Change in Official Rate of Interest

The Official Interest Rate for calculating Fringe Benefits increased by 0.25 % effective 23 November 2018.

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 treated 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 increased to 6.75% on the 23 November 2018, and the official interest rate therefore became 7.75% effective 23 November 2018.

Please note that HRTorQue Outsourcing have updated all their payroll outsourcing clients effective 1 December 2018.

Legislative Updates – Recent Changes

  1. Binding class ruling (BCR 065) that an intra-fund transfer of funds from an employer’s surplus account to the credit of an individual member is a taxable fringe benefit. This relates to post-retirement medical aid lump sum benefits on retirement (including ill-health retirement) or death.
  2. Issued in August – extension of bargaining council agreements to non-parties for the following bargaining councils:
    a. Motor Industry Bargaining Council
    b. Metal and Engineering Industries Bargaining Council
    c. Furniture Manufacturing Industry KZN
    d. National Bargaining Council for Electrical Industry of South Africa
    e. South African Road Passenger Bargaining Council
  3. Labour Relations Act – official list of accredited Bargaining Councils by the CCMA (GeN 508)
  4. Occupational Health & Safety – Construction – application for construction work permit for grade 7, 8 or 9 (Construction Industry Development Board)for periods exceeding 365 days or 3,600 man-hours.
  5. Compensation for Occupational Industry and Diseases Act – definition of active vs inactive employers.

Compensation Fund Earnings Threshold – Incorrect Notice

On the 13 June 2018, the Minister of Labour gazetted a notice in relation to the Compensation for Occupational Injuries and Diseases Act that (sic) “the increase in the minimum earnings amount of R60,336 per annum and the maximum amount of R430,944 per annum with effect from the 1 April” would apply.

The Payroll Authors Group of South Africa has contacted the Department of Labour to question this on the basis there is no minimum and that the announcement in January 2018 reflected a change from 1 March and not 1 April.

The Department of Labour has confirmed PAGSA are correct and that the maximum earnings amount of R430,944 should apply form the 1 March 2018.

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.

Notice of Draft Taxation Law Amendment Bills

To give effect to the tax proposals announced by the Minister of Finance in the Budget review of 21 February 2018, the following draft Bills have been published (16 July 2018) on the SARS and National Treasury web sites:

  • The Taxation Laws Amendment Bill;
  • The Tax Administration Laws Amendment Bill;
  • The Explanatory Memorandum to the Taxation Laws Amendment Bill, and
  • The Memorandum on the Objects of the Tax Administration Laws Amendment Bill

Youth Employment Scheme

Youth employment is a critical issue for South Africa. The Employment Tax Incentive was launched in January 2014 to reduce the cost to employers of hiring young people in order to help with this issue.

This ETI incentive is due to come to an end on the 28 February 2019 but will be reviewed by National Treasury during 2018. If the benefits exceed the tax revenue foregone, the sunset clause in the ETI will again be extended.

In addition, the Harambee Youth Employment Accelerator public-private partnerships prepare young people for work through training and matching programmes.

To provide additional pathways for young people into the world of work, the state President recently formally launched the Youth Employment Service, known as YES. The YES initiative was initiated as a collaborated between government, business, labour and civil society. Companies such as Unilever, Sasol, Investec, ABSA and Netcare have come forward to provide work experience opportunities to the first 100 YES participants. The YES initiative aims to see more than one million young South Africans being offered paid work experience over the next three years.

How does YES work?

The programme has three channels through which employment opportunities can occur:

  1. Corporate work experiences – Business that participate in the programme create one year paid positions for youths aged between 18 and 35, in addition to their current headcount.
  2. SMME host placements – Businesses that do not have the capacity to place more people in their organisations, have the option of sponsoring the salary for a one-year placement in small and medium enterprise (in year one for 7 to 10 months); and
  3. SMME development – Young people are empowered to start and grow their own businesses, with support from YES in the form of training, seed funding and value – chain integration.

There have been meetings early in 2017 to involve computerised payroll systems in the initiative and this resulted in the establishment of a working committee, this committee has met several times with the YES initiative team during the latter part of 2017 with a view to relating the data required by the YES team to the data available in payroll Systems.

Current Position

The following documents have recently been issued for public comment:

  1. Draft Requirements for B-BBEE verification for the YES initiative.
  2. Draft Terms and Conditions: Youth Employment B-BBEE Recognition.
  3. Draft Amendment Bill to the Broad-Based Black Economic Empowerment Amendment Act that, amongst other key amendments, introduces the youth Employment Service initiative B-BBEE Recognition.

Employer Requirements to Check Employees before they Work with Children or Mentally Disabled Patients

Author: Guardian (www.theguardian.co.za)

Employer Requirements to Check Employees before they Work with Children or Mentally Disabled Patients

If you are an employer who employs employees, and those employees work in an environment where they may come into contact with children or mentally disabled persons, it is imperative that you ensure all your staff and service providers, whether they are remunerated or work as volunteers are checked against both the Sexual Offenders Register and the Child Protection Register.

What does the Legislation say?
Sexual Offenders Register – Chapter 6 of The Sexual Offences Amendment Act of 2007dictates that anyone employing staff who will in any way come into contact with children at any time whilst on duty or who manages them must have them and their staff cleared against the Sexual Offences Register. The staff who have to be cleared would be anyone who is either paid or not paid (volunteers). This ensures that no staff member who has been convicted of a sexual crime against children can access children through employment.

Child Protection Register – Chapter 7 of the Children’s Act of 2005 dictates that any person managing or operating, or who works with or has access to children either as an employee, volunteer or in any other capacity at an institution providing welfare services to children, including a child and youth care centre, a partial care facility, a shelter or drop-in centre, school, club or association providing services to children must be cleared against the Child Protection Register.

What are your obligations as an Employer (as contained in the Sexual Offences Amendment Act)?
(Section 45(1) of the Act) states that any employer who intends on employing a person or has employed any employee must, in the prescribed manner apply to the Registrar for a prescribed certificate, stating whether or not the particulars of the employee are recorded in the Register

What if an employee is on the register?
Any employer who determines that an employee is on the register at the time of the check or any time thereafter is required to terminate the employee’s employment or, where possible, move them to a position in which they will have absolutely no access or contact with a child.

What if you don’t check?
(Section 45(3)) – An employer, who fails to comply with any provision of this section, is guilty of an offence and is liable on conviction to a fine or to imprisonment for a period not exceeding seven years or to both a fine and such imprisonment.

Confidentiality
Once you, as the employer have received the results, the Act goes on to say that the information needs to remain confidential. Any person who wilfully discloses or publishes any information to any other person which he or she has acquired as a result of an application contemplated in section 44 or in any other manner, is guilty of an offence and is liable on conviction to a fine or to imprisonment for a period not exceeding three years or to both a fine and such imprisonment.

What are your obligations as an Employer (Children’s Act)?
Before a person is allowed to work with or have access to children the person managing them must establish whether or not that person’s name appears in Part B of the Child Protection Register.

No person who is on the register may:

  • Manage or operate, or participate or assist in managing or operating, an institution providing services to children.
  • Work with or have access to children at an institution providing services to children, either as an employee, volunteer or in any other capacity.

What if you don’t check?
Section 124 (2) states that If an employer is found guilty of failing to establish if an employee’s name is on Part B of the register the employer is liable, on conviction to a fine or to imprisonment for a period not exceeding 10 years or both. If convicted of a second offence the person can be liable to a fine or imprisonment for a period not exceeding 20 years or both.

Changes to the Official Interest Rate for Fringe Benefits

The Official Interest Rate for calculating Fringe Benefits decreased by 0.25 % effective 1 April 2018.

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 treated 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 decreased to 6.5% on the 28th March 2018, and the official interest rate therefore became 7.5% effective 1st April 2018.

Please note that HRTorQue Outsourcing have updated all their payroll outsourcing clients effective 1st April 2018.

Labour Brokers and the “Assign Services Case”

The Assign Services case on the “deeming” provision in the Labour Relations Act is apparently due to be heard in February by the Constitutional Court with a judgement expected in April 2018. This ruling has a material impact on all employers who use employees through a labour broker.

As a reminder, the original ruling in the Labour Appeal Court (now being appealed in the Constitutional Court) held that employees deemed to be employees of the employer under the Labour Relations Act were solely the employers of the end client and not employers of the Labour Broker (or other party) with whom they were contracted. This ruling created an odd situation where employees held a contract with one party and were managed by that party, but were actually employers only of another party with whom they had no contract of employment.

Essential Services Ruling

Essential Services Ruling – Social Work, ResCare, Protective Workshops and Day Care

All Social Work Services and services to ResCare, Protective Workshops and Day Care have been legislated as essential services. This means individuals employed in these industries are not permitted to strike!

Section 23(2) of the Constitution of the Republic of South Africa, 1996 (“the Constitution”) states that… “Every worker has the right… (c) to strike.”

Section 65 (1) (d) (i) of the LRA states that… “No person may take part in a strike… if that person is engaged… in an essential service”.

An ‘essential service’ is defined in section 213 of the Act as:
I. a service the interruption of which endangers the life, personal safety or health of the whole or any part of the population; the Parliamentary service; the South African Police Service.

Having considered the written and oral submissions of the parties, as well as the applicable law referred to above, the Panel were of the view that the following services should be designated as essential:

  • Mental health care
  • Diagnostic assessments of new referrals in respect of people with intellectual and psychiatric disabilities
  • Psychological assessments
  • Therapeutic counselling services or any other counselling services
  • Mental health crisis management
  • Court preparation and assistance for victims who fall within the category of “users”
  • Rehabilitation services
  • Treatment (including assistance with adherence to medication)
  • Training (only to the extent that it is offered to the mental health users)