came forward.

In determining derivative misconduct, the chain in determining whether an employee is guilty or not, is a lengthy one. In determining this one should consider that the most probable inference was that each employee was:

  • present when the violence was committed;
  • would have been able to identify those who committed the violent acts;
  • would have known that the employer needed that information from them;
  • with possession of that knowledge, failed to disclose the information to the employer; and
  • did not disclose the information because they were guilty.

The most probable inference in this case was found to be that only some of the employees were present and therefore to dismiss all in the absence of individual identification would not be justified.

Dunlop’s expectation of its employees to come forward with information regarding those who had committed acts of misconduct, coupled with its failure to ensure their safety and protection thereafter was ultimately what lead to its loss before the Constitutional Court. Furthermore, Dunlop’s case failed on the consideration of probable inference, and the court found that to dismiss all employees in the absence of individual identification would not be justified. The Arbitration Award therefore stood, and the third group of employees were ultimately reinstated.

Mauritius Budget Speech

(Source: www.crs.co.za)

On Monday, 10 June 2019, the Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth, delivered the last Budget Speech of the present Government.

Key Highlights of the Budget Speech

The budget deficit is estimated to maintain course at 3.2% of GDP for financial year 2019/2020. Public Sector Debt to GDP has increased to 63% in 2018, and Government plans to reduce the debt to 60% before 2021 by using part of the undistributed surplus of the Bank of Mauritius. Real GDP has been increasing at an annual average rate of 3.7% since 2015 and is forecast to rise further to 3.9% in 2019 and 4.1% 2020.

The inflation rate and unemployment has decreased over the last years. 

The tax legislation will be amended to introduce rules on controlled foreign companies (CFC).

Personal Income Tax Measures

Income exemption thresholds for all categories of taxpayers for the income year 2019-2020 are being increased as follows:

  • For a taxpayer who has no dependent or one dependent, the threshold will increase by MUR5,000;
  • For a taxpayer with two dependents, the threshold will increase by MUR20,000;
  • For a taxpayer with three dependents, the threshold will increase by MUR25,000; and
  • For a taxpayer who has four dependents, the threshold will increase by MUR45,000.

The additional deduction for a child pursuing tertiary studies and relief for medical insurance premium will now be available for a maximum of 4 dependents instead of 3 dependents.

The additional income tax exemption of MUR50,000 will be granted to a retired or disabled person having more than one dependent, instead of being restricted to those having one dependent only.

The annual net income subject to tax at a lower rate of 10% has been increased from MUR650,000 to MUR700,000.

In addition, an individual deriving a basic salary including compensation not exceeding MUR50,000 in his first month, will benefit from a tax credit of 5% of his chargeable income, provided that his annual net income does not exceed MUR700,000.

Solidarity levy not applicable to lump sum income received by a person as pension or death gratuity, effective retrospectively as from 1st July 2017. However, the levy will now apply on an individual’s share of dividend in a société (partnership) or succession.

Increase in South African Tax Filing Threshold to R500,000

Editor’s Note: HRTorQue’s tax team can file your individual tax return for you. We have a special 10% discount for employees of our clients. Please contact us for more info.

On Tuesday, 4 June, the SARS Commissioner announced that SARS has increased the tax return threshold from R350,000 per annum to R500,000 per annum.

This means that only people whose total employment income before tax is more than R500,000 per year will need to file their tax returns.

However, this is not the only test and individuals will not need to submit a tax return if all of the following criteria are met:

  • Your total employment income for the year before tax is not more than R500 000;
  • You only receive employment income from ONE EMPLOYER for the full tax year.
  • You have no other form of income, e.g. car allowance, business income, and rental income, taxable interest or income from another job.
  • You don’t have any additional allowable tax-related deductions to claim, e.g. medical expenses, retirement annuity contributions and travel expenses.

If these criteria are not met then you will need to file a tax return.

Taxpayers who file their income tax returns at a SARS branch can do so from 1 August 2019.

Taxpayers who are registered for eFiling or have access to the MobiApp can file their income tax returns from 1 July 2019.

The closing dates for Tax Season are as follows:

  • 31 October 2019 for branch filing.
  • 4 December 2019 for non-provisional taxpayers who use eFiling and the MobiApp.
  • 31 January 2020 for provisional taxpayers who use eFiling.

Kenyan National Housing Development Fund Implementation Delayed

(Source: www.crs.co.za)

On Monday, 27 May 2019, the implementation of the National Housing Development Fund (NHDF) levy was extended by the Employment and Labour Relations Court, barring the government from implementing the disputed 1.5% housing levy.

The housing levy was to take effect in May following a public notice by the government in April ordering employers to deduct and remit the levy by the 9th of every succeeding month.

The case was initially filed by Central Organisations of Trade Unions (Cotu). The case was also filed by various other parties that include Central Organisation of Trade Unions (COTU), Trade Union Congress of Kenya, Consumers Federation of Kenya (CoFeK) and the Federation of Kenyan Employers (FKE) challenging the levy.