HRTorQue Outsourcing
HRTorQue Reporter
July 2015
 
HRTorQue Reporter Archive
Table of Contents
1. Employment Equity Reporting and Plans - Are you compliant?
2. Tax Return Completion Services
3. Increase in the Council Levies
4. Can foreign nationals be employed while waiting for a work permit?
5. Employees' Tax Review
6. Bonus Tax Provision - What does the legislation say?
7. Disciplinary Hearing Scheduled but Employee Resigns
8. Frequently Asked Questions
9. Contact the HRTorQue Team
1. Employment Equity Reporting and Plans - Are you compliant?
Author: Nicky Hardwick
•   Fines for non-compliance are 2% of turnover OR R1.5million.
We are receiving calls from clients regularly where they have been inspected, are non-compliant and face substantial fines.
Contact Nicky Hardwick to ensure compliance and for advice.

The Department of Labour are actively conducting audits on all designated employers and have also established a task team to assist them in these audits.

The task team is specifically checking on three aspects of compliance, namely the Employment Equity Plan (EEA13), Employment Equity Report (EEA2) and Income Differential Statement (EEA4).

Part of the element of compliance in this regard is that you must ensure that the EEA2 and EEA13 are displayed in your workplace in an area where staff have access.

Our experience of this task team is that they do not issue employers with a notice of undertaking but rather these employers are being taken to court for failing to comply.

The fine for non-compliance in these areas is 2% of turnover or R1,5 million, whichever is the GREATEST.
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2. Tax Return Completion Services
Author: Dave Beattie
•   Are you apprehensive of completing and submitting your own tax return?
Have you previously made mistakes completing your annual tax return and spent hours trying to rectify it?
Are you worried about the more aggressive tactics used by SARS?

The tax filing season officially starts on 1 July 2015 for the 2015 tax year (1 March 2014 to 28 February 2015) and for countless taxpayers this season will cause significant stress. Many taxpayers will make the decision to visit SARS and sit in lengthy queues to have their tax returns completed. Others will make valiant attempts to get their return submitted via SARS e-filing and experience the challenges posed by the complex format of the return. HRTorQue Outsourcing can provide a third option that will relieve you of this stress and ensure that your return is correctly and timeously submitted to SARS.

HRTorQue Outsourcing can provide tax completion services to salaried taxpayers for R660 (including VAT).

This service will include the following functions:
•   Collection and collation of supporting documentation necessary to complete your tax return.
Completion and filing of the tax return.
Checking of assessment and notifying you of the result thereof.

We do however reserve the right to quote separately for the completion of tax returns that require the drafting of income statements or additional expense schedules required by SARS. Taxpayers who would fall into this category would be those who earn mainly commission, receive rental income or are independent contractors.

Should you wish to take advantage of this offer or have any questions regarding this process please do not hesitate to contact Dave Beattie on 031 582 7410, 082 378 5655 or [email protected].
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3. Increase in the Council Levies
Author: Karen van den Bergh
The MIBCO Governing Board has approved an increase of 6% in the Council Levies payable to Mibco with effect from July 2015.

The new increased Council Levy will reflect on the July 2015 forecast and will be effective from 29 June 2015.

The new Council Levy payable is as follows:
Employer portion per week: R2.65
Employee portion per week: R2.65
Total weekly contribution: R5.30
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4. Can foreign nationals be employed while waiting for a work permit?
Author: Melany Bydawell
According to the Immigration Act 13 of 2002 (the Immigration Act) an employer may not employ an illegal foreigner or a foreigner whose status doesn't permit him/her to be employed.

Therefore, a foreigner who for example may be in possession of a study permit, an accompanying spouse permit or a relative's permit is not permitted to work in South Africa. In addition, a foreigner in possession of a work permit to work for one company may not work for another company.

It would be in contravention of the Immigration Act for you to employ this foreign national while he/she does not have a work permit and/or if he/she were to work for you without a valid work permit.

You could face a significant fine and/or imprisonment if the Department of Home Affairs became aware of such conduct.
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5. Employees' Tax Review
Author: Dave Beattie
•   Do you want to avoid the financial implications of a visit from SARS?
We can provide you with a payroll review and opportunity to correct any irregularities in advance.

With the South African Revenue Services being put under increasing pressure by central Government to collect more money we have seen a dramatic increase in the compliance audits being conducted. These audits are very focussed, with the auditors spending less than a day investigating legislative compliance in the following specific areas:

The tax treatment of company vehicles provided to employees, with particular attention paid to:
•   Identification of the vehicles on the asset register and the determination of which employees have the right of use of such vehicles.
The correct calculation of the company car fringe benefit.

The allocation of travel allowances to employees, with particular attention paid to:
•   The company's policy regarding the allocation of travel allowances (who receives them).
The formula used to determine the value of travel allowances allocated to employees.
Determining whether travel allowances had been taxed after taking into account the employees travel requirements.
Review of the employment contract to establish whether the travel allowance allocated is correctly described therein.

Identification of potentially untaxed benefits given to employees, with specific focus on:
•  'Employee of the Month' awards.
•  Rewards for achieving performance targets.
•  Services provided to employees free of charge.
•  Employees receiving company assets for no value or at less than market value.
•  Payment of rent or 'home office' allowances off payroll.
•  'Unapproved' risk benefits paid to assurers on behalf of employees.

SARS has also stepped up the introduction of new legislation and issued clarifying statements in the form of Interpretation Notes.
 
These Interpretation Notes cover issues such as:
•  Long service awards
•  Company cars (vehicles acquired via an operating lease or rental)
•  Taxation of employees earning multiple salaries
•  Tips paid to employees
•  Bursaries awarded to relatives of employees
•  Valuation of the company car fringe benefit

Many of these issues are being targeted in the audits to establish whether organisations are correctly applying the legislation.

It is clear from our interaction with clients that many of them are incorrectly applying these new Interpretation Notes. Whilst many organisations outsource their payroll for the comfort of knowing that it is managed in a legislatively compliance manner, the reality is that the service provider can only ensure legislative compliance if they are aware of all of the facts surrounding payments to employees. The challenge here is that most employers do not have the technical knowledge or time to unpack such issues and as a consequence legislative non-compliance is common.
 
HRTorQue Outsourcing is well placed to fill this gap. The approach used is to unpack the various issues with the client through a process known as an 'employees' tax review'. This review takes a maximum of 3 hours at the client's premises and includes a review of:
•  The payslips
•  Contracts / letters of appointment
•  Rules of any benefit funds

The findings of this review are presented in a practical manner via an easy to understand report presented to the management team.

If you would like further information on this process or would like to have such a review undertaken in your organisation kindly contact Dave Beattie on either 031 582 7410 or [email protected]. A quote will be prepared for all enquiries, with the price of the review being dictated by the size of the entity and scope of the review.
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6. Bonus Tax Provision - What does the legislation say?
Author: Karen van den Bergh
When implementing a bonus provision we traditionally spread the tax over the tax year with the bonus being paid in December. In cases where a client pays their bonuses in March (first month of the tax year) and spreads the tax over the balance of the tax year, is this acceptable?

Reference to Relevant Acts
We will make reference to Paragraph 2(1) of the Fourth Schedule to the Income Tax Act, 1962 (the Fourth Schedule):
"Every employer...who pays or is liable to pay any amount by way of remuneration to any employee shall, unless the Commissioner has granted authority to the contrary, deduct or withhold from that amount, ...and shall...pay the amount so deducted or withheld to the Commissioner within seven days after the end of the month during which the amount was deducted or withheld...or in either case within such further period as the Commissioner may approve."

The employees' tax to be deducted from remuneration must be determined in accordance with the tax tables as prescribed by paragraph 9(1) of the Fourth Schedule that provides, "The Commissioner may from time to time, having regard to the rates of normal tax...prescribe deduction tables applicable to such classes of employees as he may determine, and the manner in which such tables shall be applied..."

Paragraph 2(1) of the Fourth Schedule read with paragraph 9(1) provide authority for the Commissioner to exercise a discretion to allow an employer to withhold employees' tax in a different period as normally required (i.e. within 7 days after the end of the month) as well as the manner in which the tax tables must be applied.

The Commissioner exercises the discretion to allow an employer to pay SARS the employees' tax withheld in a different period than the normal seven days after the end of the month in which it was deducted or withheld under paragraph 2(1).

Conclusion
Ordinarily employees' tax must be deducted or withheld in the month in which the once-off amount is paid to the employee and be paid over to SARS within seven days after the end of the month in which it was deducted or withheld, however, the Commissioner exercises the authority under paragraph 2(1) of the Fourth Schedule read with paragraph 9(1) to deduct employees' tax on a monthly basis across the year of assessment as per the manner prescribed in the Guide for Employers. In conclusion, tax smoothing or "Bonus Tax Spread" is allowed in the case of a guaranteed, non-discretionary bonus.

We would, however, like to caution employers to ensure they include a clause in the employment contract that covers this practice in detail. The contract must include, and the employee must agree to the fact that, should his/her employment be terminated for whatever reason, the balance if the tax that has not been recovered for the bonus paid will be recovered from his final payment. Should the last payment not be sufficient to cover the outstanding debt, the employer needs to specifically indicate that the balance will be handled as a loan. The employer should also take cognisance of the fact that implementing this practice could pose a risk to the company. Should an employee abscond, and have no monies owed to him/her from the company, the company will be liable to settle the outstanding PAYE with SARS.

If you are currently spreading the tax for your bonus, and need assistance in aligning your contracts or your process to ensure that you are compliant. Please contact [email protected] or phone on 082 8911 722.
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7. Disciplinary Hearing Scheduled but Employee Resigns
Author: Melany Bydawell
What should you do if you have scheduled a disciplinary hearing and the employee resigns?
 
This question is often asked by organisations who, more often than not, are only too happy to let the employee leave their employment without having a disciplinary hearing and the associated costs of time etcetera.

Bear in mind that when an employee resigns he/she is still required to serve their notice period and, within this time, you are entitled to hold the disciplinary hearing and dismiss the employee, if that is the outcome.

Our suggestion would be, especially in cases of dishonesty/misappropriation of funds that you have a hearing and not allow the employee to leave without going through this process.

One reason for this is that to permit an alleged dishonest employee to leave without consequence would not give a good message to your other staff - "be dishonest and we will just allow you to resign without consequence".

Another reason would be that the employee would exit with a clean record, whether that be from a criminal or other perspective, and be at liberty to move onto to the next unsuspecting employer and once again perform similar illegal activities.

If you don't finalise the disciplinary process before the notice period expires, you can't carry on with the disciplinary action because he/she is not your employee anymore.
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8. Frequently Asked Questions
Author: Karen van den Bergh
Can I exchange may annual leave for cash?
The employer is prohibited by section 20 (11) from paying an employee for annual leave except upon termination of employment.

Payment of Remuneration
An employer is obliged to pay remuneration within 7 days after the completion of the period for which the remuneration is payable. If there is a particular pay date stipulated in any contract of employment or other agreement, then the employer is obliged to adhere to the conditions stipulated. An employer is obliged to provide an employee with a proper payslip on each payday.

Salary Increases
Salary increases are not regulated by labour legislation, except in as far as may be provided for in any Main agreement or collective agreement, where provision is usually made for annual wage or salary negotiations. In the absence of any such agreement, salary increases remains a matter of mutual interest between employer and employee. There is no obligation on the employer to grant annual increases.
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9. 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
 
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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]
 
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