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.

HRTorQue Becomes a Signatory of the UN Global Compact

HRTorQue is pleased to announce we have become a signatory of the UN Global Compact. The UN Global Compact is a voluntary initiative based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals. The UN Global Compact’s Ten Principles encapsulate a desire to incorporate and improve the following areas of one’s business:

  • Human Rights
  • Labour – including the elimination of unfair discrimination
  • Environment – and greater environmental responsibility
  • Anti-Corruption

HRTorQue believes good citizenship is an essential ingredient of good business and through this initiative hopes to build on the principles already embedded in our organisation.

Business Intelligence Tools and HR

Modern technology offers businesses essential tools to better interrogate data to improve decision making. HRTorQue is working with a number of BI Tools to improve the quality of data available to CFOs and HRDs in the workplace.

Consider these scenarios:

  • You are sitting in an EXCO meeting having presented your HR Strategy and your CEO asks you for specific data on the impact of absenteeism on the business and why it isn’t a key part of your strategy. He/she then follows up with a question on whether your main operating facility workforce is more efficient this year than last. These are key question to your strategy, but you didn’t manage to get all the data before you came to EXCO. By not having the figures handy you undermine an otherwise strong presentation. A BI Tool gives you access to dashboards that you can easily change to interrogate data real time.
  • Your CEO wants to understand how workforce efficiencies have improved over time, what the actual cost of different cost centres is and how variable pay elements (commissions/overtime) relate to actual company sales and performance. His/her hope is to quickly identify where cost creep has occurred and identify whether employment costs are aligned with actual company performance. Usually this analysis would take a few weeks and would include involving finance and operations with ongoing worries about leaking sensitive payroll data. A BI Tool allows you to interrogate more quickly the data from multiple systems to easily answer and stress test this type of analysis.
  • You are tasked with running your employment equity reporting and have no idea how good your existing data in your payroll system is. Instead of re-creating the report or running into troubles at the last minute when you have to change for missing data, a BI Tool allows you to easily analyse and track missing or incomplete data making the filing considerably easier.

Having worked on these platforms for clients, there is no doubt these tools are essential for top management as a way to easily get a response to critical questions, but also importantly to use actual data to make decisions as opposed to people’s viewpoints or speculation. Pooling data from different systems (finance, payroll, ERP) is relatively easy to do meaning more time gets spent on asking the right questions as opposed to gathering data.

Is your company whistleblowing compliant? Protected Disclosures Act

The employment relationship is governed by a large number of formal Acts of legislation. One of those less talked about and often forgotten by Employers is the Protected Disclosures Act.

In essence this Act provides for protection for employees or workers who disclose information about wrongdoing (contravention of laws, health and safety or unfair employment practices) in the workplace.

The Act sets out the obligations for Employers with respect to following up on any disclosures and the time period in which these procedures should be followed. The Act also provides for immunity of prosecution for employees or workers for the disclosure itself, but not if they themselves have been party to any illegal acts.

From a practical perspective, employers should be aware of the Act and its implications and we would encourage employers to have an appropriate policy to deal with such matters and use publicly available technology/processes to manage any disclosures so that they do not create further risk for themselves. 

Should you wish to discuss possible solutions please feel free to contact us by email at [email protected].

The objective of this article is to make employers aware of the Act and its consequences, but it is not intended to be a summary of all provisions of the Act.

Protected Disclosures Act

“The objects of this Act are –

(a)   to protect an employee or worker, whether in the private or the public sector, from being subjected to an occupational detriment on account of having made a protected disclosure;
(b) to provide for certain remedies in connection with any occupational detriment suffered on account of having made a protected disclosure; and
(c) to provide for procedures in terms of which an employee or worker can, in a responsible manner, disclose information regarding improprieties by his or her employer.”

In the 2017 amendments, worker was expanded to include Temporary Employment Services workers creating an obligation for employers to also protect these individuals in specific circumstances. The amendments specifically allow for the TES worker to bring a claim against either their employer or the client.

Protected Disclosure:

Those activities covered by protected disclosure include:

“‘disclosure’ means any disclosure of information regarding any conduct of an employer, or of an employee or of a worker of that employer, made by any employee or worker who has reason to believe that the information concerned shows or tends to show one or more of the following:

a.   That a criminal offence has been committed, is being committed or is likely to be committed;
b. that a person has failed, is failing or is likely to fail to comply with any legal obligation to which that person is subject;
c. that a miscarriage of justice has occurred, is occurring or is likely to occur;
d. that the health or safety of an individual has been, is being or is likely to be endangered;
e. that the environment has been, is being or is likely to be damaged;
f. unfair discrimination as contemplated in Chapter II of the Employment Equity Act, 1998 (Act No. 55 of 1998), or the Promotion of Equality and Prevention of Unfair Discrimination Act, 2000 (Act No. 4 of 2000); or
g. that any matter referred to in paragraphs (a) to (f) has been, is being or is likely to be deliberately concealed;”

Occupational Detriment:

The Act goes on to describe what is considered as occupational detriment which includes:

“‘occupational detriment’, in relation to [the working environment of] an employee or a worker, means –

a.   being subjected to any disciplinary action;
b. being dismissed, suspended, demoted, harassed or intimidated;
c. being transferred against his or her will;
d. being refused transfer or promotion;
e. being subjected to a term or condition of employment or retirement which is altered or kept altered to his or her disadvantage;
f. being refused a reference, or being provided with an adverse reference, from his or her employer;
g. being denied appointment to any employment, profession or office;
h. being subjected to any civil claim for the alleged breach of a duty of confidentiality or a confidentiality agreement arising out of the disclosure of –
a. a criminal offence; or
b. information which shows or tends to show that a substantial contravention of,
or failure to comply with
i. the law has occurred, is occurring or is likely to occur;
j. being threatened with any of the actions referred to in paragraphs (a) to (h) above; or
k. being otherwise adversely affected in respect of his or her employment, profession or office, including employment opportunities, work security and the retention or acquisition of contracts to perform work or render services;”

Potential remedies for the employee or worker:

The Act provides for the payment of compensation and/or damages and/or reinstatement for any impacted employees or workers. The Act further provides that any dismissal in the circumstances is deemed to be an unfair dismissal and any other occupational detriment is deemed to be an unfair labour practice.

Finance Administration Service

At HRTorQue we specialise in providing payroll and HR administrative services. There is a close relationship between the processes in finance and those in payroll (often payroll is run by the finance department) including the need to accurately reconcile payroll and capture payroll information into the accounts (while retaining confidentiality).

We are therefore pleased to announce that we have added finance resources to our capabilities and are now able to offer a number of services to clients including those below.

Service Areas

For Payroll:

  • Preparation of general ledgers for payroll info
  • Reconciliation between payroll reports, EFT payments and general ledgers (critical for audits)
  • Financial reporting (based on payroll info)

Company Setup:

  • Registration with CIPC
  • Registration with SARS and Department of Labour (corp. tax, PAYE, UIF, SDL)

Company Returns:

  • VAT returns
  • Annual financial statement preparation
  • Corporation tax returns

Management Reporting:

  • Budget preparation
  • Management reports

Finance Administration:

  • Specific finance support to perform requested activities e.g. reconciliations, finance projects, integrations, consolidations
  • Finance outsourcing
    • Bookkeeping
    • Invoicing and debtors
    • Billing and payments (creditors)
    • Stock / inventory management

NEASA Strike Warning 25 April 2018

Author: Letter from Jaco Swart (National Collective Bargaining Co-ordinator)

Dear NEASA members

Please be advised that the South African Federation of Trade Unions (SAFTU) has given notice of its intention to initiate a one day national protest action on 25 April 2018.

The protest action is aimed at highlighting the Federation’s concerns surrounding the minimum wage, economic policy and free education.

Employees who wish to participate in this protest action are entitled to do so and no disciplinary action for absenteeism may be instituted against such employees.

The ‘no work, no pay’ rule will however be applicable.

Employers who have queries in this regard may contact the NCBC HOTLINE on 086 016 3272.

The Trick to Making Things Work in Your Business

Most businesses spend considerable time and effort trying to get their business processes right. The devil is often in the detail, but in our experience in payroll and HR we see successful companies understanding that any process success comes from three key elements:

The best companies have the right system to manage their process. This doesn’t have to be the best in the market. It must however create the right platform to store information in a way that is easy to update and easy to extract (report). Considerable energy can be wasted when the system is not fit for purpose. The nice thing is that these days companies of all sizes can get access to systems – it is no longer the case these are only available to the large companies.

Policies and Procedures
“If there are no ground rules, you can’t play the game.” Often a lack of policies and procedures leads to confusion, incorrect processing and the wrong outcomes.

It goes without saying that getting the right people for the job is critical. Good managers will know this and will be prepared to have the difficult conversations and go through the pain to make sure they get the right people.

If you can tick all three boxes then it is likely you will be successful.

Changes to the Official Interest Rate for Fringe Benefits

The Official Interest Rate for calculating Fringe Benefits decreased by 0.25 % effective 1st August 2017.

Where an employer gives an employee a loan that is less than the official interest rate or interest free, the difference between the two must be taxed as a taxable Fringe Benefit. This Fringe Benefit should be processed via the payroll and reported on the Employees IRP5 against SARS Code 3801.

The Official Interest Rate is defined in the Seventh Schedule as the rate of interest that is equal to the Repo Rate, plus 100 basis points (1%).

The repo rate was decreased from 7% to 6.75% on the 21st of July 2017, which means the deemed interest rate dropped from 8% to 7.75% effective 1st August 2017.

The Rand – Things to think about

Author: Hadyn Little (Foundation Fund Managers www.foundationgrp.co.za)

The Rand has resembled a punching bag over the past year or two and its woes are never far from news headlines, but what does this actually mean for you and me individually?

2015 was one way traffic as the Rand gave up 30% against the Dollar with almost no respite over the 12 month period, but 2016 has been a very different story. Yes, there has been weakness this year (and the very real threat of even more!!), but there have also been pockets of Rand strength. So, given the volatile nature of the Rand this year how does this impact us in everyday life? Some of the impacts are obvious, but others are hidden yet no less important.

  1. The most obvious impact is for those businesses who participate in the import or export sectors. If your business imports raw materials, capital equipment or finished goods then staying closely in tune with the Rand’s fluctuations is of paramount importance. As an example I had a client who calculated his costs at €17.20 before quoting his local client, and this off a sizable import invoice of €110 000 to pay a few months down the line. Local political headlines quickly drove the rate to €17.80, and I can promise you that my client was in a mild state of panic. My advice is if you have a big invoice payment to make, or a fixed cost to adhere to then fixing your rate forward is essential.
  2. For those individuals looking to externalise a portion of their wealth then knowing what factors impact the exchange rate is key. If possible, it is advisable to have approximately 30% of your investible wealth in a hard currency (USD, GBP, EUR, CHF, JPY) but if you are about to send monies offshore for the first time then it obviously doesn’t make sense to do so when the rate is high. While predicting what the rate will do is an impossible task there are markers in the economic calendar that impact the Rand. FED monetary policy announcements, our SARB monetary policy announcements, US employment figures (first Friday of every month) and various others will drive Rand action so be mindful of these before going offshore. For those individuals who have already taken money offshore and who are looking to send more then the exchange rate becomes very important. It is vital that you calculate what your average exchange rate is over your previous transactions so that you know when to send additional monies at a rate that will bring your average rate down. Quite simply, add up the Rand value of all your transfers and then add up the Dollar values you received offshore (assuming you bought Dollars). Divide the Rands by the Dollars and that will give your average exchange rate, and then make sure any further transfers are below this rate.
  3. Our inflation rate is directly linked to the exchange rate. Almost everything we buy, from food, to clothes to electrical equipment to petrol has some import component in its price. If the importer has to spend more Rands to bring these goods in, then this additional cost is passed on to the consumer. Unfortunately, we all know that the opposite is seldom true, and that prices do not come down as the exchange rate improves, but keeping an eye on the exchange rate will help you budget for your monthly expenses should the currency be in a weakening trend.
  4. Our interest rate is also linked to the exchange rate. This is an indirect relationship with inflation as the common ground, and the Reserve Bank has set a target of 3% to 6% inflation. At present we are above 6%, with some economists predicting a breach of 7% by year end. To curb inflation the Reserve Bank increases our interest rate which attracts foreign investment and strengthens the Rand. Almost all of us have some form of debt, and a rising exchange rate that drives inflation up will ultimately end up in higher interest rates and bigger monthly instalments.

The Rand – Risks & Opportunities

Author: Hadyn Little (Foundation Fund Managers www.foundationgrp.co.za)

The Rand was stuck in one way traffic during 2015 as we lost approximately 30% of our value against the US Dollar. But, so far, 2016 has been more of a rollercoaster ride with pockets of Rand strength being countered by various setbacks, either through our own local doing (threats of arrest for Pravin Gordhan) or through international factors (plunging oil price, fears over China’s economic health, the list goes on).

Whether you are directly involved in an import or export business, or simply wanting to stay abreast of inflationary pressures as a result of Rand fluctuations, it is worth taking a look into the back half of 2016 and what lies in store for our beleaguered currency. I must however stress that this is not a prediction of what will happen to that Rand, but merely an assessment of events that could have a certain impact should they transpire.

While newspaper headlines will have us believe that its all doom and gloom for the Rand, in reality there are potential opportunities that will help us strengthen against the major currencies:

  • Brexit is actually a risk and an opportunity given that the actual impacts of this unprecedented event will not be fully understood until it has run its course. As an opportunity Brexit has created huge uncertainty in the market, and the knee jerk reaction is for investors to run to “safe havens”, which include gold and gold shares. On Friday the 24th of June (the day after the UK referendum) R4.2bn of foreign capital flowed into SA in search of our bonds and gold shares, and over R22bn flowed in over the following week. This is the biggest weekly inflow since 2008 and demand for Rand based assets saw us surge from a low of R15.67 early on Friday morning to R14.84 by mid morning. Brexit is far from over, and as the UK and Europe muddle their way through some form of resolution we can expect the resultant inflow of investment capital as a result of uncertainty to boost the Rand.
  • The Rand dances to the tune of interest rates in the US, with any increase in Dollar interest rates attracting investment capital away from Rand based assets and therefore weakening the Rand. A combination of mixed economic data coming out of the States plus global uncertainty following hurricane Brexit has meant that the FED has effectively removed any further interest hikes in 2016 from the table, and in fact there is a small chance of a rate decrease. The FED meets in mid July, September and December and should US interest rates remain unchanged, coupled with soft statements on future hikes then the Rand should strengthen at those points.
  • Local inflation is already breaching the upper limit of 6% as set out by the SA Reserve Bank, with forecasts calling for 7.5% by year end. While unlikely given the Rand’s recent recovery, our Monetary Policy Committee has the ability to increase local interest rates by 25 basis points which will make Rand based assets more attractive to international investors, and the resultant capital inflows would drive the exchange rate down. As mentioned, this is an unlikely scenario which would probably only take place if the Rand crept up to the mid R16/$1 mark therefore threatening to escalate inflationary pressures.
  • The final Rand “opportunity” is a bit of a long shot but worth mentioning none-the-less. In early June, Bloomberg switched their outlook on the commodities market from a bear to a bull run, this off the back of their commodity tracking index surging by 20% since January 2016. With stockpiles being depleted and supply constraints coming into play Bloomberg feels that a 4 year bear run could be behind us and commodity prices are set to increase. With Commodities making up 60% of our exports this would only be good for the Rand.

So the opportunities are out there, but risks are lurking as well:

  • As mentioned Brexit is both a risk and an opportunity, and the risk portion is also market uncertainty. While investors move to safe havens in times of uncertainty they also exit riskier assets. So while our gold shares benefit the rest of the JSE gets sold off and these capital outflows cause the Rand to weaken. While this point might seem contradictory to the first “opportunities” point above I can guarantee you that the Rand would have faired much worse post Brexit if we had no gold shares on our local exchange.
  • The 3rd of August sees our local municipal elections and if the violent scenes in Durban and Tshwane are repeated across the country, or if rigging is evident, then the international investment community will lose faith in South Africa causing the Rand to weaken.
  • October sees Pravin Gordhan deliver the mini-budget with credit ratings agencies paying close attention to our GDP performance as well as concrete evidence of structural reforms pulling through from the main budget tabled in February this year. We have already seen GDP come under pressure since Feb, and any unrealised reform promises will weigh heavily on the Rand.
  • On the 8th of November we have the US presidential elections and the race between Donald Trump and Hilary Clinton is too close to call. Depending on who you talk to both candidates will either be a massive success or failure so potential impacts on Rand are difficult to predict, but uncertainty is usually associated with Rand weakness.
  • December sees the next round of credit rating agency reviews with an overwhelming consensus amongst economists that a downgrade to junk status by at least one of the agencies is a certainty. Pravin Gordhan pulled a rabbit out the hat by avoiding a downgrade in June, whether he can do the double in December remains to be seen.

So what does all this mean? In Foundation Fund Manager’s opinion, the risks to the Rand outweigh the opportunities, particularly in the longer term as a downgrade to junk status would take years to recover from. Given that there will be pockets of Rand strength over the next 6 months we advise that any importers use these to book forward contracts, and any investors use these to build their positions in hard currencies.