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.

Skills Development – how to claim

If you are an organisation that is liable for and registered to pay a Skills Development Levy to SARS (where an employer expects that the total salaries will be more than R500 000 over the next 12 months, that employer becomes liable to pay SDL), you need to submit your Workplace Skills Plan (WSP) and Annual Training Report (ATR) to your specific SETA by 30th April yearly to qualify for money back in training grants.

These are the percentages that you can recover:

  • 15% of the levy your company pays when you appoint and register a skills development facilitator
  • 10% of the levy when you prepare, submit and get approval for a workplace skills plan for the appropriate SETA
  • 20% of the levy when you prepare an annual training report based on your approved workplace skills plan

You can claim the cost of training, facilitators, training venue costs, course fees and course material. There must be documentation to prove the above.

HRTorQue does offer this service so if you need assistance please contact us on [email protected].

HRTorQue HR Training Courses – October 2019

Sexual Harassment, Racial Harassment and Workplace Bullying
Date: 16 October 2019
Time: 08h30 – 13h00
Venue: Durban (to be confirmed)

The workshop is designed to assist managers and management in dealing with issues relating to inappropriate behaviours in the workplace such as sexual or racial jokes, comments or innuendos, sexual and/or racial harassment and workplace bullying. The workshop will assist in identifying policies and procedures that need to be implemented as well as possible awareness and/or training measures for the staff in this area.

For more information on in-house workshops and workshops in Cape Town and Johannesburg, contact [email protected].

Understanding Employment Equity and Compliance
Date: 30 October 2019
Time: 08h30 – 13h00
Venue: Durban (to be confirmed)

This workshop is targeted at individuals who are responsible for implementing and ensuring compliance with the Employment Equity Act legislation. At the end of the Workshop individuals will have a deeper understanding of the purpose of the Employment Equity Act; the recent Changes to the Income Differential Statement; Unfair Discrimination; Compliance in terms of Reporting; Communication; Analysis; Plans and Committee Meetings.

For more information on in-house workshops and workshops in Cape Town and Johannesburg, contact [email protected].

Understanding Discipline and Initiating Disciplinary Hearings
Date: 15 November 2019
Time: 08h30 – 16h00
Venue: Durban (to be confirmed)

The workshop has open access to all individuals who are involved in disciplining staff and who need to prepare for and present evidence during a disciplinary hearing. Tools and skills learnt will enable the individual to properly understand how discipline works and the effect of how poor understanding and management of discipline effects a Disciplinary Hearing. Finally this workshop will assist individuals in being more organized and prepared for the initiating of a hearing, and the questioning of witnesses during the hearing.

For more information on in-house workshops and workshops in Cape Town and Johannesburg, contact [email protected].

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.

Salary benchmarking

Organisations often struggle to determine how to remunerate their employees fairly. In a market where quality, skilled employees are hard to find it is important to ensure that you are competitive in terms of setting remuneration levels to attract and retain high calibre staff.

Questions like:

  • Do we have internal pay parity amongst employees?
  • Are staff paid fairly against the market?
  • What do we use for benchmarking?
  • How do we do the benchmarking?

are commonplace and are sometimes difficult to answer without the correct tools and skills.

HRTorQue has the capability to conduct an internal benchmark for all your staff and compare your internal remuneration structures against comparative external market data. This benchmarking is becoming increasingly relevant based on legislative requirements around ‘equal pay for equal work’.

eTorque as a system can be very helpful in providing easy access to remuneration data for benchmarking purposes.

For more information on the Benchmarking Intervention or on how to use e-TorQue in this regard, please contact [email protected].

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].

Dave Beattie – Looking back at 20 years in the industry

After six years’ experience at SARS, a tax degree and a healthy respect for compliance I entered the payroll / Human Resources outsourcing environment with HRTorQue Outsourcing in 1999. I was blissfully unaware at the time how much legislation covered the payroll / HR environment and how challenging its interpretation would be.

Over a period of 20 years, what is abundantly clear is that whilst South Africa may have legislation that is deemed to be ‘world-class’ a lot of this legislation severely complicates the interpretation of any issue, as in most cases the various definitions in such Acts have not been aligned. An extremely good example is the definition of ’employee’. This definition varies wildly between the Acts and this complicates the interpretation of matters pertaining to the inclusion of individuals in specific taxes / levies. This poses risk as companies are required to apply their minds to situations and may end up making interpretations that may not agree to how issues are applied by the legislative entities. These situations not only waste a lot of unnecessary time and effort, but also potentially expose the client to liability.

Another area where we have seen massive changes is the policing of legislation. Not only has policing increased, but the techniques used have become more innovative and ‘aggressive’. Systems have been implemented to link UIF and Workman’s Compensation and the existing systems linking UIF and SARS improved. 10 years ago, you could guarantee that SARS would not communicate with the Department of Labour on compliance issues. Nowadays, if you need a UIF Certificate of Compliance don’t be surprised if when it’s rejected that you are referred to SARS to get your UIF affairs in order. It’s also important to start preparing yourself for Workman’s Compensation queries if payroll, UIF and COID records do not match.

Whilst progress is inevitable, on the coalface we see how difficult it is for employers to get employees with the requisite skills to ensure compliance in this fast-paced industry. This challenge even led me to undertake a dissertation on the benefits of Human Resource outsourcing as part of my studies towards an MBA. The results clearly pointed to the fact that the employee pool in South Africa lacks the skills and experience to tackle the onerous payroll and HR needs for the average South African company. The cost of employing an individual with the necessary skills is beyond the budget of most of these companies and companies have had to therefore look at other options to ensure compliance and meet industry best practice. It has been exciting to be part of the solution to this problem. Identifying solutions to meet specific company’s needs, whilst challenging, is rewarding as these custom solutions utilise the skills across the range of experienced employees in the HRTorQue stable.

The changing payroll / HR environment means that we can never rest on our laurels. With no day ever being the same, there is no time to stagnate and that means continuously growing as a person and consultant. Not many people can say that their job offers them that. If you can marry the challenges of dealing with difficult (and sometimes disgruntled) people with this potential for personal and intellectual growth, I would suggest investing in a career involving payroll and HR legislative compliance.

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.