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HRTorQue Reporter
April 2017
 
HRTorQue Reporter Archive
Editor's Note
In this edition, we finish with our series of articles on guiding an employer through the retrenchment process focusing this month on the notification, assistance and re-employment procedures. We then have a series of articles focusing on issues we have seen recently including the tax treatment of reimbursive travel payments and the income tax and UIF implications of learnerships.

We also include a summary of recent UIF changes and finish with a reminder that the employer filing season starts on the 18 April 2017 and ends on the 31 May 2017 - there is a new e@syFile update so please don't leave it until the last minute in case you experience system challenges.

As usual, 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. Retrenchment Guide (part 4 to 6): Notification, Assistance and Re-employment
2. UIF Changes
3. Learnerships: Income Tax Deduction and UIF Implications
4. Tax Treatment of Reimbursive Travel Payments
5. Employer Filing Season Starts 18 April 2017 and Ends 31 May 2017
6. Contact HRTorQue
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1. Retrenchment (Part 4-6): Notification, Assistance and Re-employment
Author: Nicky Hardwick
In last month's article, we dealt with the consultation process. This month we finish off by looking at notification, assistance to employees and recalling/re-employment where this final stage is applicable.

Good Practice Step 4. Notification Procedure

Following the conclusion of consultations, management should, as soon as possible, notify those employees to be retrenched of the decision. Discussions should be held with ALL employees to be retrenched, including those to be relocated in new positions, put onto early retirement, transferred, etc., and letter should be sent to them containing details of notice, retrenchment pay, forwarding address, etc.

If you have agreed on the retrenchment details, put all the details into writing and sign the retrenchment agreement. This will be your only fall back in the event of the employees \ union reneging upon your settlement!

Good Practice Step 5. Assistance to Retrenched Employees

There is an onus upon management, given the no fault nature of a retrenchment exercise, to assist employees wherever possible in applying for UIF payments, Pension Refunds, and Tax Directives (1st R30,000 tax free), for Retrenchment payouts, and in seeking new employment, etc.

Adequate time is also needed to calculate individual’s packages, arrange for pension or provident fund withdrawals, or transfer to retirement annuities, etc.

Note: Again, that Sec. 196 of the Labour Relations Act provides for payment of a statutory minimum severance payment of one week per completed year of service with no upper limit. Employers may apply for exemption in case of intense financial distress.

Good Practice Step 6. Recall and Re-Employment

Should business improve and justify an increase in staff subsequent to a retrenchment exercise, first refusal of new positions should be given to retrenched employees (although there is no legal obligation to do so).
 
The following records of retrenched employees should therefore be maintained:
• Name of employee
• Postal and home address
• Telephone number, or number of a close friend
• Address of close relatives
• Details of dependants
• Any other essential information
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2. UIF Changes
Author: Karen van den Bergh
At the end of March 2016, the Unemployment Insurance Fund (UIF) declared an accumulated surplus of R99 billion rand. It is estimated that the surplus will reach R175 billion by 2019. The UIF announced that they will utilise this surplus to protect existing jobs and will introduce new rules to allow more people to qualify as beneficiaries of the fund.

Other amendments being contemplated to reduce this surplus are to cover an expansion to the existing Training Layoff Scheme as well as funding the "labour activation plan". This is the register of jobseekers kept at the Department of Labour offices to be matched with registered job openings.

The current amendments below were signed into law earlier this year:

1. Benefits will now be paid out over 12 months and not eight months.
2. Learners in training and civil servants will now also qualify to claim.
3. Maternity Benefits increases from 54% to 66% of the salary.
4. UIF benefits will not be stopped when a beneficiary dies but will be paid out to their
    dependents.

It is not believed however that any of these changes will make a dent to the surplus and it is surprising that the UIF amount has been increased. With effect from 01 April 2017, the maximum monthly deduction has been increased from R148.72 to R177.12.

It would be interesting to see how the Department of Labour utilises the surplus over the next year and what interventions they fund to potentially alleviate the unemployment problem facing South Africa.
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3. Learnerships: Income Tax Deduction and UIF Implications
Author: Dave Beattie
The signing of the Taxation Laws Amendment Act and the Unemployment Insurance Amendment Act, 2016 has had important implications for employers who have people on 'learnerships' on their payroll. These changes impact on the Income Tax deductibility of 'learnership allowances' and the imposition of UIF on remuneration paid to learners.

From an Income Tax perspective the period for the learnership allowance has been extended to 31 March 2022 (effective 01 October 2016 and applies to learnership agreements entered into on or after 1 October 2016).

•  The tax deduction value will be based on the NQF level of the learner.
For learners with a qualification equal to NQF level 1 - 6, the employer qualifies for an annual tax deduction of R40 000.
For learners with a qualification equal to NQF level 7 - 10, the employer qualifies for an annual tax deduction of R20 000.
For learners with a disability, and a qualification equal to NQF level 1 - 6, the employer qualifies for an additional annual tax deduction of R20 000.
For learners with a disability, and a qualification equal to NQF level 7 - 10, the employer qualifies for an additional annual tax deduction of R30 000.

In terms of the UIF changes there have been a raft of changes to the benefits payable, but the most important change in this context is the extension of unemployment insurance benefits to learners who are undergoing learnership training. Previously learners were specifically excluded from contributing to UIF. It is not clear whether the learners will need to contribute to UIF to be eligible for benefits, but we would assume that logically they must do.

For info, the other main changes to UIF have been summarised below:
•  UIF benefits increased from 238 days to 365 days.
Maternity leave benefits increased to 66%.
Payment of maternity benefits will not affect the payment of unemployment benefits.
Employees who lost working hours due to reduced time at their work places, will be entitled to benefits.
Families and / or nominated beneficiaries of a deceased claimant will be allowed to receive the deceased's benefits.
Charging of fees by any party (e.g. agency) to a UIF claimant for helping them submit their claims, are prohibited.
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4. Tax Treatment of Reimbursive Travel Payments
Author: Dave Beattie
The tax treatment of reimbursive travel payments made to employees is often badly dealt with. The reason for this is usually a poor understanding of the law and the lack of a coherent travel policy.

It is important that the payroll administrator (or their manager) is able to identify the various categories of travel that employees may undertake. By that I mean how likely the employee is to be required to travel and the distances that they are to travel. This will establish whether the employee should be allocated a fixed travel allowance or be reimbursed for sundry business travel. It is suggested that a basic policy be drafted explaining the circumstances under which a travel allowance and reimbursements will be made.

In terms of current tax legislation in this regard the payments will be treated as follows:

•  An employee in receipt of a travel allowance will either have 80% or 20% of their travel allowance included in their monthly taxable income. This income will accrue to IRP 5 code 3701. It is imperative the employee maintain a logbook in the format acceptable to SARS.
   
An employee required to do only occasional business mileage can be reimbursed at the rate of R 3.55 per kilometre (2018 tax year) up to a maximum of 12 000 business kilometres per annum tax–free. The reimbursement must be reflected on the employee's payslip and accrue to IRP 5 code 3703.
   
An employee who undertakes business travel for more than 12 000 kilometres per annum and/or who is reimbursed at more than R 3.55 per kilometre will still be paid tax-free on a monthly basis (even above these limits), with the payment accruing to IRP 5 code 3702. This reimbursement will however be taxed on assessment. It is imperative that the employee maintain a logbook in the format acceptable to SARS as a travel claim will need to be made when they submit their annual tax return.
   
An employee receiving a fixed travel allowance and then being reimbursed per kilometre for business travel will have the reimbursement paid to them tax-free on a monthly basis. This travel reimbursement will however be added to their travel allowance on assessment. It is important for the employee to ensure that they maintain a logbook in the format required by SARS. The fact that the travel reimbursement is paid tax-free could result in an amount being owing to SARS on assessment (if the travel deduction is not high enough). It is important for both employer and employee to take this into consideration when implementing such a policy.

The consequences of getting this process wrong can cost both the employer and employee in terms of taxes owing to SARS and result in a lot of unnecessary wasted time and effort to get things right. A clear policy outlining the company's treatment of the travel options will greatly reduce the risk of tax non-compliance and allow the employee to plan their tax affairs accordingly.

If you have any questions in this regard or would like assistance with the drafting of such a policy please do not hesitate to give Dave Beattie a call on 031 582 7410 or email [email protected].
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5. Employer Filing Season: Year Ending February 2017
Author: Jonathan Aitken
The employer annual reconciliation season starts on 18 April 2017 and employers have until 31 May 2017 to submit their Annual Employer Declarations (EMP501) for the year ended 28 February 2017. The reconciliation covers the monthly employer declarations (EMP201, payments made, Employee Income Tax Certificates (IRP5; IT3a) and ETI.

For employers with over 50 employees, SARS has issues a new version of e@syFile on the 8 April 2017. Please remember to back up your data before installing the new version. You will not be able to use the old version after the 14 April 2017.

Given SARS's system issues with ETI last filing season we would strongly recommend getting professional advice when completing the ETI information.
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6. 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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