HRTorQue Outsourcing
HRTorQue Reporter
February 2015
 
HRTorQue Reporter Archive
Table of Contents
1. Coida Maximum Earning Amount Increase Proposal
2. Garnishee Orders & Employees Suspended Without Pay
3. Private Use of a Company Vehicle
4. Donations to Public Benefit Organisations
5. Employment Contracts - Why do they need to be in place?
6. Do employees accrue annual leave on maternity leave?
7. Employment Equity Audits by Department of Labour
8. Fringe Benefit - Use of Company Vehicle
9. Loan Policy
10. Contact the HRTorQue Team
1. Coida Maximum Earning Amount Increase Proposal
Author: Karen van den Bergh
A proposal was made to increase the prescribed amount in terms of section 83(8) of the Compensation of Occupational Injuries and Diseases Act, 1983 to R355,752 per annum with effect from 1 April 2015. The previous amount was R332,479.
Top of Page
 
2. Garnishee Orders & Employees Suspended Without Pay
Author: Karen van den Bergh
We recently had an enquiry on how to handle a garnishee order for an employee who is suspended without pay and, on reviewing the Act and referral to our Garnishee team, we feedback as follows:

The Act is not clear, but we are advising our clients to inform the collecting agent that the employee is suspended without pay and, as a result, the deduction cannot be made. Once the hearing or disciplinary process is complete, and the employee is dismissed, the collecting agent is to be informed of the dismissal and that no further deductions will be made for this employee.

If, however, the employee is re-instated, it is likely that their pay will also be re-instated for the period that they were suspended. In this case, the deduction is to take place and the collecting agent informed that the employee is back at work and that deductions will continue.
Top of Page
 
3. Private Use of a Company Vehicle
Author: David Beattie
Circumstances Under Which the Value of Private Use of a Company Vehicle is Deemed to be Nil
 
We have had some recent enquires as to the circumstances under which an employee would not have to pay fringe benefit tax on the use of a company owned vehicle. The value of the private use of the motor vehicle by an employee is deemed to be nil, if all three of the following requirements are met:
 
•   The motor vehicle is available and used by employees of the employer in general (i.e. is a pool car generally used by the employees for business purposes and which is not allocated to a particular employee);
The private use of the motor vehicle by the employee is infrequent or merely incidental to business use; and
The motor vehicle is not normally kept at or near the residence of the employee when not in use outside of business hours.

The value of private use of the motor vehicle by an employee is deemed to be nil, if:
•   The nature of the employee's duties are such that the employee is regularly required to use the motor vehicle for the performance of those duties outside normal hours of work; and
The employee is not permitted to use that motor vehicle for private purposes other than:
-  Travelling between his or her place of residence and his or her place of work; or
-  Private use which is infrequent or is merely incidental to its business.

It is important to note that the no-value rule will only apply if the use outside of an employee's normal working hours occurs 'regularly'. What constitutes 'regular performance of duties outside normal work hours' is not standard and must be assessed on a case by case basis, taking into account the particular job and its responsibilities. The onus rests on the employer to prove that the requirements for the nil value provisions have been met.
Top of Page
 
4. Donations to Public Benefit Organisations
Author: Karen van den Bergh
Some employers operate payroll giving programs that allow their employee to make regular donations to public benefit organisations by way of deduction from their salaries or wages. In the past, employees may only claim those donations as a deduction from taxable income when they submitted their annual tax return.

In order to expand the potential pool of donors, and accelerate the tax benefit to employees and reduce the number of refunds on assessment, the Act has been changed to require the employer to take donations made by the employer on behalf of an employee into account for employees' tax purposes. Note that the employer has no option in this - if the employer makes the deduction (to a registered PBO), from the employee's remunerations then it must take it into account when calculating employees tax. If the donation is in respect of an organisation other than a PBO, no deduction from remuneration may be made.

The Act allows as a deduction for tax purposes of donations not exceeding 10% of the taxable income, but there is an explanatory memorandum that points out that the limit for payroll giving is set at 5% to avoid the possibility of allowing too much as a deduction when calculating employees tax, bearing in mind that:
•   An employer will not know other expenses, that will be allowed as deductions on assessment, thus reducing the income on which the 10% is calculated; and
The employee may privately make other allowable deductions that the employer will not be aware of.

Therefore on the payroll the maximum that may be taken as a deduction for employees' tax purposes is 5% of the remuneration after taking into account all other allowable deductions from remuneration.

If the deduction to the PBO is higher than 5% the balance will be refunded on assessment.

The Fourth Schedule of the Income tax Act states that the donation which must be deducted from remuneration are those "for which the employer will be issued a receipt as contemplated in section 18A(2)9(a)". That is, a receipt giving all the details set out in the Act, which will not be repeated here. The explanatory memorandum states:

The employer acts as the concentration point for donations through a payroll giving programme. From an audit perspective, rather than having to audit individual deductions claimed, SARS automatic employer/employee data match will take care of that leg of the audit trail. All that will be necessary will be confirm that the total of deductions reflected on the employees' tax certificates issued by the employee is supported by the 18A receipts issued to the employer.

Accordingly, the employer must ensure that it receives a receipt from the PBO to which donations have been made for the total of those donations.

The Act goes on to provide that an employee's tax certificate setting out the donations made by the employee for which the employer has received receipts from the PBO's concerned will be sufficient for SARS to allow the donation as a tax deduction to the employee.

The SARS source code against which to report these donations is Deduction Code 4030 - Donations deducted from the employee's remuneration and paid by the employer to the Organisation. The total of the actual donation made is to be printed here and not the allowed maximum of 5% of taxable remuneration. This will allow SARS to match the deductions to the 18A certificates received by the employer and will allow the employee to claim the additional 5% of the taxable income that was disallowed for PAYE purposes, on assessment.
Top of Page
 
5. Employment Contracts - Why do they need to be in place?
Author: Melany Bydawell
The Basic Conditions of Employment Act section 29 requires and employer by law to provide every employee with a written contract of employment.

This is required no later than the first day the employee starts work. If you fail to comply with this, it could result in a substantial fine.

Employment contracts are beneficial in that they regulate your relationship with employees and is vital to any employment relationship.

Contracts refer to the terms and conditions of employment together with the benefits.

As importantly, the clauses in your contract need to tie up with the remuneration, allowances and funds in place.

Contact Melany Bydawell if you would like to have your contract reviewed.
Top of Page
 
6. Do employees accrue annual leave on maternity leave?
Author: Melany Bydawell
The answer is yes.

In terms of the Basic Conditions of Employment Act (BCEA) it states that within a leave cycle of 12 months 21 days' annual leave are accrued. The BCEA doesn't make any exclusion for maternity leave.

The BCEA also prohibits maternity leave and annual leave from running concurrently (section 20(6)). Further, Section 6 of the EEA prohibits an employee from being unfairly discriminated against.

As such, not allowing annual leave to accrue during the unpaid maternity leave period would be unfair discrimination.
Top of Page
 
7. Employment Equity Audits by Department of Labour
Author: Nicky Hardwick
Contact Nicky Hardwick for assistance with your Employment Equity requirements and ensure compliance to avoid fines!

Please be advised that Department of Labour are actively conducting audits on Employment Equity Compliance. In the last two weeks, six of our clients have been audited and they are being asked for the following documentation:

1. Letter of Appointment of Senior Manager
2. Minutes of Equity Meeting and details of people who are on the forum
3. Employment Equity Plan
4. EEA2 and EEA4
5. Acknowledgment of Submission

Please be reminded that fines for non-compliance are as follows:
 
Previous Contravention
Contravention of any provision of section 16 (read with 17), 19, 22, 24, 25, 26 and 43 (2)
Contravention of any provision of section 20, 21, 23, and 44 (b)
No previous contravention R1 500 000 The greater of R1 500 000 or 2% of employer's turnover
A previous contravention in respect of the same provision R1 800 000 The greater of R1 800 000 or 4% of employer's turnover
A previous contravention within the previous 12 months or two previous contraventions in respect of the same provision R2 100 000 The greater of R2 100 000 or 6% of employer's turnover
Three previous contraventions in respect of the same provision within three years R2 400 000 The greater of R2 400 000 or 8% of employer's turnover
Four previous contraventions in respect of the same provision within three years R2 700 000 The greater of R2 700 000 or 10% of employer's turnover
  Section 16 - Consultation with employees
Section 17 - Matters for consultation
Section 19 - Analysis
Section 22 - Publication of Report
Section 24 - Assigning of a Senior Manager
Section 25 - Duty to inform
Section 26 - Duty to keep records
Section 43 (2) - Review by DG
Section 20 - Employment Equity Plan
Section 21 - Report
Section 23 - Successive EE Plans
Section 44 (b) - Recommendation by DG following review
Top of Page
 
8. Fringe Benefit - Use of Company Vehicle
Author: Karen van den Bergh
As from 1 March 2015, the determined value in calculating the fringe benefit on the use of a company vehicle is no longer based on the cost to the employer but on the retail market value. A regulation will be issued by the Minister of Finance in a Gazette to define the retail market value.

This change is only applicable in respect of vehicles acquired on or after 1 March 2015. Therefore, employees who currently have the right of use of a motor vehicle will be unaffected.
Top of Page
 
9. Loan Policy
Author: David Beattie
The purpose of this policy is to provide a guideline as to the circumstances under which the company provides loans, the application procedure that needs to be followed and then the payback process. The company must remember that the National Credit Act must be considered when Loans are concluded within the Course and Scope of an Employment Relationship.

Section 40(1) of the Act provides that where a company has at least 100 credit agreements or a total principle debt owed to it, under all outstanding credit agreements, that exceeds the threshold of R500 000, then a company will be obliged to register as a credit provider under the Act.

It is important to note that the company is not in the business of providing short-term loans. The EXCO do however acknowledge that there are circumstances that may necessitate an employee being assisted through a difficult financial time. With this in mind, it is the company policy that loans will only be granted in the following circumstances:
 
Medical or family emergency
•  Hospitalisation of employee, spouse or children.
•  High medical expenditure incurred by employee, spouse or child.
•  Repatriation of employee, spouse or children as a result of death or injury.
 
Qualifying tertiary education / development
An employee registers for a recognised tertiary qualification or industry approved course with the aim of improving their skills, knowledge and value to the company.
 
Relief of financial pressure
Under exceptional circumstances, the employer, after considering all the facts, may provide a loan to provide financial relief to an employee. Employees are however cautioned against acting financially irresponsibly knowing that they will be granted relief by the employer.

Should an employee believe that they have circumstances that may warrant the granting of a loan they must make an application in the format required and it will be considered by the management team.

Procedure
 
The employee will be required to follow the procedure laid out below to be considered for an approved loan:
•   The employee must complete the Loan Application Form and attach the appropriate supporting documentation detailing the expenses wishing to be covered and a schedule of fixed monthly income and expenses.
The employee must also complete the Acknowledgement of Debt form.
The completed paperwork must be given to the Managing Director / Financial Director for consideration / approval.
The approved Loan Application Form must be handed to the HR / Payroll Department before the monthly payroll cut off for the necessary deduction to come off the employee's salary.

Loan Terms and Conditions
•   Applicants must sign an Acknowledgement of Debt form to confirm their liability to the company.
Applicants must have a leave value credit in excess of the loan amount.
Applicants may only have one loan in place at any one time.
The maximum loan value: The monthly loan repayment value may not be more than 20% of the employees monthly Cost to Company figure.
Employees with existing loan garnishees and external loan repayments will be excluded from this loan scheme unless management make a specific exception in a particular case.
The loan amount or loan period may not be increased during the loan period. Future loan applications will be considered on a nil balance only.

Interest Rate
•   Interest will be levied on the loan. This loan rate will track the cost of capital to the company.
In cases where loans are provided for recognised study purposes the Seventh Schedule to the Income Tax Act allows for no interest to be levied (without there being a fringe benefit implication). The non-charging of interest in these cases will be at the discretion of the EXCO.

Employees Tax - Fringe Benefits on Loans

Where interest is levied at a rate lower than the SARS official rate of interest (which varies from time to time), the employer will be obliged to tax such interest as a fringe benefit through the payroll on a monthly basis.

No value shall be placed on the benefit derived in consequence of -

The granting of a casual loan or loans if the aggregate of such loans do not exceed the sum of R3 000 at any time. The loans contemplated in this exclusion are short-term loans granted at irregular intervals to employees and not all loans merely because they are less than R3 000. A taxable benefit would arise if the loans were granted on a regular basis to all employees or a certain category of employees notwithstanding the fact that the loan does not exceed R3 000.

The granting of a loan for the purpose of enabling the employee to further his / her own studies.

If a financial institution such as a bank provides loans to its employees at the same rate as to the customers of the institution on the same conditions and under the same circumstances, no taxable benefit will accrue if such customer rate is below the official interest rate.

If a low interest or interest free loan is provided to a director of a company or to a member of a close corporation, no taxable benefit will accrue if such loan is, for example, provided only as a result of the director's shareholding and not in respect of any services rendered. In such a case, the interest on the loan will not be deductible in the hands of the company or close corporation.
Top of Page
 
10. Contact the HRTorQue Team
Head Office (Durban)
 
Phone: 031 564 1155
Fax: 031 564 1228
 
Email: [email protected]
Website: www.hrtorque.co.za
 
Address: 163 Umhlanga Rocks Drive
Durban North, KwaZulu-Natal
 
FB
 
Sales
Melany Bydawell: 031 582 7425
[email protected] or 083 441 5618

Payroll & HR Administration
Karen van den Bergh: 031 582 7413
[email protected] or 082 891 1722

Human Resources / Employee Relations
Melany Bydawell: 031 582 7425
[email protected] or 083 441 5618
 
Employment Equity & Skills Development
Melany Bydawell: 031 582 7425
[email protected]
Nicky Hardwick: 031 582 7418
[email protected]
 
Tax
Dave Beattie: 031 582 7410
[email protected]

Executive Coach and Team Interventions
Melany Bydawell: 031 582 7425
[email protected]
 
Payroll Third Party Administrator

Kacey Chetty: 031 582 7409
[email protected]
 
Accounts
Cheryl Naidoo: 031 582 7408
[email protected]

Dispatch
Karl van der Merwe: 031 582 7407
[email protected]
 
Subscribe to HRTorQue Reporter