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| Editor's Note |
With payroll providers rushing around trying to resolve the practical implementation of the new retirement savings legislation, our February reporter is shorter than normal.
In this edition we update you on some of the practical implementations of the retirement savings changes (don't forget to refer back to our circulation in January summarising the impact of the changes on employers), provide an update on the change in the official interest rate yet again (more likely to follow during the course of this year) and provide solid guidance on how to analyse absenteeism better.
We also remind clients about the upcoming COIDA submission deadline at the end of April 2016.
Finally, Dave rounds off with a solid tax tip for the month.
As usual, should you require any further detail on any of these topics, please feel free to contact us.
We do offer a referral scheme for new clients sent in our direction so if you know of anyone looking for outsourced payroll services then please let us know.*
*Terms and conditions apply. |
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| Table of Contents |
1. Retirement savings changes - update
2. Retirement savings changes - practical considerations
3. The Official Interest Rate
4. Managing absenteeism - what is an acceptable rate?
5. COIDA submission deadline - 30 April 2016
6. Tax Tip
7. Contact HRTorQue |
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| 1. Retirement benefit savings changes - update |
| Author: Jonathan Aitken |
You may be aware that government has been considering delaying the implementation of the retirement savings changes because of the concerns raised by COSATU. This would be practically very difficult to unwind given the changes made to payroll and pension fund software to allow business to be ready by the 1 March deadline.
That said, the main area of contention is the requirement to take a portion of pension savings as an annuity at retirement as opposed to a lump sum. This doesn't impact short term payroll and any delay to address this concern need not have an impact on meeting the 1 March payroll implementation deadline.
Latest "leaked" news in the last day or two indicates this is exactly what the government intends doing i.e. only delaying the decision on the requirements at retirement.
We shall be watching this space closely. |
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| 2. Retirement benefit savings changes |
| Author: Jonathan Aitken |
Interpretation of how to apply the R350,000 cap.
Editor's note: This article is really to illustrate the unintended consequences of the new legislation and to remind clients that while we always strive to get payroll and systems as accurate as possible, different interpretations and lack of guidance by SARS can lead to quite different results for employers and employees.
As with any new major legislation the practical implementation of the legislation can lead to real differences depending on interpretation. The application of the R350,000 cap in the retirement benefit savings legislation is a case in point and could impact an employee working at more than one employer during the period.
Looking at this in more detail:
The new legislation allows for a deduction of the lesser of a percentage cap (27.5% of remuneration) or R350,000. This is specifically set out in the legislation as:
"The total deduction to be allowed in terms of this paragraph must not in the year of assessment exceed the lesser of -
(aa) R350 000; or
(bb) 27,5% of..."
Interpreting the act, one could calculate this in two ways as an employer (without further guidance from SARS):
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Fully utilise the monetary cap limit as quickly as possible during the tax year until the R350 000 is exhausted, or |
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'Spread' or 'average' the R350 000 monetary cap limitation equally over the tax year (i.e. R350 000 รท 12 to get a monthly cap) |
If an employee works at two employers during the period then use of the first method could result in that employee taking advantage of the R350,000 cap at both employers and then having to pay additional tax under assessment. Not really an outcome that is intended by the legislation. |
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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 0.5 % effective 1 February 2016.
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 0.5 % to 6.75% on the 28th January 2016, and the official interest rate therefore became 7.75% effective 1st February 2016. |
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| 4. Managing employee absenteeism - what is an acceptable rate? |
| Author: Melany Bydawell |
Editor's note: In South Africa, many companies take for granted a high level of absenteeism and tend to analyse absenteeism rates at a high level. Our experience shows that by looking a bit deeper, significant savings can be made by analysing and managing absenteeism better.
Employers do have the right to expect good attendance from their employees despite widespread belief to the contrary. Employment is a contract between two consenting parties. The employee is responsible for being available for work and providing specific services on a regular basis. The employer is responsible for paying for the services rendered. However, in many cases absentee issues will undoubtedly arise and must be resolved in a manner which is fair and equitable to both the employer and the employee.
Enormous savings can be realised through effective management of non-attendance at work, however, most companies do not measure the direct costs through the effective use of the tools and procedures that are available to them.
What is an acceptable absenteeism rate?
In terms of the Basic Conditions of Employment Act, an employee is entitled to 30/36 working days' sick leave in a 3-year period (this is dependent on whether an employee works a 5 or 6-day week).
If the total staff within a company collectively, take their full entitlement, the company's absenteeism rate will run at approximately 4%. It is generally believed that if a rate falls within this, then the absenteeism figures are acceptable and no further action is required.
It is also considered acceptable for staff to continue absenting themselves once they have exceeded their 30/36 days as long as the company does not pay them.
In these instances, many companies believe that they are not incurring any further costs.
These additional days which are regarded as unpaid/annual leave, are usually not taken into consideration when the absenteeism rate is calculated. This often results in an inaccurate assessment of the situation.
In view of the above, many companies run at absenteeism rates as high as 12% without even realising it.
In reality, Pareto's 80/20 principle is applicable and through analysis of data it has been found that 20% of staff are usually responsible for 80% of total sick leave taken within organisations.
By correctly analysing absenteeism, companies can make significant savings in operational efficiency. |
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| 5. Upcoming COIDA Submission deadline - 30 April 2016 |
| Author: Jonathan Aitken |
The Compensation Fund provides compensation to employees who are injured or contract diseases through the course of their employment. The Fund is governed by the Compensation for Occupation Injuries and Diseases Act (COIDA) of 1993 (amended in 1997) which determines how (and by whom) the fund is administered and the conditions for eligibility for compensation. It is the key piece of legislation governing workplace injuries. All employers are required to be registered for COIDA and to make annual reports and contributions to the Compensation Fund.
On or before the 30th April 2016 each registered business is required to submit their Return of Earnings (ROE) submission to the Department of Labour.
If you have not requested this service from us in the past and require us to complete and submit this return on your behalf, please contact us on [email protected]. If we have submitted for you in the past then we will complete your return and send you the figures before submission. The cost for this service is R650.00 per return. |
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| 6. Tax tip for the month |
| Author: Dave Beattie |
As we enter the last month of the tax year most taxpayers will be worrying about the state of the economy, the weak Rand, high food prices and job security. In and amongst this doom and gloom many taxpayers receiving a travel allowance will forget to make note of their vehicle's closing mileage on 29 February 2016.
This closing mileage is required on the taxpayer's tax return to ensure that they make full disclosure and thereby qualify for a travel tax deduction. Failure to record the correct figure could lead to the taxpayer's logbook being rejecting and this deduction being denied.
It is for this reason that we suggest that you make an immediate note in your diary so that there is a reminder on that day.
Should you require any assistance regarding the layout of a travel logbook do not hesitate to contact Dave Beattie on 031 582 7410 or [email protected]. |
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| 7. 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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