Author: Karen van den Bergh
The hospitality industry in South Africa presents a unique set of payroll challenges driven by its fast-paced and people-intensive nature. With high staff turnover, irregular working hours, and frequent use of seasonal or part-time labour, managing payroll effectively can be complex. Employers in this sector must also comply with strict labour and tax regulations, particularly the Basic Conditions of Employment Act (BCEA) and Sectoral Determination 14, which govern wages, hours, and conditions of employment.
Challenges:
- Managing Hours of Work
One of the most significant challenges lies in managing variable hours and shift work. Irregular schedules, split shifts, and late-night work makes time tracking difficult, especially where manual systems or paper sign-in sheets are still used. Errors in recording hours can lead to miscalculations in pay and overtime, particularly on Sundays, public holidays, and night shifts, where higher pay rates apply.
- High Staff Turnover and Casual Labour
Another ongoing issue is high staff turnover and the use of casual labour. Constant hiring and terminations create a heavy administrative burden for payroll teams. Misclassifying employees – such as treating casuals as permanent staff or failing to register temporary employees for UIF – can easily lead to compliance breaches. Ensuring that all employees, regardless of contract type, receive the correct entitlements, is essential for both fairness and legal compliance.
- Sectoral Determination 14
Compliance with Sectoral Determination 14 is another area of concern. This regulation sets out minimum wage levels, working hours, overtime rules, and leave entitlements specific to the hospitality sector. Many businesses, particularly smaller establishments, struggle to remain compliant due to the complexity of the law or lack of awareness. Common errors include incorrect averaging of working hours and miscalculated leave accruals, which can expose employers to penalties and disputes.
- Payroll Systems
A large proportion of businesses in the industry still rely on manual or outdated payroll systems, which increases the risk of errors and missed deadlines. Without proper processes and/or integrations between payroll and time-and-attendance systems, inaccuracies in payslips, miscalculations, and reporting delays are common. In addition, tips and gratuities remain a grey area for many employers. Questions around whether tips should be taxed, included in gross earnings, or distributed among staff, often result in inconsistent practices and potential payroll disputes.
- Record Keeping
Record-keeping and audit trail issues are also widespread. Many hospitality businesses lack proper employment records for casual or seasonal workers, and supporting documentation for deductions, bonuses, or overtime is often incomplete. This creates significant risk during SARS or Department of Labour audits. Similarly, statutory deductions and submissions – such as PAYE, UIF, and SDL – can become problematic due to the complexity of different employee categories and inconsistent payroll data, leading to errors in EMP501 reconciliations and missing IRP5s.
- Multiple Locations
For multi-location operations, such as hotel groups or restaurant chains, managing payroll across multiple sites adds yet another layer of complexity. Wage rates, benefits, and union agreements may differ between branches, making it challenging to maintain consistency and compliance without strong processes and centralised oversight.
The biggest practical problem we often see is employers assuming that managing these elements is too expensive. On the contrary, there are multiple options to get good systems and processes particularly with modern technology.
In summary, payroll management in the hospitality industry requires careful attention to detail and a solid understanding of sector-specific laws. The combination of variable working hours, frequent staff changes, and complex compliance requirements means that businesses without robust systems and payroll expertise risk non-compliance, staff dissatisfaction, and financial penalties. To mitigate these risks, employers should conduct regular payroll audits, implement reliable time-tracking systems, and ensure their payroll software and processes are aligned with current legislation.
At HRTorQue, we’re here to ensure your payroll runs as smoothly and seamlessly as possible. Chat to one of our tax consultants today for more information.