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| Table of Contents |
1. Essential Services Ruling
2. Recovering a Debt from an Employee
3. Tax Treatment of Severance Benefits
4. When are loans a fringe benefit for an employee?
5. Labour Brokers and the "Assign Services Case"
6. COIDA - Maximum Earnings Increase from 1 March 2018
7. Contact HRTorQue
Should you require any further detail on any of these topics, please feel free to contact us. |
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| 1. Essential Services Ruling |
| Author: Nosisa Sibanda |
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) |
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| 2. When and how can one recover a debt from an employee? |
| Author: Jonathan Aitken (source: Laboursmart) |
It often happens that employees borrow and owe money to employers. While the recovery can often be done amicably there are occasions when it becomes more difficult.
Section 34(1) of the Basic Conditions of Employment Act allows an employer to deduct an amount from an employee's remuneration only if the employee has consented thereto in writing or the deduction is permitted in terms of a law, collective agreement, court order or arbitration award.
Section 34(2) of the BCEA allows for deductions from remuneration where the employer has suffered losses or damage on account of the employee and a specific process is provided for prior to the deduction of monies:
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The loss/damage occurred due to the employee's fault during the course of his/her employment; |
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A fair procedure has been followed, including giving the employee an opportunity to give reasons why the loss/damage should not be deducted; |
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The deduction does not exceed the cost of the loss/damage; |
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The deductions do not exceed a quarter of an employee's monthly salary. |
As employees are required to consent in writing to the deduction of monies from their remuneration it is advisable to obtain such consent from all employees prior to any damages or losses being suffered. This may be done through the incorporation of a clause to such effect in their contracts of employment. Thereafter should the position arise where monies need to be recovered they should only be recovered after a fair process has been followed. Deductions must be made within the prescribed limit of a quarter of an employee's monthly remuneration. |
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| 3. Tax Treatment of Severance Benefits |
| Author: Karen van den Bergh |
For years, payroll administrators, tax consultants, accountants and human resource consultants have battled to get their heads around the tax treatment of tax directives pertaining to 'voluntary' retrenchments. There was a generally prevailing opinion that a 'voluntary' retrenchment did not qualify for the favourable tax treatment given to 'involuntary' retrenchments. The logic of this was that the employee had chosen to leave employment and that the termination was akin to a 'mutual termination'. In reality though the concepts are far removed from each other from a tax treatment perspective. This article will focus on the concept of 'retrenchment' as a means of reducing the number of employees due to the closing of the business or for economic or restructuring reasons.
In a recent development the South African Institute of Tax Professionals (SAIT) made a submission to SARS stating that the concept of 'voluntary retrenchment', as opposed to forced retrenchment, exists in employment law. The courts have held that voluntary retrenchment agreements are valid and enforceable contracts.
Erika de Villiers, head of tax policy at SAIT, says that in the latest guide relating to tax directive forms SARS clearly makes a distinction between voluntary retrenchment and involuntary retrenchment. This new classification appears to reflect an interpretation that in the case of a voluntary severance package, the employee does not qualify for the more favourable tax treatment applicable to a severance benefit.
In terms of the tax tables for severance benefits, the first R 500 000 is tax free and the remaining amounts are taxed at a sliding rate, with 36% being the top rate. It is interesting to note that the voluntary retrenchment option is processed by SARS in the same way as normal taxable income, with the normal tax tables applicable to individuals being used. In such cases the IRP 5 source code used to report such income would be 3601 (normal taxable income).
The SAIT submission states that the Income Tax Act does not differentiate between voluntary and involuntary retrenchment packages. The definition of 'severance benefit' deals with amounts paid on retrenchment for an employee, and does not refer to the terms 'voluntary' or 'involuntary'. Erika de Villiers says that SAIT is of the view that the SARS Completion Guide for the forms should be updated in order not to differentiate between 'voluntary' and 'involuntary' retrenchment.
SARS has been receptive to these comments and have stated that they will be amending their guides and forms in due course to reflect the change in policy. De Villiers says that in the interim SARS accepts that the voluntary retrenchment packages should be disclosed under the 'involuntary' retrenchment field on the application form, to ensure that the payment is treated correctly.
It is also important to note that should an employer negotiate a more favourable voluntary retrenchment package payable due to the operational reduction of staff, this payment will still fall within the definition of 'severance benefits' and qualify for the favourable severance benefit tables.
This certainly creates a complication for employers who have followed the policy currently in practice at SARS. Tax directives may need to be cancelled and new applications made. There is unfortunately only a small window of opportunity to do this before the 2018 tax year closes. |
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| 4. When are loans a fringe benefit for an employee? |
| Author: Dave Beattie |
The legislation in this regard remains unchanged.
Loans in aggregate of less than R 3 000 at any one stage do not attract any fringe benefit tax. If the loan exceeds this value though, SARS will raise a fringe benefit based on the SARS interest rate applied to the loan balance. This fringe benefit will be added to the employee's taxable remuneration that month. Generally payroll systems will do this calculation for you provided you notify the payroll administrator of the loan balance, the agreed monthly repayments and whether an interest rate is applied to the loan. If this interest rate is equal to or higher than the SARS official rate (currently 7.75%) no fringe benefit will be applicable. If it is lower the payroll will tax the difference monthly. |
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5. Labour Brokers and the "Assign Services Case"
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| Author: Jonty Aitken |
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. |
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6. COIDA - Maximum Earnings Increase
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| Author: Jonty Aitken |
| The maximum amount of earnings for which COIDA applies has been increased to R430,944 effective 1 March 2018. It is noticeable that this is from 1 March 2018 (the start of the tax year) as opposed to the usual 1 April 2018 which makes things easier practically for employers. |
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| 7. Contact HRTorQue |
Durban
Phone: 031 564 1155 • Email: [email protected] • Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
Johannesburg
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191 |
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