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| Editor's Note |
After a challenging 2015, business conditions look set to remain difficult into 2016. A sluggish economy is unlikely to be helped by a number of factors including weak Chinese growth, a depreciating Rand (and Chinese yuan), continued poor mining prospects together with domestic challenges and (likely) increased borrowing costs (both public and private) resulting in lower disposable income for consumers.
Not a great way to start 2016, but really hoping to be proved wrong.
In this type of climate it is important to get the basics right and for businesses to focus on operational improvements and delivery. We wish you all the best in doing so. Shout if we can help!
In this edition we largely look at basic house-keeping issues, but there are also two feature articles. One on the recently publicized changes to retirement savings rules (now law) and the second the announcement of our recently launched HR Administration product which has had an extremely successful start. Please note the retirement savings article is a high level summary and more detailed note will be circulate din the next few days. Please read on for:
• The new retirement savings legislation
• HRTorQue's HR Administration product
• Changes to the Official Interest Rate for fringe benefits
• How long should you expect to wait for a refund from SARS?
• Tips for designing an effective incentive scheme
• Can an employee discuss their employment conditions with another employee?
• Increases to domestic workers minimum wage
• A guest piece from the Quattro Group on tips when starting a business; and
• Notice of a new sick leave policy in our standard Policies & Procedures (for those clients
who use this service)
Should you require any further detail on any of these topics, please feel free to contact us. |
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| Table of Contents |
1. Retirement savings changes
2. HR Administration
3. The Official Interest Rate
4. SARS refund waiting period
5. Designing an effective incentive scheme
6. Employees talking to others about their conditions of employment
7. Domestic workers - minimum wage
8. Tips on starting a company
9. Sick leave policy update
10. Contact HRTorQue |
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| 1. Taxation Law Amendments Bill 2015 |
| Author: Karen van den Bergh |
Retirement benefit savings legislation changes
Editor's Note: The changes to the treatment of retirement savings have been in the market for a while. However, now they are really here, please don't underestimate the impact they may have both practically in payroll changes you need to have ready for March 2016, but also in creating uncertainty amongst employees (fear of the unknown).
In the Taxation Laws Amendment Act, 2015, some of the Government's retirement reform proposals first tabled in 2013, were passed into law. The new rules aim to bring into line the tax treatment and annuitisation requirements for all types of retirement funds (pension, provident and retirement annuity funds).
Further detail on the changes will be circulated in a separate HRTorQue reporter in the next few days. Suffice to say the changes will impact both employers and employees for contributions made to both defined benefit and defined contribution schemes.
As a result the changes will directly impact payroll in March 2016 (impacting net pay, PAYE, SDL and UIF) requiring employers to accurately source information from pension providers and administrators. In addition, recent negative press publicity is likely to create uncertainty amongst employees - we highly recommend running training courses to update employees and resolve this uncertainty.
If you require assistance gathering information, considering the impact of changes on your business or training employees and would like a consultation with your payroll consultant and/or one of our other specialist consultants please let us know and we can set up the meetings. |
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| 2. HR Administration - new HRTorQue product |
"HRTorQue offers an unique HRAdmin product to make sure your employee records and filings are complete and easily available when you need them."
Behind some of the well-known aspects of Human Resources activity such as recruitment, payroll, training, remuneration and grievances, there is a massive amount of administration involved in keeping employee records up to date. Time consuming and menial, this is a task which often falls by the way side until the records are needed and not available or until an incorrect return is submitted to authorities with resulting penalties and fines.
HR Administration forms an integral part of all business requirements and failure to manage this element creates many staff management challenges.
While it is a solution to hire an extra HR resource, we also find through client feedback that this firstly costs more than clients wish to spend on HR admin, but more importantly doesn't always solve the problem as the new hire tends to get pulled into doing other HR work and the HR admin becomes an issue again.
Recognising this challenge, HRTorQue have come up with a great solution for clients.
This solution comes in two distinct parts:
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We offer a resource to tidy up your HR Admin in the short term and longer term to make sure you stay organised; and |
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We offer clients access to an excellent HR Admin software package (through eTorQue) providing a platform to store and maintain employee records |
Take advantage of the following:
• No need to hire a new HR full time resource
• No training period to get the new resource up to speed
• Access to fully trained and experienced personnel
• Access through your HRTorQue HRAdmin resource to a wealth of experienced
professionals at HRTorQue
• Access to a proven, established software platform
• A cheaper and more effective overall solution
Please email us on [email protected] if you would like to hear more about this exciting product. |
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| 3. Changes to the Official Interest Rate for fringe benefits |
| Author: Karen van den Bergh |
The Official Interest Rate for calculating Fringe Benefits increased by 0.25% effective 20th November 2015.
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 was increased by 0.25% to 6.25% on the 20th November 2015, and the official interest rate therefore became 7.25% effective 1st December 2015. |
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| 4. How long should you expect to wait for a refund from SARS? |
| Author: Dave Beattie |
In practice there is no legislative period in which SARS needs to make a refund making it difficult to predict. While historically this would be within 21 days, current experience is for this to extend to 51 days or longer.
As a tax practitioner a large portion of my time is spent following up on administrative matters with SARS. The most time consuming of these tasks is following up on tax refunds on behalf of individual tax clients. I get regular calls from clients asking when they can expect their tax refunds. It is extremely frustrating as I cannot provide an adequate answer to this question. In previous years the refunds were paid out within a couple of days and in a worst case scenario you could expect your money within 21 days.
So what has changed?
Looking at the legislation, refunds are dealt with in Section 190 of the Tax Administration Act and Section 102 of the Income Tax Act. Clients are always amazed when they are told that there is no provision in these Acts that imposes an obligation on SARS to pay out refunds within a certain amount of time. Whilst SARS does have an operational target of paying refunds out within 21 days, it would be a mistake to promise a client that. It is a popular misconception that the 'due date' and 'second date' are relevant as they don't have anything to do with the payment of a refund. (The 'second date' is the date on which interest will start being charged by SARS if tax owing on assessment is not paid. This interest will be charged from the 'due date'.)
The relatively new concept of the 'review' has further muddied the water as it can conceivably be used to extend the refund period.
Consider the following:
Assuming your return is subject to a review, it is SARS operational policy to finalise such reviews within 30 working days. The onus is then on the taxpayer / tax practitioner to contact the SARS Call Centre if the matter has not been finalised within the 30 working days. The Call Centre operator must then escalate the matter to the appropriate supervisor and provide the taxpayer / tax practitioner with a case number. The frustrating part of this process is that the supervisor then has 21 working days to look into the matter. In most cases refunds are released within this 21 day escalation period.
Another issue that can delay the release of a refund is the status of the taxpayer's banking details on eFiling. It the banking details are listed as 'invalid' they need to either be corrected on eFiling or the taxpayer would need to do this process personally at their local SARS branch. It may be advisable to check on this issue before starting the tedious follow up process.
It is imperative that the taxpayer provides the tax practitioner with all the necessary information to complete their tax return as soon as possible. This not only ensures that the practitioner can get their return in as soon as possible but it also ensures that the practitioner can upload any supporting documentation timeously and reduces the risk of a review.
With the fiscus requiring more money and SARS under increasing pressure to collect this in the form of tax it is understandable SARS are looking to sit on refunds for as long as possible. It remains to be seen whether this will become standard practice or whether a legislative change will be introduced to govern this process. I for one would like there to be certainty in terms of the refund procedure so that there exists reciprocal responsibility between SARS and the taxpayer / practitioner. What is certain though is that the current refund follow-ups take a lot of time that could certainly be better spent elsewhere. |
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| 5. Designing an effective incentive scheme |
| Author: Melany Bydawell |
Editor's Note: Incentive schemes designed properly are the driving force in an organisation to align performance with company goals. Give us a call if you are designing yours and need some guidance.
Is your existing Incentive scheme resulting in the desired outcome?
The first step in introducing a scheme is to recognise that sincere recognition, regular communication, objective measurement and motivation are essential ingredients. Desired results include creation of positive behaviour from employees and looking for ways to incentive outside of, but including compensation (in the same way as any good sales conversation should necessarily deal with price, but only as part of a portfolio of product attributes). For example, consideration of age groups and length of service could be taken into account if you include service awards in the scheme.
You should also consider including ways to acknowledge both individual and team efforts and achievements. In deciding on your recognition and rewards, consider what motivates employees to excel within your business context.
When discussing schemes with employees, most will state that they want additional remuneration. However, research shows that this in itself is not effective in the long term and this regular remuneration in turn becomes an expectation that is difficult to retract at a later stage and can in some circumstances, result in an unintended negative impact on employee morale.
Some steps to consider are as follows:
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Decide on the performance criteria - these can be areas that you want to improve on, for example health and safety, financial goals, productivity and attendance. |
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Determine how and what rules guide the improvements. |
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Have a session with employees (suggestion box) for them to give their ideas and as you decide on the objectives, link these to the organisation's strategy and overall goals. It could be productive to also ask all employees for their ideas as there will be more enthusiasm if they feel that they are a part of the process. |
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Achieving the performance criteria goals must (of course) directly increase your company's economic value. |
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Incentives can be defined for a specified time-frame. |
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Ensure that goals are CLEAR AND MEASURABLE - for example, rather than stating 'improvement in health and safety' state 'accidents to be reduced by 70% by end March 2016'. |
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Make them ACHIEVABLE AND REALISTIC. |
Determine which incentives are the most motivating and avoid monthly/regular cash awards that are quickly forgotten. |
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| 6. Disclosure of conditions of employment |
| Author: Melany Bydawell |
Disclosure by employees of their conditions of employment to other employees
Is an employee entitled to discuss the conditions of their employment with other employees?
This question comes up regularly from clients who are concerned that employees freely discuss their conditions of employment with others.
The Basic Conditions of Employment includes provision for this under 78.(1) (b) as follows:
Protection of employees against discrimination
Rights of employees
78. (1) Every employee has the right to -
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make a complaint to a trade union representative, a trade union official or a labour inspector concerning any alleged failure or refusal by an employer to comply with this Act; |
| (b) |
discuss his or her conditions of employment with his or her fellow employees, his or her employer or any other person; |
| (c) |
refuse to comply with an instruction that is contrary to this Act or any sectoral determination; |
| (d) |
refuse to agree to any term or condition of employment that is contrary to this Act or any sectoral determination; |
| (e) |
inspect any record kept in terms of this Act that relates to the employment of that employee; |
| (f) |
participate in proceedings in terms of this Act; |
| (g) |
request a trade union representative or a labour inspector to inspect any record kept in terms of this Act and that relates to the employment of that employee. |
(2) Every trade union representative has the right, at the request of an employee, to inspect any record kept in terms of this Act that relates to the employment of that employee.
The Act is therefore clear in giving employees the right to communicate with others about their conditions of employment. |
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| 7. Increases in domestic worker minimum wages |
| Author: Karen van den Bergh |
The Minister of Labour, Mildred Oliphant, had the pleasure of announcing that: "wages for the vulnerable workers in the Domestic Worker Sector will be adjusted with effect from 1 December 2015".
In terms of Sectoral Determination 7: The minimum wages will be adjusted upwards for employees.
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This means that an employee that works more than 27 hours in Area A (largely urban areas)) should be paid not less than an hourly rate of R 11.44. |
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Secondly, for an employee that works less than 27 hours in Area A should be paid not less than an hourly rate of R 13.39. |
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Thirdly, for an employee that works more than 27 hours in Area B (largely rural areas) should be paid not less than an hourly rate of R 10.23. |
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Fourthly, for an employee that works less than 27 hours in Area B should be paid not less than an hourly rate of R 12.07. |
The new determination will be effective until the end of November 2016 (following which a new determination will be issued).
Sectoral determination covers the protection of workers in vulnerable sectors/areas of work. The determination sets minimum working hours, minimum wages, number of leave days and termination rules. |
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| 8. Starting a Company - Tips to get you going |
| Author: Doug Hoar (Quattro) |
Editor's Note: If you would like to talk to the Quattro team about your business structure, please email us at [email protected].
It seems as though 2016 has a rough ride in store for us but as the wise old saying has it: "Fortune favours the brave". Just remember to mix a good dose of realism in with the bravery.
That said, if you've been sitting on a brilliant business idea, and if you've ever dreamt of leaving your 9 to 5 job and starting up on your own, this could well be your year!
Get going with these 3 steps:
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Consider checking first that you are suited to the excitement, rewards, risk and rough-and-tumble of entrepreneurship by taking the "Entrepreneurial Personality Profile" test on the Psychology Today website at http://psychologytoday.tests.psychtests.com/take_test.php?idRegTest=3204. |
| 2. |
Passed the test? Great, next step is to get off on the right foot with "Starting a Business: Ten Simple Rules for a Successful Start-up" on the Business Partners website at http://www.businesspartners.co.za/starting-a-business/. (Tip: Don't ever lose sight of Rule 10 "Enjoy Yourself"!) |
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All done? Stage 3 is to choose the right trading vehicle to suit your particular needs and those of your new business. This is important - starting off with one legal entity and then later moving the business to another type risks all sorts of unhappy legal and tax issues (quite apart from all the obvious practical ones, like wading through piles of red tape at SARS, Telkom and your bank's "please hold, your call is important to us" call centre). |
In South Africa you have these four main options to choose from:
1. A sole proprietorship ("sole trader"). Only one owner - you are the business.
2. A partnership of 2 to 20 owners.
3. A private company ("Pty Ltd") for any number of owners ("shareholders"). (CC's - close
corporations, still exist, but no new ones can be registered).
4. A business trust (also any number of owners).
There are other specialised types of companies available only to non-profit organisations (charities and the like), and to professionals (lawyers, accountants, doctors etc.) and various ways in which different legal entities can be combined but for the purposes of the newsletter we have only referred to the 4 most common options listed above.
 It is important that you do not make any decisions without first seeking professional advice on the legal and tax implications of using each type of entity. QUATTRO ACCOUNTS is an accounting services company that specialises in assisting SMME's with bookkeeping, accounting, tax, company secretarial and advisory services. |
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| 9. Sick Leave Policy - Contracts of Employment |
| Author: Melany Bydawell |
| We have introduced a new policy to our HR & Disciplinary Policy and Procedure Manual. If we have previously drawn up your contracts and policies, contact [email protected] to receive this. The purpose of this policy is to set guidelines on how to manage sick leave. |
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| 10. Contact HRTorQue |
Head Office (Durban)
Phone: 031 564 1155 • Email: [email protected] • Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
Johannesburg Office
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191 |
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